Financial Times | July 21, 2013
Israel: A bitter harvest
By John Reed
The EU’s moves to label settlement products are seen as a sign of a bigger threat to the state
In a refrigerated shed, shielded from the blazing summer heat of the Jordan Valley, about 15 Palestinian workers are sorting ripe figs by size and packing them into plastic supermarket containers, then boxes marked in German, English and French: Feigen, figs, figues.
The farm’s Israeli owner, Avigdor Arbel, moved to the area from the southern city of Ashdod in 1974 when he was 22 and the government was offering young men land to settle near the Jordanian frontier after Israel seized the West Bank in the 1967 six-day war.
Much of the outside world deems the area inside a Jewish settlement where Mr Arbel grows his figs, dates, grapes and peppers as land occupied illegally by Israel and part of a future Palestinian state. “England doesn’t want any fruits from here,” Mr Arbel’s son Ortal says. But for what Britain does not want there are other customers in Israel or abroad: “There are Russians buying,” he says.
Now the EU, Israel’s biggest trading partner, is pressing home the point forcefully with its 500m-plus consumers as it prepares to draft EU-wide guidelines for the labelling of goods made at settlements as originating from Israeli-occupied Palestinian land.
Brussels last week shocked and angered Israel’s government by issuing new guidelines prohibiting EU funding for Israeli entities based in the West Bank, East Jerusalem and the Golan Heights. The new measures mean that companies, academic institutions and other organisations that have operations beyond the Green Line, which marks Israel’s internationally recognised borders, will no longer be eligible for scholarships, grants or funding from European institutions.
Israel’s settlement economy faces further problems: the EU – whose foreign ministers meet in Brussels on Monday – is now considering the labelling guidelines for settlement goods, which would affect some $300m of Israeli exports, according to a World Bank estimate.
In April, the foreign ministers of 13 EU member states wrote to Lady Ashton, the bloc’s foreign policy chief, asking Brussels to adopt EU-wide guidelines for labelling. The UK is one of several European countries that already label settlement products, most notably fruit and vegetables, as do some supermarket chains.
Officials are studying guidelines that would urge all member states to follow suit. While Brussels is cloaking the labelling measures in bland language about consumer protection and the need to uphold its own laws, the push reflects hardening political and public attitudes on the continent towards Israel’s occupation of Palestinian lands, which are beginning to shape a tougher foreign policy.
“The issue of labelling is about making the distinction that the Green Line is still there,” a European official says. “It’s about making the difference between Israel, with which we have legitimate relations, and settlements, which we think are illegal.”
In Israel, the EU’s tightening economic cordon around the settlements has tapped into deep anxieties about the country’s growing political and economic isolation, while also straining diplomatic relations already burdened by historical baggage relating to the treatment of Jews in Europe during the second world war.
After last week’s crackdown on funding for settlements, Benjamin Netanyahu, the prime minister, called José Manuel Barroso, the European Commission’s president, and pleaded in vain with him to postpone publication of the guidelines. Politicians across the political spectrum, including Shimon Peres, Israel’s dovish president, said last week that the EU’s crackdown on settlements was poorly timed and would complicate efforts by John Kerry, the US secretary of state, to restart Israeli-Palestinian peace talks.
Israel’s government claims that by reinforcing the 1967 boundary – which it wants to redraw by annexing big “settlement blocs” from a future Palestinian state and then swapping other land – the EU is encouraging intransigent negotiating terms of reference among the Palestinians. Naftali Bennett, head of the pro-settler Jewish Home party that sits in Mr Netanyahu’s coalition, described last week’s measures as an “economic terror attack against peace”.
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While the settler goods amount to only a fraction of Israel’s roughly €13bn in annual exports to the EU, Israel sees this as symptomatic of a greater threat to the country. The government is sensitive to what it calls “delegitimisation” of the Jewish state and worries that the EU’s moves could be a prelude to a broader economic boycott of the kind imposed against South African goods in the waning years of apartheid. A movement known as Boycott, Divestment, Sanctions is seeking to isolate Israel politically and commercially.
Officials are asking why Brussels does not apply the same standards to other politically contentious areas such as Tibet, northern Cyprus or Western Sahara.
“If consumers have the right to know about a controversial area being the origin of a product, then they should certainly know about other products coming from other controversial areas in which they or the EU have a very strong position,” says Yigal Palmor at the Israeli foreign ministry. “If this new regulation singles out Israel and is not to be universal, then it would clearly be discriminatory, and as such reprehensible.”
EU officials have suggested that Israel is overreacting to meticulously thought-through bureaucratic measures about which it had been amply informed. They also reject the use of the word “boycott” used by some Israeli politicians in connection with the planned labelling measures.
“The EU is not in favour of trade bans, insofar as other instruments are within reach, nor does it support participation in boycotts,” says Michael Mann at the European External Action Service, which Lady Ashton heads. “In fact, taking these steps could benefit Israeli trade; confusion as to whether a product is from Israel or from a settlement might lead some consumers to avoid all Israeli produce.”
Among Palestinian activists, leftwing Israelis and the international BDS movement, some view the planned labelling guidelines as a tepid and overdue response to what they see as Israel’s years of flouting EU regulations and international law, which does not recognise the settlements as part of Israel.
“In our opinion it is not sufficient for the European Commission to punt responsibility to the consumer,” says Wesam Ahmad, a campaigner with Al-Haq, a Ramallah-based human rights organisation. “The Europeans have obligations under international law to prohibit these goods by banning them from entering the market.”
Complicating the discussion further is a lack of information on the size of Israel’s settlement economy, even among the EU civil servants grappling with the mechanics of the issue. Israeli statistics make few distinctions between goods originating inside its internationally recognised 1948 borders and those from the West Bank, which Israel identifies as “Judea and Samaria” and treats as an integral region of the country.
And while it is relatively straightforward to identify a place of origin for agricultural produce such as Jordan Valley dates and figs, the West Bank’s settlements also have areas that make industrial goods or semi-finished goods that are later sold as “made in Israel”. Many West Bank enterprises have head offices or are themselves registered in Israel proper.
“The most important things made in the West Bank are intermediate products,” says Charles Shamas, a humanitarian law specialist with the Mattin Group, a non-governmental organisation based in Ramallah. “Their production ends up being incorporated into other companies’ products or being branded by other companies.”
Long before it began grappling with the labelling issue, the EU tried for years to enforce its own trade rules, under which goods made behind the Green Line do not qualify for the preferential access that Israeli goods enjoy under the country’s association agreement with the bloc. A European Court of Justice ruling in 2010 underscored that Europe cannot give settlement-produced goods the same preferential trade treatment offered to Israeli ones.
In 2005, Brussels asked Israel to provide a list of postcodes so that the customs offices of member states would know whether an imported good originated in a settlement. Last year it published these postcodes on the commission’s website. Pro-Palestinian activists warned that many settlement goods were still being routed via Israeli companies and securing privileged access to the EU.
Still, the increased scrutiny is being felt in the Jordan Valley, where farmers are watching the EU’s hardening stance with trepidation. The arid area accounts for most of the West Bank’s agriculture, and 40 per cent of its territory.
David Elhaiini, mayor of the Jordan Valley regional council, saw some of his farm’s export markets wither as individual European countries and supermarket chains began labelling goods or stopped importing from the West Bank. He exported 140 tonnes of fresh herbs to Europe a year before what he calls the “boycott” but he now sends just 100.
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Like other Israelis who oppose the EU’s planned labelling move, Mr Elhaiini says that settlements are an important source of money for Palestinians. He says the 6,000 who work on farms in the Jordan Valley have a combined income of 300m shekels ($84m) a year.
“All the governments in Europe are afraid – your countries in Europe have a lot of Muslims and they are afraid,” Mr Elhaiini says in regard to labelling. He also accuses the EU of hypocrisy for not labelling goods such as wine produced in the Golan Heights, Israeli-occupied Syrian land. (The funding measures announced last week did, however, apply to the Golan.)
Palestinian farmers in the area say their own operations are being pushed aside by better funded settlements that also use most of the area’s water. Some complain they are having to use expensive drinking water for their crops, or saline water, which is suitable only for growing dates. “Even if labelling is a good idea, the best idea would be banning settlement produce,” says Saleh Njoum, who farms further south near the Jordanian border.
When the EU foreign ministers meet in Brussels on Monday, diplomats say a resolution is likely to be tabled urging Israel to return to the table for peace talks.
Within the EU, work is continuing on the labelling directive. Linas Linkievicius, foreign minister of Lithuania, which holds the EU’s rotating presidency, is among the officials who has warned Israel that shirking the labelling issue could lead to a broader boycott by European consumers.
Amid growing alarm in Israel’s government, European officials say the country had no right to be surprised about measures that were long in preparation. “This is about the clock ticking and the train leaving the station,” says one.
SodaStream: Activists sniff at the ‘Kleenex of home soda’
SodaStream, which makes household soft-drink systems and describes itself as the “Kleenex of home soda”, is the kind of successful new company that has earned Israel its “Start-Up Nation” nickname. In June its share price surged to its highest level in two years after Israeli media reported rumours that Coca-Cola and PepsiCo were considering buying the company, which listed on Nasdaq in 2010.
But SodaStream has also attracted the attention of the Boycott, Divestment and Sanctions movement that favours an economic boycott of Israeli companies that do business in settlements. BDS activists have homed in on the company’s manufacturing operation in Mishor Adumim, an industrial area of Israel’s Ma’ale Adumim settlement east of Jerusalem.
SodaStream’s story illustrates the pressure faced by Israeli industrial companies with activities inside the settlements – and the complexities that surround issues relating to manufacturing in the West Bank.
Who Profits, an Israeli non-governmental organisation focused on Israeli corporate activities in the occupied territories, concluded in a 2011 report that “exploitation is an inevitable part of commercial production in an occupied area”.
BDS activists have claimed victory in getting some of SodaStream’s clients to boycott its products and pushing the company to relocate within Israel’s internationally recognised borders.
In SodaStream’s regulatory filings, the company has warned investors that the risk factors it faced included manufacturing activities “on disputed territory sometimes referred to as the West Bank”.
The company, though, rejects activists’ claims that a Swedish retailer dropped it under pressure to boycott – although it does acknowledge it provides some of its customers in France, Nordic countries and elsewhere with products from facilities other than Mishor Adumim. SodaStream also says that it made plans to build its new primary manufacturing plant in Lehavim long before it came under criticism from the BDS movement.
“We have been dealing with this noise for several years, and it has not affected our business,” says Yonah Lloyd, a company spokesman. “We don’t expect that to change.”