Background & Overview
by Mitchell Bard
(Updated August 2016)
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.
Overview
America Fights the Boycott
Examples of Boycott Requests
The Boycott Begins to Crack
Into the New Millennium
Overview
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.
The blacklisting process is capricious; it is unclear
whether boycott officials collect any evidence at all before placing an
individual or company on the blacklist. No two countries have identical
lists, and six countries Algeria, Mauritania, Morocco, Somalia, the Sudan and Tunisia do not enforce the secondary boycott. Egypt's policy changed from
strict enforcement to unofficial complicity after the signing of the peace
treaty with Israel, despite the provision whereby Egypt agreed to the
“termination of economic boycotts and discriminatory barriers to the
free movement of people and goods. . . .”
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.
Current law prohibits:
Agreements to refuse or actual refusal to do business with or in Israel or with blacklisted companies.
Agreements to discriminate or actual discrimination against other persons based on race, religion, sex, national origin or nationality.
Agreements to furnish or actual furnishing of information about business relationships with or in Israel or with blacklisted companies.
Agreements to furnish or actual furnishing of information about the race, religion, sex, or national origin of another person.
Examples of Boycott Requests
BAHRAIN
Prohibited Boycott Condition in a Purchase Order:
“In the case of overseas suppliers, this order is placed subject to the suppliers being not on the Israel boycott list published by the central Arab League.”
KUWAIT
Prohibited Boycott Condition in a Custom’s document
“[The vessel entry document asks the ship’s captain to certify that,] no goods, dry cargo, or personal effects listed on the document of Israeli origin or manufactured by a blacklisted firm or company are to be landed as they will be subject to confiscation.”
SAUDI ARABIA
Prohibited Boycott Condition in a Contract
“Vendor shall comply with the Israel boycott laws in performing his contractual obligations.”
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).
Into the New Millennium
In April 2004, representatives from 19 Arab
countries met for the 72nd conference Bureau for Boycotting Israel to discuss tightening
the boycott. The four-day meeting considered blacklisting new companies
that do business with the Jewish state. Mauritania, Egypt and Jordan, which have diplomatic
ties with Israel, stayed away from the meeting.
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 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
came 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.
Little publicity has been given to the boycott in recent years, but it continues to be enforced by most Arab countries. The 90th meeting of liaison officers was scheduled in Cairo during August 2016 because the civil war in Syria prevented meeting in the Damascus headquarters. Kuwait and the UAE announced their intention to attend the meeting, which planned to evaluate the boycott and to coordinate with the international Boycott, Divestment and Sanctions (BDS) movement.
On August 5, 2016, the Internal Revenue Service (IRS) published an updated List of Countries Requiring Cooperation with an International Boycott: Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, United Arab Emirates, Yemen.
Sources: Mitchell Bard is the Executive Director of the American-Israeli Cooperative Enterprise; Office of Antiboycott Compliance; Gulf News, (August 2, 2016); KUNA (August 2, 2016); Louis Rothberg, Margaret M. Gatti, Marynell DeVaughn, “IRS Publishes List of Countries Requiring Cooperation with an International Boycott,” The National Law Review, (August 19, 2016). |