Europe irresolute over
Israeli trade fraud

Brian Whitaker
The Guardian
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 and democracy".

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 exports.

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.

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 preferential rates.

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 way.

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 rates.

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 action.

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 partnership.

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.