JERUSALEM — For several years now, Kibbutz Harum in the Golan Heights has been manufacturing water-supply products for both the Israeli and European markets.
Though the European market is generally a difficult one to crack, the kibbutz has earned a good living from its exports thanks to the tax break it has enjoyed as part of a long-standing tax agreement between Israel and the European Union.
Under the agreement, Israeli goods may enter Europe free or largely free of the customs tariffs imposed on goods from many other non-EU countries. Thanks to this edge, which makes Israeli goods competitive with local European brands, dozens of Israeli manufacturers have scored successes in European markets.
Now, in a highly controversial move, some European countries are demanding that the EU suspend the tax break for any Israeli product produced outside of Israel’s pre-1967 borders.
As Israeli officials readily concede, the tax agreement, which has existed in one form or another for 30 years, does not actually apply to items produced in East Jerusalem, the Golan Heights, the West Bank or Gaza Strip. But they are asking why, after three decades of looking the other way, is the EU so insistent on enforcing the rules now?
“Europe is our biggest customer,” says a manager at the Kibbutz Harum water-products factory. “We earn about $3 million annually from Europe. If [the tax] goes through, it could devastate us.”
Government officials are relatively unconcerned over the possible loss of revenue, as European sales of products made over the Green Line, such as Ahava cosmetics and Mei Eden mineral water, amount to no more than $20 to $30 million. However, they fear any EU resolution that distinguishes between pre- and post-1967 Israel could prejudice future peace talks.
David Granit, deputy head of the Foreign Ministry’s European division, calls the EU’s pressure “unfair in the sense that when we signed our previous agreement back in 1985, they didn’t raise the issue. Now that we’re negotiating with the Palestinians about final status, about which settlements will stay and be removed, they’re bringing it up.
“We’ve told them that the status of the West Bank and Gaza will be solved through negotiations. It they dictate now, they are prejudicing the outcome of the peace talks,” Granit says. “By saying that the products produced in the territories aren’t Israeli, they’re saying that Europe doesn’t recognize the concept of compromise.”
Another Israeli official, who asked to remain anonymous, says that any such EU decision would be “very hypocritical.”
“The European Union is trying very hard to take up some of the political slack left by the Bush administration’s vacuum in the Middle East,” says the official. “At the same time, some of their members — I won’t say which — are trying to score political points with the Palestinians by taxing some of our products. The EU can’t do that and still be viewed as an impartial broker.”
The tax issue is another example of the EU’s perceived shift to helping the Israeli left and the Palestinians. An investigation by the Israeli newspaper Ma’ariv revealed that the EU provides hundreds of thousands of dollars each year to nonprofit organizations affiliated with the left, including Peace Now and the Four Mothers movement, which lobbied for Israeli withdrawal from Lebanon.
The EU has come under attack from Israeli lawmakers. Michael Kleiner called for the withdrawal of Israel’s ambassador to the EU. Reuven Rivlin called for an investigation into the funding. Benny Alon claimed the recipient organizations were acting as “agents for the political agenda of foreign countries.”
And last month, Prime Minister Ariel Sharon bypassed a visit to Belgium, which is taking over the presidency of the EU, reportedly because the Brussels prosecutor’s office has ruled that Sharon could be tried on war crimes charges stemming from his role in the massacre at Sabra and Shatilla.
An EU official told the Jerusalem Post that although it does not provide financial support to political parties, it supports “nongovernmental organizations that work for peace, democracy and human rights in the civil societies around the Mediterranean.”
For Stephano Dicara, deputy head of the EU’s delegation in Israel, the issue is “strictly technical, not political.”
“In point of fact, this issue was first raised with the Israelis three years ago, and we’d hoped that a political solution” between the Israelis and Palestinians that would delineate borders “would come out of Camp David. Unfortunately, we know how that ended.”
Approximately 11 months ago, Dicara says, customs authorities from several member states initiated a formal procedure to enforce the treaty. Israel was given notice, and 10 months — until May 2001 — to officially respond.
Since then, he notes, customs officials from Israel and the EU have been working on the matter.
Dicara stresses that “nothing has been decided yet.” The EU will take up the issue at a meeting later this month, but no decision is expected for several months.
The EU official insists that the EU’s bid is not linked to Palestinian pressure.
“No, no, this has to do with a specific treaty and is independent of any particular lobby,” Dicara says. “And as you know, the economic impact on Israel would be extremely minimal. There is an international treaty and we believe treaties must be respected as a matter of principle.”
Marla Van Meter, spokeswoman for the Golan Heights Residents Committee, isn’t convinced.
“It’s so hypocritical,” she says angrily. “You know the same rules don’t apply to other countries, including those whose borders have changed over the years for all sorts of reasons. The EU is trying to put very unfair pressure on Israel and the people living in these areas, who were given permission by the Israeli government to settle and build homes.”
Residents of “post-67” areas “have a right to pursue their livelihood,” Van Meter says, “especially and until any decision to change the borders is made. Right now, they have no right to try to put a black list on communities that are now part of the state of Israel.”
Adam Keller, spokesman of Gush Shalom, a far-left-wing group that instituted its own local boycott of products from the territories in 1998, has been actively encouraging the EU to strip these products of their favored status.
“We consider the settlements as obstacles to peace, and we regard this boycott as a necessary measure,” he says of his organization’s media and Internet campaign.
Keller is proud of Gush Shalom’s role in “educating” the EU about which products are produced over the Green Line, including those whose products bear an address inside Israel proper.
While the question of trade tariffs represents an important component of Gush Shalom’s strategy toward ending what it sees as Israel’s occupation of Palestinian land, for Israeli manufacturers, the end of tax protections could mean financial ruin.
“We’ll be up the creek,” acknowledges a Jordan Valley farmer, whose moshav exports flowers to the EU. “Our distributor is in Tel Aviv and so it’s difficult for anyone to know where the flowers are grown, but what if someone finds out?” he asks nervously.
“It’s a real concern,” agrees a tomato grower in the Gaza Strip who, like most of those interviewed, asked that the name of his business not be published. “Life here is very difficult right now as it is, and it’s difficult to keep our business growing. Losing our tax break would be a major blow.”