Israel blocked Palestinians exports from leaving the territories on February 9, in another chapter of the trade war they have been fighting since September, when the Palestinian Authority banned Israeli veal from entering its territories. The battle threatens both Israeli farmers and particularly the already fragile Palestinian economy, which is highly dependent on the Hebrew state.
Beyond rockets and air strikes, Israel and the Palestinian authority have been fighting another kind of battle. A month after US president Donald Trump unveiled his controversial Middle East plan, the conflict between Israel and the Palestinian Authority (PA) has now reached a state of full-blown trade war.
On February 12, the PA led by President Mahmoud Abbas hailed “a victory for International law” as the United Nations High Commissioner for Human Rights (UNHCR) office released a list of 112 companies it said are complicit in violating Palestinian human rights by operating in Israeli settlements in the occupied West Bank.
This first-ever international attempt to name and shame businesses was slammed as “shameful” by Israel, where officials fear the list could be used to boycott firms. The move could add a new chapter to tensions with the Palestinian Authority.
Three days before the UNHCR report, the Israeli military ignited another battle as they announced the blocking of all West Bank agricultural goods, the Times of Israel reported. Following Defence Minister Naftali Bennet’s press release on February 9, the military said it would not allow Palestinian farmers to transfer products through the Allenby Bridge, West Bank’s only direct export route to the world and its sole border with neighbour Jordan.
According to the Coordination of Government Activities in the Territories (COGAT), a unit of the Israeli ministry of defence responsible for the civil activities in the Palestinian territories, this was an immediate response to the “Palestinian boycott of veal, which has seriously harmed Israeli cattle farmers”.
For as negotiations with the Hebrew state fell apart in late 2019, Palestinians had decided in September to ban all Israeli calf from entering its territories, a surprise decision that saddled Israeli farmers with huge losses.
‘Calf war’ part of Palestinian ‘disengagement’ strategy
The veal ban is only part of a political, bureaucratic and economic “disengagement” strategy conceived by Abbas’ Prime Minister Mohammad Shtayyeh. Originally an economist, Shtayyeh is trying to push for higher independence for the Palestinian territories, whose economy is completely dependent on its Israeli neighbour – especially imports, exports and basic goods.
“We are exercising our natural right to diversify our markets, encouraging direct imports in order to strengthen our economy,” Palestinian Economy Minister Khaled Al-Assili said on what the local media nicknamed the “calf war”.
Escalations and retaliations
Under pressure by Israeli farmers, Prime Minister Benyamin Netanyahu retaliated: in early February, the Hebrew state banned all produce imports from the West Bank. The Palestinian Authority quickly struck back, banning multiple Israeli products from its territories, such as vegetables, fruits and beverages.
Deprived of their own ports and airports, Palestinians can only export products via Israel’s ports, such as the Ashdod and Haifa ports, as stipulated by the 1994 Paris protocol regulating trade issues, where Palestinian products, including dates and olive oil, are then sent mainly to Europe and neighbouring Jordan.
The latest Israeli measures are “very dangerous”, Palestinian Minister of Agriculture Riyad al-Atari said. “There will be negative effects, but the negative consequences will also affect the Israeli economy,” he added.
Israeli and Palestinian economies are deeply intertwined, despite tensions. The latter imported $600 million worth of Israeli produce in 2018 – 71 percent of the sector’s Palestinian importations, according to the latest data. According to the Palestinian Ministry of Economy, it also exported $88 million worth of produce to the Hebrew state – marking 68 percent of Palestinian exports.
As the ‘calf war’ is expected to continue, the Palestinian agriculture could be strongly impacted, with its produce prevented from reaching Israel, Jordan and World markets.
“We have asked the government to create an emergency fund to deal with this crisis and provide farmers with the means to resist,” Abbas Melhem, director of the Palestinian Farmers’ union, told our reporters.
The Palestinian government seems to have heeded farmers’ calls and announced urgent measures last week. It also intends to ask for international intervention and is considering bringing the case to international courts of justice, as well as the World Trade Organization. All in order to interrupt what they call “the economic and agricultural Israeli war”.
But apart from calling for the international community to react, the PA has very limited resources. In mid-2018, the US cut $200 million of aid after President Abbas froze their relations – a retaliation to Trump’s recognition of Jerusalem as Israel’s undivided capital. Then Israel cut $138 million of tax handovers to the Palestinian Authority on February 2019, further strangling its funds.
In 2018 and 2019, Palestinian territories’ GDP growth has almost completely stalled around 1 percent, with an unemployment rate of 26 percent in 2018, according to the World Bank. The institution said the situation was “unbearable”.
The only way out of this economic dead end would be to strengthen exports and services, the World Bank estimates – a highly unlikely situation for now, given the latest escalations in the trade war.