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A rapidly growing number of European states have banned imports from Israeli settlements or are preparing to do so. Spain is already implementing its ban, the Netherlands and Ireland will start this month, Belgium and Norway are in various stages of legislation, the UK has announced its own legislative push within the next six to nine months, with France and Canada declaring they would follow suit. Several other countries – Sweden, Poland, Denmark, Finland and Portugal – are seeking to anchor such a move at the EU level, where a Franco-Swedish initiative failed to win majority support in recent months, but remains on the table.
The direct economic damage of such punitive measures to the overall Israeli economy is minor, as long as they are restricted to products originating in the settlements, although it may be severe for certain exporting producers and farmers. The broader risk is that these measures could spill over into trade with sovereign Israel, potentially normalizing non-trade with Israel within the Green Line. It lies in a spillover of such bans into the trade with Israel as a result of their over-compliance, de-risking, chilling effect, and informal or de facto boycotting, referred to here as a silent boycott. Although directed against the settlements, these measures reinforce perceptions of Israel as a pariah state and an undesirable place to do business. Proof of origin requirements, supply chain checks, responsibilities imposed on European importers, and stringent restrictions on the part of banks, shipping companies, insurers, and distributors may render a transaction with an Israeli company complicated, expensive, and riskier. Current data already point to a chilling effect and “silent boycott” by European importers, and the risk of their expansion is very real. What is more, trade with and through the Netherlands and Belgium is particularly sensitive because the ports of Rotterdam and Antwerp also serve as gateways to other European markets. the UK, France, and Canada, for their part, are members of the G7, the group of the world’s leading industrialized countries, and are themselves of major economic importance.
The expansion of sanctions from goods to services poses an additional risk not only to Israel’s trade but to its financial stability. Spain, for example, has banned commercial advertising of products and services originating in the settlements. Moreover, the UK has announced plans to ban financing, brokerage, construction services, and more. The details of the legislation in each case will determine the level of risk. The paper will review the measures adopted by different countries and the resulting risks.
This paper examines the economic and commercial implications for Israel of the prohibitions on trade with settlements. The first part comprises background on the European policy of differentiation between Israel and the settlements and previous trade restriction measures. This is followed by a comparison between the laws adopted or promoted in various Western European states. The paper then examines the direct implications for settlement businesses and exports, and the spillover risk for companies operating in sovereign Israel and for the Israeli economy as a whole.
