- The Washington Times - Tuesday, May 1, 2001

JERUSALEM Israeli officials are warning that European economic measures aimed at punishing the Jewish state for its handling of the Palestinian uprising in the West Bank and Gaza would probably backfire on Europe and have no real economic impact.
The officials were responding to reports that European Union foreign ministers intend to restrict Israels privileged trade status when they meet in Brussels on May 21.
A European diplomat in Israel said the group would probably take aim at goods manufactured in Jewish settlements in the West Bank and Gaza but was unlikely to go so far as to suspend the Association Agreement, which gives Israel free trade status with the European Union.
"Its hard to imagine a decision to actually abrogate the agreement with Israel," said the diplomat, speaking on the condition he not be named.
The European Union, which has accused Israel of using excessive force against Palestinian violence in the West Bank and Gaza, has long contended that agricultural and consumer products coming from Jewish settlements should not enter Europe duty free. Most of the world considers the settlements, which Israel built after the capturing the West Bank and Gaza in 1967, illegal.
But economic officials in Israel said distinguishing between goods made in Israel and those made in the settlements was impractical and economically useless.
"This would have virtually no practical economic effect on Israeli exporters," said Zohar Peri, director of Israels Foreign Trade Administration. "It would be a symbolic punishment and nothing else."
Mr. Peri said less than 1 percent of the $10 billion in goods Israel exports to Europe annually is produced in settlements in the West Bank and Gaza.
Other officials said it would be difficult for European importers to trace the precise origin of goods since Israel lists products manufactured in settlements as "made in Israel."
Flowers and other agricultural goods form the bulk of settlement export to Europe, though several Israeli industries are located in the West Bank and Gaza. They include Soda-Club Enterprises, a large roducer of home seltzer dispensers that exports almost exclusively to Europe.
Soda Club is one company that officials said could stand to lose if the EU adopts the punitive measures, although they said the duties would be relatively low.
Israel gives tax breaks to companies operating in the Jewish settlements in the West Bank and Gaza. Many of the companies rely on the local Palestinian population as its source of cheap labor.
One official predicted the Israeli companies would probably seek to recover losses of revenue due to new duties imposed by Europe by laying off workers, an outcome that would end up hurting the Palestinian population.
A senior official in Israels Foreign Ministry said the European measure would have political consequences as well.
"Its the type of thing that would reinforce the feeling in Israel that the European Union can be a fair mediator in the Israeli-Palestinian conflict," said the official, who did not want to be identified.
The Europe Union spends hundreds of million of dollars on ventures and projects that promote Middle East peacemaking but complains that it has never had the kind of influence in peace talks that Washington has.
Palestinians have pushed for a wider European role in the process, but Israel eyes the EU suspiciously, viewing it as generally sympathetic to Palestinians and critical of the Jewish state.
Mr. Peri, the trade administration director, said punitive measures against Israel would reinforce that image.
"Imagine that because of such sanctions, a Jew and an Arab who are neighbors in the West Bank and grow the same things, are subject to different terms. This would be unfair," he said.
Palestinians also have what amounts to a free-trade agreement with the European Union.
France led the call for punitive measures after Israeli troops occupied a swath of land in the Gaza Strip from which Palestinians were firing mortars at the Jewish state earlier this month.
Both Washington and Brussels condemned the Israeli move as "excessive and disproportionate." Israel withdrew its troops after 24 hours.
Israel is hoping its traditional European allies, Germany and Britain, will vote down the economic measures at the May 21 meeting.

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