The Death of the Secondary Boycott Against Israel

by Roger Alford

At the recent Northwestern Law School conference on the Israeli-Arab Dispute and International Law I had the good fortune to address one of the few bright spots in current Arab-Israeli relations.

Most international law scholars of the Arab-Israeli conflict seem to know little about international trade, and focus almost exclusively on the laws of war in their discussion of Middle East relations. Therefore when I was choosing my topic for discussion, I decided to analyze the current status of the Arab League boycott against Israel. The secondary boycott, of course, involves the blacklisting of any corporation that does business in Israel.

As a result of the secondary boycott, Arab consumers suffered because they did not have access to the most efficient source of goods and services. Israeli investment also suffered because foreign corporations often chose to sell their products to dozens of countries with hundreds of millions of consumers rather invest in one small country with a few million consumers. Third-country corporations were caught in the middle and forced to make hard choices that they should never have been forced to make.

The good news is that in the past fifteen years the secondary boycott against Israel has died a quiet death. According to official reports from the United States, of the twenty-two members of the Arab League, only three countries–Iraq, Libya, and Syria–continue to enforce a secondary boycott. Even then, it appears that only Syria is serious about it. USTR has recently stated that the secondary boycott “has extremely limited practical effect overall on U.S. trade and investment ties with most Arab League countries.” As a practical matter, we are experiencing the death rattle of the secondary boycott against Israel.

One can only speculate about the cause of death, but I would hazard that it has much to do with the legalization of international economic relations. Since the end of the Cold War, thousands of bilateral investment treaties have been signed. Hundreds of those involve Arab countries, with Egypt having signed seventy-nine, Morocco seventy-three, Oman seventy-one, Lebanon forty-nine, Jordan thirty-five, etc. These BITs are unusually significant in that they depoliticize disputes by guaranteeing foreign investors the right to pursue treaty-based investment arbitration. If an investor is blacklisted as a result of the secondary boycott against Israel, then it likely has a viable claim for a BIT violation, such as compensation for conduct tantamount to an expropriation or denial of fair and equitable treatment.

Equally momentous is the binding nature of the WTO rules, which prohibit discriminatory import bans. The Arab League boycott violates WTO rules against MFN treatment and quantitative restrictions. Not surprisingly, none of the twelve Arab League countries that are WTO members enforce a secondary boycott, and only three of them–Kuwait, Saudi Arabia, and the UAE–continue to enforce a primary boycott.

Even the primary boycott is subject to a strong legal challenge before the WTO, but Israel thus far has decided to forego this avenue, concluding that “the boycott right now is on the defensive as a result of working behind the scenes…. We do not wish to politicize the WTO.” One may take this at face value, or conclude that Israel fears that such a challenge would require the WTO to finally interpret the national security exception, an ambiguous provision that deserves careful interpretation in a less politically-volatile context.

WTO accession talks will continue to create pressure to eliminate the secondary boycott. In its accession talks, for example, Saudi Arabia confirmed that “the application of secondary and tertiary boycotts had been terminated in practice and in law.” Recent WTO decisions involving China’s accession commitments now make clear that those promises are subject to legal enforcement. The three secondary boycott holdouts–Iraq, Libya, and Syria–are all seeking WTO membership, and given the nature of accession talks, one can be sure that termination of the secondary boycott will be a precondition of their membership.

That’s great news for the Arab street. The importance of promoting foreign investment is particularly acute in the Middle East. The Arab world is facing a ticking time-bomb, with approximately 70 percent of its population under twenty-five years old. It desperately needs to find ways for its growing population to contribute to its economy. For most Arab countries, the commitment to strengthen their economies and develop trade relationships has taken precedence over the desire to enforce a secondary boycott against Israel. Almost nine out of ten Arab countries have concluded that the costs of continued enforcement of the secondary boycott outweigh the benefits.

That’s also great news for Israel. It is now enjoying a tremendous influx of foreign investment. The boycott’s greatest risk was always that it would impede direct foreign investment into Israel. That fear no longer animates the discussion. In the same year that Israel was at war with Lebanon, it enjoyed record direct foreign investment of over $13 billion.

http://opiniojuris.org/2010/05/25/the-death-of-the-secondary-boycott-against-israel/

4 Responses

  1. Thank you Roger, you have a point there, but Israel should not be given a pass on its actions against the Palestinians.

  2. The secondary ban was frequently circumvented via shell corporations, although for brand-name products that wasn’t really a solution.

  3. To follow up on Ali’s comment:

    A flotilla of eight boats carrying thousands of tonnes of construction materials, medical equipment and other aid is preparing to sail to Gaza in the next few days, setting the scene for a confrontation with Israel which has vowed to prevent the ships breaking the blockade on the Palestinian territory.
    Three cargo ships and five passenger vessels plan to meet up in international waters between Cyprus and Gaza Strip before heading towards Gaza City. The Israeli military is expected to stop the flotilla and divert it to the Israeli port of Ashdod.
    One of the organisers of the flotilla, which includes three vessels from Turkey, is IHH, a humanitarian aid group supported by Ankara. Diplomatic relations between Turkey and Israel have deteriorated since the Israelis launched a three-week war on Gaza in 2008-09. An attempt to block the flotilla is likely to increase tensions between the two countries. The Turkish prime minister, Racep Tayyip Erdogan, has called on Israel to avoid this be allowing the boats through.
    “This could make relations between Israel and Turkey more complicated,” said Yigal Palmor, an Israeli foreign ministry spokesman.
    On board the ships are 10,000 tonnes of cargo and about 700-800 activists and politicians from more than 40 countries. The cargo includes building materials, medical supplies and paper for schools. One boat is carrying a complete dental surgery including drills. Crayons and chocolate are also on board for Gazan children. The cargo has been paid for by donations.
    “We’re trying to break the blockade of the Gaza Strip and tell the world that Israel has no right to starve 1.5 million Palestinians,” said Greta Berlin, of the Free Gaza Movement, another organiser of the flotilla. “We are bringing in vitally needed supplies so the people of Gaza can rebuild their infrastructure.”

    Israel has imposed an economic blockade on Gaza since the Palestinian Islamist movement Hamas seized control almost three years ago. Nearly all exports and imports are banned and only a limited supply of food and medical aid is allowed in. [guardian.co.uk]

    Here are some revealing statistics from a recent report by the World Health Organization on the situation in Gaza:

    “In Gaza, Israel’s blockade is debilitating the healthcare system, limiting medical supplies and the training of medical personnel and preventing serious medical cases from travelling outside the Strip for specialized treatment.”

    “Israel’s 2008-2009 military operation damaged 15 of the Strip’s 27 hospitals and damaged or destroyed 43 of its 110 primary health care facilities, none of which have been repaired or rebuilt because of the construction materials ban.”

    “Some 15-20 percent of essential medicines are commonly out of stock and there are shortages of essential spare parts for many items of medical equipment . . . ”

    In Late 2008, nearly 1 in 5 Palestinians lived in “extreme poverty.” Over half lived below the poverty line.

    “In the second half of 2008, one third of West Bank households and 71 percent of Gaza households received food assistance, with food accounting for roughly half total household expenditures – making families highly vulnerable to food price fluctuations.”

    “In May 2008, 56 percent of Gazans and 25 percent of West Bank residents were deemed food insecure by the UN.”

    Chronic malnutrition has risen in Gaza over the past few years to reach 10.2 percent.” [This is especially true among children in Gaza).

    The entire fishing and agricultural sectors in the Palestinian population are very badly off.

    Information courtesy of Juan Cole’s blog, Informed Comment.
     

  4. I may be missing something, but why does WTO membership require dropping secondary boycotts? The U.S. is a member, and maintains secondary boycotts against Iran and Cuba, and formerly did against Libya.

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