Jerusalem Center for Security and Foreign Affairs (JCFA)

For many years, Israel has been the subject of a widespread, coordinated attack to promote Boycotts, Sanctions, and Divestment (BDS). While feigning bona fides humanitarian concerns, in reality, the goal of the BDS movement is to undermine Israel’s legitimacy as the nation-state of the Jewish people. While some diversification of the efforts can be identified, it is impossible to ignore the fact that the Palestinian Authority (PA) stands at the forefront of this struggle, in breach of all the agreements it has signed. To date, the State of Israel and its representatives have focused their efforts on combating BDS activities in various ways, mainly in the international arena.

Against this background, and as a complementary activity, the Jerusalem Center for Security and Foreign Affairs (JCFA) has formulated a proposal for an alternative approach to this phenomenon.

The main thrust of the proposal is to exact a price from the PA for its activities to promote BDS by presenting and stressing the fact that BDS activities can be a two-way street.

In the plan’s first stage, emphasis would be placed on highlighting the extent of trade between Israel and the territories under PA rule, in all its aspects, based on trade data as published by the PA. This stage will last, according to the proposal, for several months. It will be leveraged to convey a clear media message that while the Palestinian leadership calls for boycotting Israel, the Palestinians themselves maintain ongoing trade with the Jewish state and that the primary beneficiary of this is the PA and its residents.

In the second stage, emphasis would be given to the “cost of loss” of continued BDS activity, that is, what could happen to the Palestinian economy if Israel decides to impose a boycott on goods originating from the PA.

In the third stage, the price of loss would be realized, and Israel would take active measures to stop trade between Israel and the territories under PA rule.

First Stage – Conveying a Clear Message to the PA: BDS Activities Have a Price

As stated above, while the PA promotes and supports actions to cause foreigners to boycott Israel and Israeli goods, the Palestinians themselves buy a great deal of goods from Israel, alongside marketing quite a few of their goods to Israel. According to reports from the PA’s Bureau of Statistics, on the one hand, the extent of Palestinian “imports” from Israel constitutes a significant percentage of the total imports to the PA. On the other hand, the extent of Palestinian “exports” to Israel is even more significant. The extent of trade can be understood from this table:

As can be seen, over the timeline and consistently, the volume of “imports” of goods from Israel to the areas under PA control exceeds an average of 55 percent of all “imports.” Similarly, according to the PA data, over 90 percent of Palestinian “exports” are sold to Israel.

The “imports” from Israel substantially benefit the PA, because Palestinian buyers pay VAT or other taxes on the goods they buy from Israel. According to the economic arrangement between Israel and the PA (Paris Agreement), Israel collects these taxes and transfers them to the PA. Thus, for every transaction carried out between a Palestinian and an Israeli merchant, the PA takes a cut equal to the taxes collected.²⁸

According to data provided to the JCFA by the Ministry of Finance in response to a Freedom of Information Act request, in 2022, the amount of VAT collected by Israel and transferred to the PA was no less than NIS 2,820,050,880, and in 2023, including during the ongoing Swords of Iron war against Hamas in Gaza, the amount of VAT collected by Israel and transferred to the PA was no less than NIS 2,726,435,028.

In other words, the PA operates under the saying “You have murdered and also inherited” – on the one hand, the PA promotes BDS actions (“murder”), and on the other hand, the same PA profited (“inherited”) almost NIS 3 billion from trade with Israel. In practice, the extent of trade from Israel to the PA territories is mostly limited to the sale of fuels and electricity.²⁹

The “exports” to Israel benefit the PA because they allow the employment of tens of thousands of Palestinians in various roles to produce the goods sold to Israel.³⁰

Second Stage – The PA’s Loss

For the time being, the PA benefits from a situation where it acts simultaneously both to promote a boycott against Israel and to continue to profit from trade with it. This trade allows for both the PA to sustain itself based on tax revenues, and to provide tens of thousands of jobs for Palestinians who produce and market their goods to Israel and also buy from Israel.

The “price of loss” to the Palestinian economy in the current situation is zero.

If Israel were to promote a plan that reflects the PA’s actions, the price of loss to the Israeli economy would be minimal, while the price of loss to the Palestinian economy would be rather high.

A window into this reality can already be seen today due to the prohibition, or at least the significant reduction since the October 7, 2023, Hamas attack, in allowing workers from the West Bank to enter Israel. Before the attack, over 100,000 workers from PA territories were entering Israel and tens of thousands of others worked in the Israeli communities in Judea and Samaria. These workers earned an above-average income for Palestinians employed in PA territories. From the pre-October 7 situation, the PA profited in at least two dimensions. On the one hand, tens of thousands of Palestinians found employment in Israel and in Israeli communities instead of being unemployed. On the other hand, the PA received from Israel the income taxes paid by those workers on the salaries they earned.³¹ According to Ministry of Finance data, in 2022, the PA’s total income from income tax paid by Palestinians who worked in Israel and in Israeli communities in Judea and Samaria amounted to approximately NIS 188,157,211, while in 2023 the amount decreased to approximately NIS 123,326,523.

If Israel were not only to stop the entry of workers but also to expand the reduction of trade with PA territories to the point of a complete ban, the damage to the Palestinian economy could be enormous and would lead to an almost complete slowdown and even a rise in unemployment.

Today, it is not only the PA, but also Turkey, that benefits from promoting BDS activities against Israel.

At the beginning of May 2024, the Turkish government announced a complete trade boycott against Israel,³² supposedly in light of the war against Hamas terrorists in the Gaza Strip. Despite the decision, it turns out that Turkey continues to trade with Israel, but through a circular transaction via the PA.

According to reports,³³ since the decision to impose the Turkish boycott on Israel, trade between Turkey and PA territories has jumped by 1,200%.³⁴ This harms Israel in at least two ways.

On the one hand, the circular transaction allows the Turks to present a false image to the world that a complete Turkish trade boycott has been imposed on Israel,³⁵ while in practice, trade continues, even if in slightly smaller volumes. The very existence of the Turkish boycott, at least declaratively, harms Israel’s image and allows the Turkish government to advance its poisonous agenda against Israel while Turkish merchants are not really harmed. The only casualties are the Israeli merchants who used to market their goods in Turkey.

On the other hand, the body that profits from the move is the PA, again due to the economic arrangements established in the Paris Agreement. According to the agreement, Israel collects and transfers to the PA taxes it collects on “imports” of goods from abroad when their final destination is PA territories. The circular transaction of ordering Turkish goods to PA territories, when in practice these goods return to the Israeli market, causes both a direct loss of taxes from importing the goods directly to Israel and the transfer of taxes to the PA.

In this transaction, Turkey and the PA profit, and significantly so, while Israel is the only victim.

Therefore, in phase two of the plan, it is necessary to clarify that as long as the Palestinians continue to promote boycott activities against Israel, and as long as PA territories serve as a kind of sanctuary for foreign countries to impose a boycott, Israel will not sit idly by and the price of loss to the Palestinian economy will far exceed the loss to Israel’s economy.

Third Stage – Severing Trade Relations

As long as the PA does not cease promoting all boycott activities, it is necessary to act to implement the final stage of the plan by severing economic ties between Israel and PA territories. The plan should include a ban on the entry of workers and goods from PA territories into Israel, as well as preventing Israeli trade with PA territories.

Summary

Since other efforts to stop the boycott program have not yielded the desired result on the PA, new tools and courses of action need to be examined. In practice, while the PA promotes BDS activities against Israel, the Palestinian economy relies, almost entirely, on trade with Israel. This absurd situation causes significant damage to Israel and its economy while the PA profits significantly from the very trade it tries to block from the rest of the world. In this plan, based on economic reports from the PA, the JCFA has suggested new courses of action, emphasizing both the messaging about the price of loss, and the price of loss itself.

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