On
Settlement Trade, Europe Doesn't Stand
Tall
Peter
Lagerquist
(Peter
Lagerquist is a freelance journalist based in Israel and the
Occupied Territories.)
April 8,
2003
The
transatlantic rift over the war in Iraq, and now post-war
reconstruction, builds on growing European disenchantment with
muscular US unilateralism. French and German opposition to the war
-- echoing the sentiments of a majority of the European Union's
member states -- highlighted seemingly growing differences between
European and American attachments to international laws and
conventions, underscored by recent trade disputes and wrangling over
US attempts to exempt its nationals from the jurisdiction of the new
International Criminal Court. Differences between European capitals
and Washington have been particularly acute as regards the
Israeli-Palestinian conflict. In early February 2003, German Foreign
Minister Joschka Fisher pointedly notified Secretary of State Colin
Powell that he viewed this conflict, and not Iraq, as the main
foreign policy challenge in the Middle East. More recently, British
Foreign Minister Jack Straw provoked a furor in Tel Aviv when he
suggested that Israel should comply with UN Security Council
resolutions mandating an end to its occupation of Palestinian lands,
just as Iraq should have complied with resolutions dictating its
disarmament.
The
pronouncements of Fischer and Straw may be heartening for partisans
of the EU and those hopeful that Britain's support for the Iraq war
was purchased by an American promise to intervene positively for
peace between Israel and the Palestinians. Yet such optimism glosses
over the fact that the EU's own commitment to international laws and
norms in Israel-Palestine has eroded perceptibly over the past
decade. While repeatedly expressing concern about Israeli violations
of humanitarian law, particularly during the second Palestinian
intifada, the EU has failed to hold Israel accountable in any
meaningful way. Its economic non-policy on Israeli settlements has
been a particularly stark case in point, not least because of what
it has implied about the EU's attachment to its own laws.¾
BOOMING
TRADE
For
several decades, settlement enterprises in the West Bank, Gaza and
Golan Heights have been exporting goods labeled "made in Israel" to
the European common market, benefiting from successive free trade
agreements between Israel and the European Community. Most recently,
the EU signed an Association Agreement with Israel in 1995, as part
of the Union's broader free trade policy in the Mediterranean
region, guaranteeing that European importers would not pay duties on
goods purchased from Israeli manufacturers. On the back of such
arrangements, the EU has become Israel's largest trading partner --
in 2001 alone, Europe bought a record $10 billion of Israeli goods
and services.
Concomitantly, however, the Union has also become a
premier international trading patron of the Israeli settlement
movement. Israeli government estimates value the settlements' annual
exports to Europe at about $200 million, comprising mostly produce,
cut flowers, textiles, cosmetics and wine. But when this total is
adjusted to include exports partly processed in occupied territory,
it amounts to about $2 billion, or 20 percent of total Israeli
exports to the EU. The special EU treatment accorded this trade by
the Association Agreement violates the EU's legal commitment to the
Fourth Geneva Conventions, according to which the settlements are
illegal and should not be allowed to derive economic benefits from
the Convention's signatories.
A
combination of factors have nevertheless permitted the trade in
settlement products to flourish over the past decade. Chief among
these was tacit European acceptance during the Oslo "peace process"
of the 1990s that the parameters and "sensitivities" of the peace
process superceded international law -- a principle to which the
Palestinian Authority arguably also acceded in signing the Oslo
accords. The EU's reluctance to let politics interfere with its
expanding Mediterranean trade initiative, which it sees as a crucial
mechanism for dialogue in the region and which is also bound up with
considerable economic interests, has complicated matters further.
Various EU members have taken differing positions on the issue, but
the consensual mode of EU foreign policymaking has allowed the
lowest common denominator position to prevail. Despite escalating
controversy over the settlement trade dating back to 1998, and calls
in 2002 by the European Parliament to suspend free trade with Israel
outright, the EU's executive tier has so far stymied any action.
What is more, over the past five years, this inaction has gradually
shaded into active intervention to forestall, and ultimately render
near impossible, future remedies.
OSLO AND
ITS COMPLICATIONS
Since a
1980 European Community declaration in Venice, Europe has been
officially committed to a permanent solution to the conflict based
on international law and UN Security Council resolutions -- a
position affirmed as late as 1996 in Dublin. The term permanent
solution encompasses such matters as the status of occupied East
Jerusalem, the right of return of Palestinian refugees and the
status of Israeli settlements, which have slipped in US diplomatic
parlance from being "illegal" to mere "obstacles to peace."¾¾
Nevertheless, since the 1970s, European governments
have turned a blind eye to the settlement trade, in large part due
to limited public pressure in Europe itself. This non-policy was
boosted by the advent of the Middle East peace process. Israel,
supported by the US, successfully argued through its supporters in
the Union that Europe should delay action on the issue until the
conclusion of a final Israeli-Palestinian peace settlement that
resolved the status of the Occupied Territories.
However,
because settlements are officially not recognized as being part of
Israel, and are therefore not entitled to benefit from its trade
privileges with the EU, the issue has provoked growing tensions
between EU's executive bodies and the foreign ministries of its
member states on the hand, and their respective customs authorities
on the other. The issue came to a head in 1997. Pressure from
customs bureaucracies was then building over Brazilian orange juice
fraudulently channeled via Israeli firms to the European market,
spurring questions from the European Parliament and national customs
officials about Israel's broader compliance with the customs treaty.
In the face of initial Israeli intransigence, the European
Commission -- the EU's executive branch -- was eventually stirred
into action.
"They got
very upset when they did certification and the Israelis did not
respond," recalls Charles Shamas, a Ramallah-based humanitarian law
expert and trade consultant who has been working on Israeli trade
policies in the West Bank and Gaza for the past ten years. Brussels
sent a fact-finding commission.
Its 1998
report established grave Israeli violations of the trade agreements,
to the extent that "the validity of all preferential certificates
issued by Israel, for all products, are put in doubt." As the
guardian of the EU's treaties, the Commission could not but respond
to the findings. It called for enforcement by the EU and its member
states, and issued a notice warning European companies trading with
Israel that they could be liable for back-dated import duties if
they were importing settlement products. Some states, including
Germany, began demanding that importers of Israeli goods deposit
funds to cover any retroactive duties.
COLD
FEET
After the
1998 report, the Israeli government openly told European officials
that they refused to accept that the settlements were not part of
Israel. Israel would continue to export settlement products to
Europe under the reduced tariffs of the Association Agreement. This
Israeli position could have been declared flagrant non-cooperation
with the rules of the Agreement, allowing the EU to suspend the
Agreement completely or take other unilateral action. Rather than
argue that such non-cooperation existed, however, the EU decided it
would have to rely on Israeli authorities to clarify the origin of
products through certain verification procedures. Not surprisingly,
Israeli authorities affirmed that all products were originating in
Israel.
Because
few people in Brussels were then in the mood to rock the boat of the
faltering Oslo process -- or endanger the economic interests bound
up with the Association Agreement -- the European Commission
stalled. In answers to questions from European parliamentary
members, the Commission has since denied the existence of the blunt
Israeli responses to the 1998 report, asserting only that it had
"indications" calling into doubt the validity of the Israeli origins
certificates.
France
and Germany were among the countries which opted instead to push for
a non-confrontational solution, boosted by Israeli arguments that
the EU should not seek to "prejudge" the borders of the Israeli
state by pushing the issue, since these were then subject to
negotiations with the Palestinians. In January and March 2000, the
European Commission replied to parliamentary questions about the
settlement trade by declaring that it would seek "solutions that do
not prejudice the positions of any of the parties." In other words,
the EU agreed tacitly that it would ignore, in practice, the
indefinite continuation of Israeli violations of the Fourth Geneva
Conventions as a concession to the Oslo process.
DAMAGING
PRECEDENTS
The EU's
attempts to reach a solution have since resulted in a prolonged tug
of war between the EU and the Israeli authorities, on the one hand,
and various EU governments and their customs bureaucracies on the
other. Throughout, the Commission has shied away from addressing the
basic issue of Israel's non-cooperation. This position was
encapsulated by a statement also made in March 2000, that "the
procedure for verifying the origin of products enables us to
determine if a product may be benefiting from the right to
preferential treatment, even if there is no cooperation on the part
of the third country involved in determining the product's origin."¾
The
statement set a damaging precedent. While deferring an outright
EU-Israeli confrontation, it also undermined the grounds on which
the EU could challenge breaches of the trade agreement. Henceforth,
Israel could keep insisting that its disagreements with the Union
were merely due to differences in interpretation of the agreement,
not a lack of cooperation -- since such cooperation was not
needed.
At
Israel's suggestion, the EU initially sought to square the circle by
getting the Palestinian Authority to agree to have settlements
considered part of its customs territory, subject to its own trade
agreement with the EU. The PA wasn't interested. The EU then tried
to obtain voluntarily from the Israelis a list of goods produced in
settlements. Though such a list is readily available on the
Internet, courtesy of the Israeli anti-settlement organization Gush
Shalom, the Israeli government was not so forthcoming.
¾
As
required, verification procedures were then activated. After
coordinating with the EU's central customs body, by August 2000
several EU customs authorities forwarded to Israel detailed
questions about the origin of exports by more than a thousand
Israeli firms. In due time, Tel Aviv replied that all exports came
from Israel. The EU deemed this reply unacceptable. Several
frustrated member states asked the Commission for "political
guidance." "According to the Agreement, if the answers received do
not contain sufficient information, they shall collect duties. So
the customs services asked, 'What shall we do?,'" recalls Shamas.
"The Commission said, 'It's your responsibility.'" In a barbed
rejoinder, the customs services accepted all the Israeli answers,
released all security guarantees and granted preferential tariff
treatment to all the queried imports. "The member states said,
'Don't ask us if you let the Israelis get away with it,'" notes
Shamas. "[They] were fighting because they had an additional burden
forced on them; they are under pressure from their customs
authorities. So the two sides are trying to slide away from
responsibility for the issue."
FACTS ON
THE GROUND
Such
evasion has come at a price, however. By failing to act on its own
information about Israeli trade policies and the real origins of its
settlement exports, the Commission has rendered near impossible any
future action against existing settlement exports. "Under treaty
law, practice that is known by both parties is acceptable," says
Shamas. This was confirmed by a May 2001 ruling by the European
Court of First Instance, concerning long-standing Turkish export to
the EU of televisions incorporating a high share of parts
manufactured overseas. The court quashed a belated attempt by EU
customs authorities to claim duties on the TV sets, noting that it
had known about the problem for a substantial period of time, but
failed to act on it. Therefore it could not now penalize the
European importers. To guard itself against similar complications
with Israel, on November 23, 2001, the Commission issued another
"notice to importers" of Israeli products, reiterating its warning
that retroactive duties could be claimed. In all likelihood,
however, it was too little, too late.
The EU's
continued vacillation on the issue has defied growing political
pressure to act. In reaction to Operation Defensive Shield, the
massive Israeli tank invasion of the West Bank in March-April 2002,
the European Parliament in May 2002 voted to suspend the Association
Agreement, invoking its human rights clause. Yet the European
Council -- the EU's political decision-making body, composed of the
heads of state of the union's member states -- is not obliged to
follow the Parliament's resolutions, and discarded the vote.
Privately, EU diplomats say that there is no chance the Association
Agreement would ever be suspended. This assessment has been
confirmed publicly by EU public relations commissioner Chris
Patten.
Without
guidance from the EU, customs authorities in various member states
have increasingly had to go it alone -- with limited results.
Pursuant to the November 2001 notice, Italian customs decided to
collect deposits from importers to cover possible tariffs. This
sparked no small amount of concern in Tel Aviv, since Italian
customs practice allowed them to refuse preferences not only for
particular questionable brands, but also for whole categories of
similar goods. Entire industries in Israel suddenly found themselves
in the firing line. However, at the request of Tel Aviv, the Italian
government quickly intervened to cancel the customs decision,
unopposed by countervailing Commission guidelines.
The
Italian example since has impelled EU member states to scale back
the scope of their alternative remedies. On April 3, 2003, British
authorities announced that they would deny duty preferences to a
limited set of Israeli imports, "where there is reasonable doubt as
to entitlement." Similar decisions have reportedly been taken by
other EU members, after another unsuccessful verification cycle
covering some 60 categories of good was launched in January 2003.
According to Shamas,
the
British decision is a highly circumscribed initiative which will
have minimal economic impact -- so as not to provoke a legal
challenge that customs authorities know might be difficult to
defeat. "They are doing it hoping that no importer sues," he says,
adding that "there is general agreement that this is not the end of
the story."
"PUT UP
OR SHUT UP"
For
Shamas, the matter has been unresolved for far too long. "It's
become a particularly trenchant case of 'put up or shut up.' Here we
have the community, and its institutions and member states, actively
engaged in irregular conduct compromising the community's own law
under community treaty, in order not to have to require Israel to
implement its association agreement as public international law
requires. So community institutions have crossed the line between
inaction to wrongful action. They are basically complicit in
Israel's own violations of the Geneva
Conventions."
Ironically, the EUês rhetorical distance from US Middle
East policy has widened while the settlement trade issue has heated
up in Europe. While Washington has acquiesced in Israel's ongoing
reoccupation of Palestinian towns, at least for the duration of the
Iraq war, in early March 2003 the EU sent a protest letter to the
Israeli Foreign Ministry, which "censured IDF actions in the West
Bank and Gaza Strip [and] also criticized the expropriation of
Palestinian land for the construction of a separation fence between
Israel and the West Bank, as well as the closure of universities and
infringement of human rights in population centers in the
territories." According to official Israeli sources, the letter was
"one of the most serious that we have received in the recent past."
Should the EU want to do something about Israeli infringements of
Palestinian rights, they could very well start at home.
Yet for
the time being, EU intervention in the Israeli-Palestinian conflict
is likely to be confined to tweaking the forthcoming US "road map"
to Middle East peace -- a document notable for its scant references
to international law. The road map, in keeping with the
long-standing diplomatic status quo, rests on a false premise:
constructive international intervention in the conflict must always
emanate from Washington, rather than Brussels or the UN building in
New York. Despite its rhetorical protestations, the EU appears
destined to continue its service as a legitimizing cover for US
unilateralism in Israel and Palestine, if not yet in
Iraq.