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memri
January 20, 2006 No.
261

The Arab Boycott of Israel in the Globalization Age

Introduction

The Arab boycott was initiated by the Arab League as a form of economic warfare against the newly-declared State of Israel in 1948. The boycott was expanded in an effort to undermine Israel's economic viability and, in 1951, the Arab League established a Central Boycott Office (CBO) in Damascus to coordinate Arab boycott activities. The present Commissioner General of the CBO is a Syrian national, Ahmad Khaza'.

The boycott of Israel by Arab countries has had a long and checkered history. While the boycott was surreptitiously breached over the years, it was delivered a near-fatal blow following the peace agreement between Egypt and Israel in 1979 and the subsequent signing of the Israel-Palestinian Declaration of Principles in September 1993, known as the Oslo Agreement.

The renewed conflict between Israel and the Palestinians, following the second Intifada of 2000, awakened from their slumber many quarters that have never been comfortable with a policy of "normalization" with Israel and free trade with her.

While the voices for reinstating a comprehensive boycott on Israel are randomly heard, there remain many practical and, indeed, rational, voices which underscore the futility, not to mention, in the age of rising globalization, the impracticality of reinstating and enforcing a total boycott.

Levels of Boycott

The boycott was meant to operate at three levels - primary, secondary and tertiary. The primary aspect of the boycott prohibits the importation of Israeli-origin goods and services into the boycotting countries. The secondary and tertiary levels discriminate against foreign firms that do business with Israel and the boycotting countries. Specifically, the secondary level of boycott prohibits any entity in the Arab League from engaging in business with foreign firms that contribute to Israel's military strength or economic development. The tertiary boycott prohibits business dealings with foreign firms that do business with blacklisted companies. Perhaps the most damaging aspect of the Arab boycott was the unintended consequences arising from the unofficial voluntary boycott when companies independently avoided doing business with Israel for fear of Arab retaliation.

The "Black List" is maintained and updated by the CBO in Damascus. It is estimated to include as many as 10,000 firms or individuals. The CBO informs a firm when it is placed on the "Black List" but the "Black List" itself is kept as a confidential document and information on its content becomes public whenever a company is listed or de-listed. [1]

The Enforcement of the Boycott

While the legal structure of the boycott in the Arab League remains unchanged, its enforcement varies widely from country to country. Some member governments of the Arab League have consistently maintained that only the Arab League as a whole can revoke the boycott. Other member governments support national discretion on adherence to the boycott, and a number of states have taken steps to revoke their adherence to some aspects of it. For example, in September 1994 the Gulf Council on Cooperation (comprising Saudi Arabia, U.A.E., Qatar, Oman, Bahrain and Kuwait) announced that it would end its adherence to the secondary and tertiary aspects of the Arab League boycott of Israel, eliminating a significant trade barrier to the U.S. firms.

After signing peace treaties with Israel, Egypt and Jordan are no longer members of the boycott office. Since the fall of the Saddam regime, Iraqi merchants have been known to import Israeli goods through Jordanian traders and commission agents without restrictions. Mauritania, which maintains full diplomatic relations with Israel, said it found its relations with Israel "particularly helpful to the Palestinian cause." [2]

The rhetoric emanating from countries like Syria, Lebanon when under the thumb of Syria, and Iraq under Saddam Hussein about the maintenance of the boycott far exceeds the political will and the political inclination of most members of the Arab League to enforce it.

The Arab boycott has been languishing for years but was kept alive by periodic resuscitation. Quite often it follows the ebb and flow of the Israeli-Palestinian relations. The interest in the boycott declines when these relations show signs of improvement. But when the relations are marred by conflicts, such as during the Intifada, the interest in and, more significantly, the rhetoric for, reinforcing the boycott rises. But even when the interest in the boycott appears to go up, the corresponding action for enforcement seems to lack the potency and vigor that characterized the early history of the boycott.

The attitude toward boycott enforcement is best reflected in the frequency of meetings of the CBO. Originally intended to meet twice a year to update the boycott policies and their companion "Black List" the Boycott Office had met only twice between 1993 when the Palestinians signed the Oslo agreement with Israel and 2002. In the latter year, the Arab summit, meeting in Beirut, decided to reactivate the boycott following the Palestinian intifada. During that time span of about 10 years, the meetings could not be held for lack of a quorum, which reflected a lack of interest by at least one-third of the members. In the semi-annual boycott meeting in April 2003 which was held as usual in Damascus shortly after the occupation of Iraq, delegations of 14 Arab countries attended while eight countries were absent. Three of the 14 countries attending were representatives of their local embassies rather than the professional boycott officers. [3]

Sample of Action Taken by the CBO

The London daily al-Hayat illustrated the pattern in which the boycott office operates. In the 68th session of the CBO, held in April 2002, two companies were added to the "Black List," four companies were removed from it, and 18 companies were kept in abeyance until "further action was considered." The following is as a sample of COB's actions:

Added to the list was the Turkish company Rotem Kimyevi Maddeler because it was considered as a branch of an Israeli company, Amfert Negev. The Turkish company allegedly exported chemical material of 100 percent Israeli origin to Arab countries, and 30 percent of its capital was allegedly Israeli.

The boycott was lifted from the Portuguese company Transportes Aereos Portugueses S.A. after submitting documents denying any relations with Israel in general and with the Israeli airline El Al in particular.

However, when the boycott office dealt with a multinational corporation, the requisite action was invariably postponed. For example, in the case of the American computer giant Hewlett Packard, a decision was postponed despite "information indicating it has established branches in Israel." Similarly, a decision was also postponed regarding another multinational company, the German industrial giant Siemens, "despite information about its dealings with Israel."

According to al-Hayat, the decisions taken by the Boycott Office reflected the "the intervention of strong economic interests in every country to avoid its inclusion in the 'Black List.'" [4]

In connection with the most recent meeting of the Boycott Office on November 2005, it was announced that two ships, one Panamanian and the other Cambodian, were included in the "Black List." [5] While the placing of the two ships was meant to convey that the CBO was still active, the action itself is meaningless. Many of the cargo ships sail the high seas under "a flag of convenience," whether it is Liberian, Panamanian, or of a host of other countries which offer this service for a fee. A ship owner could change the ship's name and registration as fast as it is placed on the Syrian-administered "Black List."

The U.S. Takes the Lead in Legislating Anti-Boycott Laws

During the mid-1970s the United States adopted two laws that seek to counteract the participation of U.S. citizens in other nation's economic boycotts or embargoes. These anti-boycott laws are the 1977 amendments to the Export Administration Act and the Ribicoff Amendment to the 1976 Tax Reform Act. These anti-boycott laws were adopted to encourage, and in specified cases, require U.S. firms to refuse to participate in foreign boycotts that the United States does not sanction. They have the effect of preventing U.S. firms from being used to implement foreign policies of other nations which run counter to U.S. policy. Specifically, these laws prohibit agreements that:

  • Refuse to do business with or in Israel or with blacklisted companies.
  • Discriminate against other persons based on race, religion, sex, national origin or nationality.
  • Furnish information about business relationships with or in Israel or with blacklisted companies
  • Furnish information about the race, religion, sex, or national origin of another person.

The U.S. has established the Office of Anti-Boycott Compliance in the Department of Commerce to monitor and implement the provisions of the law. [6] The Anti-Boycott Office has been vigilant and the U.S. government has exercised its considerable influence on a number of governments in the region to ease the embargo provisions.

The Free Trade Agreements (FTAs) with the U.S., which call for free trade bilaterally, strike at the heart of the boycott, even though FTAs are discriminatory because they favor the products of countries entering such agreements. The boycott bureau remains a nuisance factor.

Boycott Under Globalization

Globalization is identified with a number of trends, including greater international movement of commodities, money, information and people. It is also identified with the development of technology, organizations, legal systems, and infrastructures to allow this movement. In the last 50 years, barriers to international trade have been considerably lowered and, in some instances, completed removed, through international agreements such as the General Agreement on Tariffs and Trade (GATT) and the creation in the mid-1990s of the World Trade Organization. It is therefore obvious that economic boycott in all its manifestations runs contrary to the benefits of lower trade barriers and, as such, it is economically harmful to those who implement it and hence counterproductive.

The application of boycott, particularly the secondary and tertiary levels, is all but impossible in the age of globalization. In the field of technology, in particular, insisting on a boycott policy is not only not enforceable but is self-defeating. A commercial airplane, whether it is the frame, the engine or the avionics, is made up of thousands of parts supplied by hundreds of contractors and sub-contractors, and Israel may be one of them. It would be utterly beyond reason to demand a certificate of origin for every part of the plane and expect the manufacturer to comply.

Moreover, in High Tech, a lot of electronic components change hands in the global market and to insist on a certification of origin would be to deny oneself the advances and advantages of modern technology. The reality is that the enforcement of the boycott against Israel "is a custom more honored in the breach than in the observance."

Writing in Al-Ahram Weekly under the title "Ghosts of boycotts past," Dina Ezzat said:

…The new globalized economic order has made boycotting Israel's economy far more problematic than once it was. Which is why, during a period of seething tensions between the Arab states and Israel, the old weapon, both as concept and practice, is failing to muster the strength it had in the bygone days of the 1950s and 1960s. [7]

A cartoon in the Saudi daily al-Riyadh titled "The weapon of boycott" shows a tank with a turret in the form of a hamburger with a straw protruding as a gun. [8]

Syria Expands the Boundaries of the Boycott

Having realized the futility of the boycott in recent years, Syria, the host country of the Boycott Office and the moving spirit behind its ideology and action, has expanded the boundaries of the boycott by maintaining that while the boycott was economic in the first place, "it was also a boycott of all forms of normalization with the Zionist enemy and the patterns of American culture which the [US] tries to impose in the name of globalization on the peoples of the earth, seeking to obliterate their identity, history and culture because America is short on all of these…" [9]

In other words, the Boycott Office has now become an instrument to fight globalization which threatens primarily the Syrian state-run command economy drowning under the weight of stifling regulations, pernicious corruption and a mafia-style political system. [10]

Syrian staff are the primary beneficiaries of the salaries advanced by the Arab League. If the CBO were abolished, many of these bureaucrats will be out of work or will be working as civil servants in the Syrian government at a fraction of their current salaries and benefits. Therefore they are not likely to lower their zeal for the boycott even if their zeal was shared by diminishing number of a supporting cast.

The Status of Saudi Arabia

There was a question whether Saudi Arabia will continue to adhere to boycott policies following its membership on the World Trade Organization. Saudi Arabia, however, did participate in the last meeting of the CBO, held in Damascus in November, 2005. Commissioner General of the CBO Hamad al-Tayab Bousalaa praised Saudi Arabia's participation, describing it as a "new initiative, considering that the access agreement to the World Trade Organization falls under the item of sovereignty." He insisted that the boycott of Israel does not fall under the jurisdiction of the WTO but rather under the Arab League. The Saudi daily al-Watan, which reported this item, did not dwell upon the Saudi position. [11]

Conclusion

In the age of globalization which is characterized by the meltdown of international trade barriers some Arab countries, with Syria taking the lead, still cling to the old ways of restricting free trade through antiquated and most inefficient ways for purposes that are neither politically or economically sustainable.

While even a partial boycott is not without economic cost to Israel in terms of trade, tourism and investment, neither is it cost-free for those who practice it. Despite the boycott, and perhaps as a challenge to the boycott, full or partial, Israel has been able to develop a world-class high tech economy. Today more than ever globalization is Israel's strongest ally and the boycott's biggest barrier. Even Arab economists understand that, in a globalized market, a boycott will be as porous as it will be ineffective.

* Dr. Nimrod Raphaeli is Senior Analyst of MEMRI's Middle East Economic Studies Program.


[1] Asia Times (Taiwan), May 3, 2002.

[2] Al-Ahram Weekly (Egypt), April 11-17, 2002.

[3] Al-Hayat (London), April 22, 2003.

[4] Al-Hayat (London), May 2, 2002.

[5] Champress (Syria), November 29, 2005.

[6] http://bxa.doc.gov/antiboycottcompliance/oacrequirements.html.

[7] Al-Ahram Weekly (Egypt), April 11-17, 2002.

[8] Al-Riyadh (Saudi Arabia), May 12, 2002.

[9] Tishreen (Syria), April 9, 2003.

[10] MEMRI Inquiry and Analysis No. 259, “The Syrian Economy under Bashar al-Assad,"January 13, 2006, The Syrian Economy Under Bashar al-Assad.

[11] Al-Watan (Saudi Arabia), November 22, 2005.