Israeli trade fraud
30 April 2001
There is no conduct quite so unbecoming as the betrayal of a friend.
Israel professes to be a friend of Europe and yet, in its dealings
with Europe, Israel has cheated and lied and abused the trust that
was placed in its officials. It has done this cynically and systematically
- and has been found out. The question now is what Europe is going
to do about it.
In 1995 Israel and Europe signed an agreement "to establish
lasting relations, based on reciprocity and partnership". On
the first page, both sides declared a commitment to "the common
values that they share" and "the observance of human rights
Among other things, Europe promised Israel cooperation in a wide
range of fields, including culture and science - an important morale-booster
for any country which has been ostracised by its neighbours.
But the biggest prize for Israel was trade: it would be allowed
to export its own goods to Europe either duty-free or at reduced
rates. Today, that trade accounts for one third of Israel's worldwide
This was not merely a goodwill gesture by Europe. The agreement
(and another one signed later with the Palestinians) was meant to
reward Israel for its participation in the Oslo peace process, and
to encourage further progress in the negotiations. Indeed, several
European countries waited for signs of further progress before ratifying
The agreement was based (misguidedly, as it turned out) on mutual
trust. This meant that Israeli customs officials were expected to
certify - truthfully - that the goods exported to Europe had in
fact been produced in Israel.
But no sooner had the ink dried on Shimon Peres's signature than
Israel began to cheat. To imagine that this was due to a few bent
officials in the customs department would be a mistake: cheating
was built into the system and it was carried out with the blessing
of the Israeli government.
The cheating took three forms, which I outlined in an article last
week (Europe colludes in Israeli trade scams). One was to re-label
produce from other countries as Israeli.
Another was to pretend that products from illegal Israeli settlements
had originated within Israel's internationally-recognised boundaries.
The third was to frustrate the Palestinians' efforts to trade directly
with Europe and instead force them to send their produce via Israel
under an Israeli label. Because of this, money which by rights should
have gone to Palestinians went to Israelis and, in the case of imports,
the Palestinian Authority was deprived of much-needed tax revenue.
In 1997, as a result of complaints, the European commission sent
a delegation to Israel to find out why Brazilian orange juice arriving
in Europe had been certified as Israeli in order to qualify for
The problem, the delegation concluded, went way beyond orange juice:
Israeli customs officials simply could not be trusted. The problem
was so serious, their report said, that "the validity of ALL
preferential certificates issued by Israel, for ALL products",
was in doubt.
The commission then issued a warning to European companies which
trade with Israel, pointing out that they could be liable to backdated
import duties if the certificates proved to be invalid.
In the meantime, the commission announced it would take steps to
verify the "ample evidence" of Israeli violations of the
agreement, and added that "should these violations ... be confirmed
they should be brought to an end." Instead, they continued.
Last year, after months of hesitation, the process of returning
suspect certificates to Israel for verification finally got under
Britain has so far returned certificates for Ahava cosmetics, dates,
carpets from Barkan (a West Bank settlement), wines, brandy and
liqueurs, pencils, plastic household items, key blanks and locks,
electrical items, and bath and skincare products. The commission
has also alerted British customs to watch out for biscuits and Soda
Stream drinks makers. Other countries have taken similar action,
but the products have continued to enter Europe at preferential
The procedure laid down in the agreement for challenging the validity
of certificates is to seek verification, though nobody is in any
real doubt that the products have come from illegal settlements
and that their documentation has been falsified. They are listed
as settlement products on rival Israeli websites which urge people
either to boycott them or to make a point of buying them.
Under the rules, once Europe asks for verification, Israel is allowed
10 months to provide evidence of the real origin of a product. The
deadline on some products has already expired; on others it will
expire between now and the end of September. So far as is known,
Israel has not replied.
In the absence of confirmatory evidence from Israel within the
10-month deadline, customs authorities throughout Europe can refuse
preferential treatment for the product concerned, and claim backdated
duties at the full rate.
Israel, in turn, is obliged under the agreement to take punitive
action against anyone who has been involved in falsifying documents.
In the coming weeks, European leaders will decide whether to continue
with this leisurely, piecemeal approach or whether to take tougher
Ending preferential treatment for settlement products would certainly
be progress, but it barely scratches the surface. It does not address
the European commission's most serious complaint: that all certificates
issued by Israel, for all products, are suspect.
To re-establish trust, Israel will have carry out a thorough overhaul
of the way it does business with Europe. On past form, that is unlikely
to happen unless Europe threatens to terminate the agreement.
Given that Israel has shown such persistent bad faith - in contrast
to the spirit of "reciprocity and partnership" on which
the agreement is based - there are reasonable grounds for termination.
The unfair practices employed against Palestinian trade with Europe
are further evidence of Israel's lack of commitment to a genuine
Finally, one might ask whether the agreement has served its aim
of promoting peace. By helping to keep the settlements in business
it may well have prolonged the conflict. And while the peace process
is on hold, might it not make sense to put the Euro-Israeli agreement
on hold too?
France has already said it wants tough action. But any decision
would have to be unanimous - and Britain and Germany are resisting.
Last January, Britain's foreign secretary, Robin Cook, was asked
in a letter if he would consider suspending the agreement on the
grounds that Israel had infringed a clause dealing with human rights.
In response, Mr Cook pointed out another clause that says: "Nothing
in this agreement shall prevent a party from taking any measures...which
it considers essential to its own security".
Mr Cook, who used to pride himself on Britain's "ethical"
foreign policy, commented: "Any EU moves towards suspension
of the agreement on human rights grounds would involve lengthy and
difficult negotiations with Israel on the relative weight to be
attached to these two articles. These negotiations would leave little
room for anything else in the EU-Israel relationship."
So perhaps Ariel Sharon need not worry after all. For Europeans,
arguing with the Israelis is far too tiresome.