- The Washington Times - Monday, December 8, 2003

TEL AVIV — The threat of EU trade sanctions has forced Prime Minister Ariel Sharon into an uncharacteristic retreat from his support of Jewish settlements.

For the last five years, both left-wing and right-wing governments have resisted EU efforts to exclude companies located in Jewish settlements from the favored status under a Israeli-EU free-trade agreement.

But with $7.5 billion worth of Israeli exports to the continent at risk of being held up for customs checks, Mr. Sharon last week reluctantly endorsed a policy that would identify goods manufactured in the West Bank, Gaza Strip and the Golan Heights.

The move exposes factories located on land captured in 1967 — which account for $140 million in exports to the European Union — to customs duties of up to 6 percent. Moreover, it marks an rare moment in which Mr. Sharon’s government is proposing to differentiate between the settlements and Israel proper.

“It’s not an issue of whether I support it or don’t support it. I wouldn’t support anything like that. But I still need to make a decision at the end of the day,” Mr. Sharon told reporters at a recent press conference.

“We have entire industries facing the danger of the same tax they want to levy on Judea and Samaria and Gaza. We need to find the most appropriate solution.”

But Ariel Mayor Ron Nachman, who helped establish the nearby Barkan Industrial Park more than 20 years ago, said Mr. Sharon had backed down.

Today, Barkan is a sprawling hilltop complex housing 120 factories. Mr. Nachman said that exposing settlement companies to European customs will also hurt Palestinians, who number about one-third of the 5,000 workers employed in Barkan.

“The Europeans pushed the prime minister into a position where they’re holding all of the Israeli exports hostage because of goods from beyond the 1967 line,” Mr. Nachman told Israel Radio. “If someone did that to their friend, it would be called extortion.”

Not long after signing the 1995 Israeli-EU free-trade agreement, European officials objected to extending the preference to companies located in the West Bank, Gaza Strip and the Golan Heights — territories they do not recognize as part of Israel.

For years, Israel largely ignored the appeals, refusing to specify the precise origin of its exports. But during the 17 months through last August, some 4,600 Israeli shipments were held up by EU customs officials in order to verify the origin of the goods, according to the Israeli trade ministry.

“We started to have a negative atmosphere created toward Israeli business in Europe,” said Trade and Industry Ministry official Boaz Hirsch. “We saw wider circles of importers who were hesitant to do business with Israel because they would have had to pay customs. The problem wasn’t going away.”

What Israeli trade officials are proposing is to specify for the first time on customs manifests the exact location of the manufacturer. Officials call the proposed change a “technical” resolution to a “technical” problem between Europe and Israel.

While exports manufactured in Jewish settlements will still arrive with Israeli markings, European customs agents will know whether the shipments came from disputed territories. The end consumer, however, won’t be able to tell whether the product came from inside Israel or the West Bank.

Emanuel Giauferet, deputy head of the EU mission in Israel, said the Israeli proposal “goes in the right direction,” but implementation still needs to be spelled out.

“Almost since the beginning of the trade relationship, there has been a trade irritant,” he said. “This has been overdue.”

Oded Tyrah, president of a glass exporter and the head of Israel’s Manufacturers’ Association, said the Israeli proposal is the “optimal” solution, even though it leaves uncertain the fate of exporters in the settlements.

“I am only talking about economic optimization, which is different from political considerations,” he said.

A spokeswoman for the Benjamin Council, an association of Jewish settlements in the north-central West Bank, said that most manufacturers at the Barkan industrial zone wouldn’t speak about their export activities for fear of being exposed to European customs.

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