The Arab Boycott
By Mitchell Bard
(Updated September 27, 2007)
The Arab boycott was formally declared by the newly formed Arab League Council on December 2, 1945: “Jewish products and manufactured goods shall be considered undesirable to the Arab countries.” All Arab “institutions, organizations, merchants, commission agents and individuals” were called upon “to refuse to deal in, distribute, or consume Zionist products or manufactured goods.” As is evident in this declaration, the terms “Jewish” and “Zionist” were used synonymously by the Arabs. Thus, even before the establishment of Israel, the Arab states had declared an economic boycott against the Jews of Palestine.
The boycott, as it evolved after 1948, is divided into three components. The primary boycott prohibits direct trade between Israel and the Arab nations. The secondary boycott is directed at companies that do business with Israel. The tertiary boycott involves the blacklisting of firms that trade with other companies that do business with Israel.
Once on the list, it is sometimes difficult to get off, since the company or some Arab sponsor must initiate the request. A firm might be required to supply proof that it no longer has any business with Israel and/or might be asked to make investments in Arab countries equal to those made earlier in Israel. Bribery is another means of becoming “de-listed.”
The objective of the boycott has been to isolate Israel from its neighbors and the international community, as well as to deny it trade that might be used to augment its military and economic strength. Israel's capacity to reach its full economic potential was hindered for decades by the actions of Great Britain, Japan and other countries that cooperated with the boycott. It has undoubtedly enhanced Israel’s isolation and separated the Jewish State from its most natural markets, but the boycott failed to undermine Israel’s economy to the degree intended.
America Fights The Boycott
In 1977, Congress prohibited U.S. companies from cooperating with the Arab boycott. When President Carter signed the law, he said the “issue goes to the very heart of free trade among nations” and that it was designed to “end the divisive effects on American life of foreign boycotts aimed at Jewish members of our society.”
The Arab League threatened to take a decisive stand against the new law, which was regarded as part of “a campaign of hysterical laws and bills . . . which Israel and world Zionism are trying not only to enforce on the U.S.; but also in some countries of Western Europe.”
Contrary to claims that the bill would lead to a drastic reduction in American trade with the Arab world, imports and exports increased substantially. Broader diplomatic and cultural relations also improved. Nevertheless, certain U.S. companies were blacklisted for their relations with Israel. In addition, few other nations adopted anti-boycott laws and, instead, complied with the boycott. For example, the Military Aircraft Division of British Aerospace sent a purchase order to an American supplier in connection with the British agreement to sell Saudi Arabia Tornado aircraft and other weapons in the late 1980's. It guaranteed none of the items “are made in Israel directly or indirectly either in whole or in part and such items are not reshipped from Israel for Israeli account or by proxy for or on behalf of or with any persons or organizations resident in Israel. The supplier moreover warrants not to dispatch any of the items on any Israeli carrier.”
For many years, language has been included in the foreign operations appropriations acts concerning the boycott. For example, Section 535 of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2006 (P.L. 109-102), states that: (1) it is the sense of Congress that the Arab League boycott is an impediment to peace in the region and to United States investment and trade in the region; (2) the boycott should be revoked and the CBO disbanded; (3) all Arab League states should normalize relations with Israel; and (4) the President and the Secretary of State should continue vigorously to oppose the boycott and encourage Arab states to assume normal trading relations with Israel. U.S. embassies and government officials raise the boycott with host country officials, noting the persistence of illegal boycott requests and the impact on both U.S. firms and on the countries’ ability to expand trade and investment.
In August 2007, the federal antiboycott statutes were revised amending the existing penalty guidelines and outlining procedures for firms to voluntarily report violations of the law. Officials hope that by providing companies an incentive to “come clean ” they will do so and save the Commerce Department the need for costly investigations.
The Boycott Begins To Crack
On September 30, 1994, the six Gulf Cooperation Council states announced they would no longer support the secondary boycott barring trade with companies doing business with Israel, but U.S. companies continued as of 2007 to receive requests to cooperate with the boycott from GCC countries. At a meeting in Taba, Egypt, February 7-8, 1995, Egyptian, American, Jordanian and Palestinian trade leaders signed a joint document the Taba Declaration-supporting “all efforts to end the boycott of Israel.”
Since the signing of peace agreements between Israel and the PLO and Jordan, the boycott has gradually crumbled. The Arab League was forced to cancel several boycott meetings called by the Syrian hosts because of opposition from countries like Kuwait, Morocco and Tunisia. The primary boycott prohibiting direct relations between Arab countries and Israel has slowly cracked as nations like Qatar, Oman and Morocco have begun to negotiate deals with Israel. Furthermore, few countries outside the Middle East continue to comply with the boycott. Japan, for example, has exponentially increased its trade with Israel since the peace process began. Still, the boycott remains technically in force and several countries continue its enforcement (e.g., Lebanon enforces the primary, secondary and tertiary boycotts).
In late 2005, Saudi Arabia was required to cease its boycott of Israel as a condition of joining the World Trade Organization. After initially saying that it would do so, the government subsequently announced it would maintain its first-degree boycott of Israeli products. The government said it agreed to lift the second and third degree boycott in accordance with an earlier Gulf Cooperation Council decision rather than the demands of the WTO. In June 2006, the Saudi ambassador admitted his country still enforced the boycott in violation of promises made earlier to the Bush Administration (Jerusalem Post, (June 22, 2006) and the Saudis participated in the 2007 boycott conference.
During free trade agreement negotiations with Bahrain, Oman and the United Arab Emirates, the status of the boycott was an issue of concern and the countries agreed not to comply with the boycott. However, indications suggest that these countries continue to support the boycott.
Representatives from only 14 Arab countries attended the biannual conference of the Arab League’s Bureau for Boycotting Israel in Syria in April 2007. Mauritania, Egypt, Jordan, Bahrain and Oman were among the nations that were absent. Those that did participate included the Palestinian Authority, Lebanon, Saudi Arabia and Iraq.
The U.S. government has raised concerns about the enforcement of the boycott by Iraq. In 2006, the number of requests from Iraq for U.S. companies to comply with the boycott increased 287%. Requests in 2006 were also up from Lebanon, Bahrain and Qatar. The largest source of boycott-related requests comes from the United Arab Emirates. In 2006, according to the Department of Commerce, nine companies paid just under $96,000 to settle allegations that they violated the U.S. antiboycott provisions, an increase from five cases in 2005 and $57,000. In January 2007, the New York office of the National Bank of Egypt was fined $22,500 for boycott violations.