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Jerusalem Center for Public Affairs
Strategic Alliances for a Secure, Connected, and Prosperous Region

EU-PA Cooperation and Risks to the Palestinian Future

Pinhas Inbari

Although the European Union repeatedly emphasizes its opposition to the Boycott, Divestment, and Sanctions (BDS) movement, its policy of labeling products manufactured in territories east of the 1949 Armistice Lines has reinforced the Palestinian BDS strategy to assault Israel, isolate it, and cause its economic collapse.

Clearly, Europe does not seek Israel’s economic demise. Israel is an important trading partner for the EU in the Mediterranean area, and EU-Israel trade amounted to €34.3 billion in 2016.1 Italy, Germany, France, and the United Kingdom have voiced opposition to the BDS campaign, some describing it as anti-Semitic.2 However, the EU claims that its product-labeling policy – which seeks to differentiate between Israel within the pre-1967 lines, which Europe recognizes, and the territories located to the east of those lines, which Europe does not recognize as belonging to Israel – is only intended to pressure Israel to withdraw to the 1967 lines, thus enabling the creation of a Palestinian state.

However, the EU definition is misleading and even factually inaccurate. The Israeli economic presence in the West Bank east of the 1967 lines is centered in joint Palestinian-Israeli employment areas.

The EU labeling policy actually undermines the West Bank industrial zones that provide excellent employment to some 35,000 Palestinians. These zones come under the jurisdiction of Israeli local authorities, but have no connection to “settlements.” Business and commercial enterprises in these 15 zones provide employment for Palestinian workers who cannot find alternative work in the PA-controlled territories.

The ever-increasing economic frustration and desperation of the Palestinian population has resulted in violent clashes in Palestinian cities such as Nablus, Ramallah, and Hebron, and undermine the PA’s stability.

Europe, for its part, in cooperating with only the highest levels of the PA leadership, has willfully ignored the voices of thousands of Palestinian workers who welcome Israeli commercial enterprises in the West Bank and depend on West Bank industrial zones to support their families.

The 15 West Bank industrial zones provide a path to a viable Palestinian economic future that the EU and the PA currently ignore. Israeli entrepreneurs and industrialists such as Rami Levy and SodaStream’s Daniel Birnbaum do not need the industrial zones to grow their businesses. In fact, SodaStream left the West Bank and expanded its operations in its new home in the Idan Hanegev facility.

Nabil Basherat, Palestinian manager at SodaStream, has noted, “The BDS movement and European lawmakers simply do not consider Palestinian workers. When SodaStream closed its Mishor Adumim facility, 600 Palestinian families were left unemployed and without means of supporting their families. This is not the way to create a middle-class base for a Palestinian state.”3 The very fact of such Palestinians’ employment is a stabilizing factor for the PA. Without it, 35,000 Palestinian breadwinners – each with an average of six family members, equaling some 200,000 people – would be added to the Palestinian unemployment statistics. The ever-increasing economic frustration and even desperation of the Palestinian population has resulted in violent clashes in Palestinian cities such as Nablus, Ramallah, and Hebron, and undermines the PA’s stability. Thus the EU’s product-labeling policy does not promote Palestinian statehood; it has had the opposite effect.

SodaStream workers assembling home carbonation machines
SodaStream workers assembling home carbonation machines, October 2017. (David Abitbol)

Moreover, EU product labeling has already backfired. It not only has failed to further distinguish between Israel and the disputed territories. De facto, the EU labeling policy has erased the perceived distinction between West Bank products and Israeli products produced in Israel. PA-based Palestinian NGOs such as PACBI and Sabeel, and global BDS calls to boycott all of Israel, provide ample evidence.

Palestinian economic challenges also reflect regional realities. Since 2011, when a Tunisian street vendor set himself on fire because he was refused a street-cart permit to sell his goods, Arab economic desperation has continued to claim a high price across the Middle East. Tunisian authorities are still reeling from the government’s inability to stabilize the country’s failing economy.4 Stability has been undermined by economic failure in other Arab countries including Egypt, Libya, and Algeria to name a few. The inability of governments, in Arab countries that are not oil superpowers, to stabilize their economies has also created a problem for Europe, resulting in waves of immigration, an influx of Arab refugees into its cities, and increased exposure to Islamist terrorism.

Ralph Tarraf, EU Representative to the West Bank, Gaza, and UNWRA
Ralph Tarraf, EU Representative to the West Bank, Gaza, and UNWRA delivers a speech in Jerusalem, May 2017. (EASS official photo)

The PA is no different in this respect than those collapsing Arab regimes; in fact in many ways it is even worse.

Europe sees the Jewish settlements as the primary impediment to the creation of a Palestinian state. However, the Palestinian case is similar to the Arab Spring; the PA’s inability to provide the population with livelihoods is the main stumbling block on the Palestinian road to viable and secure statehood.

The Palestinian case is similar to the Arab Spring; the PA’s inability to provide the population with livelihoods is the main stumbling block on the Palestinian road to viable and secure statehood.

The Israeli industrial areas in the West Bank have been an important part of PA economic stability. But Europe has fundamentally misunderstood their significance and has even undermined their importance. Established prior to the outbreak of the Second Intifada in 2000,5 West Bank industrial zones stood empty until 2002,when the deadly Second Intifada was in full swing, in part because Palestinians were still employed within Israel’s 1949 Armistice Lines.6 Yet as Palestinian terror spread across Israeli towns and cities and it became impossible to employ Palestinians within Israel, the West Bank industrial areas enabled Palestinians to work closer to their homes and provided a security solution for Israel.

Despite the wave of terror that swept Israel at that time, thousands of West Bank Palestinians maintained their employment in well-paying Israeli companies in the West Bank industrial zones.

These zones, similar to other industrial zones in Israel, were established through private investment, not funds from “settlers.” Investors included Arabs from East Jerusalem and Israeli Arab businesspeople.

This model of economic cooperation has emphasized equality between Arab and Jewish workers, all of whom are protected by Israeli labor laws. The principal architect of the concept of West Bank industrial zones, then Minister of Industry and Trade, Natan Sharansky, promoted this phenomenon as a model for peace.7 Ironically, perhaps, the PA’s cooperation with Europe compounds the PA’s negligence regarding the economic danger in which it finds itself.

EU officials visit Shuafat Refugee Camp
EU officials visit Shuafat Refugee Camp, July 2017. (EASS official photo)

The PA has neglected the economic wellbeing of its public in favor of the political and ideological struggle against Israel. The EU, for its part, has not focused on Palestinian financial prosperity as a crucial aspect of their prospective statehood. The EU has preferred to fund the PA, while simultaneously advocating Israel’s full withdrawal from Area C of the West Bank.

Europe has even advocated dismantling existing Israeli industrial zones across the West Bank, which provide employment to tens of thousands of Palestinians, who earn monthly compensation that is 350 percent greater than in PA-controlled areas.

The EU and the PA have pursued policies that have endangered the Palestinians’ political and economic future. For example, in 2015, when former U.S. Secretary of State John Kerry renewed his peace initiative, he proposed a $4 billion investment to the PA, based on the assumption that the Palestinians were aware of how important their financial stability was for achieving statehood. Yet, the PA leadership rejected the initiative, despite a U.S.-led offer to invest deeply in Area C. In fact, Kerry wanted the U.S. initiative to play an important role in U.S. mediated talks between the PA and Israel. In contrast, Europe pushed to diminish Israel’s presence in Area C without a diplomatic pathway to an Israeli-Palestinian agreement.

EU officials visiting a playground in Area C of the West Bank
EU officials visiting a playground in Area C of the West Bank, December 2016. (EASS official photo)

The EU product-labeling directive has also energized the PA’s larger goal of a total boycott of Israel, designed to “penalize” the Jewish state and cause its economic collapse.8 For example, Israeli companies designated for the Palestinian boycott include agricultural giant Tnuva and the Strauss dairy conglomerate, neither of which has any link whatsoever to “settlements.” These companies are not even located in industrial zones in the territories, but are still considered “connected to settlements.” Palestinian bank executives reported to this author that these BDS claims are baseless. Instead, Palestinian corruption underlies the BDS charges.9 However, from an international standpoint the BDS charge that Israeli industrial food giants are somehow “connected to settlements,” and hence a target for boycott and labeling, means that the EU’s labeling policy in effect supports a Palestinian boycott of all Israeli products.

The Europeans could claim that this position is Palestinian rather than European. But just as they follow the Palestinian lead in product labeling and pressuring Israel to withdraw without a final agreement, they are just as likely to follow them in extending labeling from “products of the settlements” to labeling Israeli financial entities as “connected to the settlements,” in other words, targeting the entire Israeli economy.

Such a move was made in a January 2016 Human Rights Watch report on Israeli banks that were supposedly “connected to the settlements.”10 Attorney Sari Bashi, editor of the Human Rights Watch report, confirmed to the Voice of Israel11 that the report addresses all five of Israel’s large banks. Hence, it does not refer to pressure on West Bank settlements, but on the Israeli economy within pre-1967 Israel, to the point of paralyzing the nation’s banking system. Bashi explained that the banks have branches in the settlements and grant mortgages only to Israelis and not to Palestinians.

By the same logic, Palestinian banks that do not give mortgages to Israelis are also contravening international law. The link between the report and the Palestinian position is clear from the fact that Bashi submitted the report to PA Chairman Mahmoud Abbas.

Human Rights Watch encouraging denormalization with Israel
Human Rights Watch encouraging denormalization with Israel, May 2017. (Twitter Sari Bashi)

This is an example of an international human rights organization adopting the PA position, which now calls for a blanket boycott of Israel, and reflects Human Rights Watch’s intention to incorporate this demand into its official report.

The PA is convinced that the EU will ultimately adopt its position. Senior Palestinian official Nabil Shaath, responsible for contact with Europe, said on Radio Palestine on April 21, 2014: Since the U.S. Congress fully backs Israel and protects it from paying the price for its crimes, we have no choice but to deal with it by means of a boycott like the one that took place against the apartheid state of South Africa. I have just returned from Norway and I can tell you that within a few months the whole world will adopt this position. This is BDS. It makes internal Palestinian dynamism and a boycott of Israel a necessity. It is already underway in Europe and also in the United States. The number of American universities boycotting Israel is on the increase. We in the government, which is still obligated by the Oslo Accords, cannot adopt this struggle. It is a struggle of the people, by popular organizations, but Fatah has taken this position on board and within a few months government and party struggles will merge.12 The PA still sees no link between the risk of economic collapse and the closure of places of employment in the industrial zones. It has failed to internalize the danger to its own stability in the event that its policies leave tens of thousands of people unemployed.

Surprisingly, however, West Bank union leader Shaher Saad, based in Nablus, noted the economic danger posed by EU product labeling and BDS to the Palestinian economy.13 As he told Radio Palestine: We asked both the present government and the previous government to create alternative jobs. We cannot overlook the 35,000 workers employed in the settlements [in the industrial zones]. It is not possible to discuss this matter [a boycott of the settlements] without finding a solution or an alternative for those workers employed in the settlements. It is not we but the government that should be addressing this, but it is our clear opinion that all parties should accept full responsibility and first and foremost find work for all of these people, not simply introduce a boycott program. It makes no sense to say that 35,000 workers should just go home. It would be a disaster. It will swell the ranks of the poor and exacerbate poverty and the social problems of the Palestinian Authority.

The head of the West Bank unions is not alone in opposing the closure of the industrial zones. Former Mayor of Nablus Ghassan Shakaa, who also serves on the PLO Executive Committee, said, We are making a laughing stock of ourselves when we say that we are capable of imposing a boycott on Israel or ending our relations with Israel, especially with regard to security and economy, which are the two components of life for Palestinians and civilians in the West Bank. We cannot boycott Israel. How will we obtain fuel or flour? How do we expect to have electricity – and so on and so forth…? If we were to decide to cut off economic relations with Israel and cancel cooperation under the Paris Economic Agreement, would we be able to live without them?14 Why then is Europe ignoring Palestinian union leaders and mayors who warn against the economically devastating effects of closing the West Bank industrial zones? It appears that Europe’s relationship with Ramallah’s network of elitist, leftist, anti-American and anti- Israeli nongovernmental organizations is a Gordian knot. Representing those NGOs is Mustafa Barghouti of Ramallah, head of several nongovermental organizations that have expressed antimosity towards the United States and Israel.

Without European support of these BDS-promoting NGOs, all of them would cease to exist. In elections to the Palestinian Legislative Council, they barely managed to gain representation.

Without European support of these BDS-promoting NGOs, all of them would cease to exist. However, since Europe does give them massive support, it also listens to their platforms as they preach an extremist anti-Israel attitude favoring boycott and isolation.

However, Europe provides them massive economic support and a platform to preach extremist anti-Israel positions advocating boycotts and isolation. These NGOs also prevent Europe from hearing what the Palestinian public is saying about their socioeconomic situation, and their desire for positive relations with Israel.

Europe should be engaging in responsible conduct, in contrast to the problematic behavior of the PA. But Europe, instead of exploiting its influence with the Palestinians to promote good-neighborly relations with Israel and positive diplomatic interactions, has pursued negative measures, such as its product-labeling policy.15 Such measures generate tensions with Israel and reflect previous European missteps in the Middle East.

The most important question must be emphasized. Will current EU policy prevent the establishment of a Palestinian state and lead to ongoing economic, political, and security crises for Palestinians, Israelis, and neighboring countries? Pinhas Inbari is a fellow and Middle East analyst at the Jerusalem Center for Public Affairs and a leading expert on the Arab world and Islam.

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3 Nabil Basherat, interview, SodaStream factory, Idan Hanegev, October 30, 2017.

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9 Interview with a senior Palestinian Banking executive, Bethlehem, March 19, 2017 In this case, one Palestinian agent from a Palestinian company sought to oust a competing Tnuva distributor from the West Bank town of Bethlehem and used the BDS libel to delegitimize his competitor, in favor of prominent individuals close to the Fatah’s PA headquarters – the Muqata in Ramallah


11 January 1, 2016.

12 Radio Palestine, November 8, 2014.

13 Ibid.

14 Interview on Nablus Live TV, غسان-الشكعة-يدلي-بتصريحات-كبيرة /#ixzz4CYq9W99O

15 Similar statements were made by Israeli opposition leader Isaac Herzog on Voice of Israel radio, January 24, 2016.