Lapid slams EU directive on settlements

Minister of Finance Yair Lapid: Every day that Israel is not in peace negotiations is a day that our international standing is further damaged.

"The latest directive is part of a long line of directives which are isolating Israel in the world," said Minister of Finance Yair Lapid in response to the EU directive banning cooperation with Israeli entities beyond the Green Line. "Time is not in our favor, and every day that Israel is not in peace negotiations is a day that our international standing is further damaged."

Lapid added, "Nonetheless, this is a miserable directive, poorly timed, and sabotages efforts by US Secretary of State John Kerry to bring the two parties to the negotiating table. The EU directive signals the Palestinians that there is no international or economic price to be paid for their continuing refusal to return to talks, and causes them to believe that Israel will be forced to capitulate to economic and diplomatic pressure."

Lapid said that he would contact Israel's friends in the EU and tell them that the directive harmed the very objectives they wanted to achieve, and drives peace farther away.

Israel's economic establishment is worried and its political establishment has responded angrily to the EU directive which states that agreements with Israel do not apply to the territories. The precedent-setting directive, taken in June, bans all 28 EU member states from cooperating with Israeli entities operating in settlements in Judea and Samaria and east Jerusalem. The ban on cooperation includes scholarships, research grants, and prizes to Israeli entities in the occupied territories.

The directive, which comes into effect in 2014, adds a territorial clause to agreements between EU member states and Israel, and effectively bans settlements in Judea and Samaria from cooperation with Europe, including in the economic sphere.

Senior economic officials responded cautiously today to the directive, saying that they were studying its significance. Manufacturers Association of Israel president Zvi Oren said, "I regret the EU's intention of mixing politics and economics. Israel's extensive economic relations with the EU could be a tool for promoting relations between us and countries in the region, in particular the Palestinian Authority. We therefore call on the EU Commission to act positively, promote economic cooperation between Israel and the Palestinian Authority, which will help improve diplomatic relations in the region. I therefore call on the EU to avoid creating barriers and taking actions which will sabotage future agreements. Instead, the focus should be on promoting a policy of dialogue and cooperation between Israel and the EU.

Israel Export and International Cooperation Institute chairman Ramzi Gabay said, "This directive is liable to harm Israeli exports. There is no place for mixing political and economic issues. I believe that the Israeli government will know how to act at all levels so that Israeli industry will not be harmed by this directive."

However, top industrial sources noted that the directive, which will only apply to future agreements between Israel and EU member states, will change nothing on the ground at the moment. "This is a dramatic directive which is evidence of the political atmosphere in which Israel operates, but it actually changes nothing at the moment," a top industrialist told "Globes".

The Ministry of the Economy has not officially responded to the EU directive. Minister of the Economy Naftali Bennett, the chairman of Habayit Hayehudi, has also refused to directly comment on it. Top ministry officials said that the issue and its significance will be clarified in the coming days with Ministry of Foreign Affairs officials, and that, in any case, the directive applies to future agreements.

The territories are already excluded from agreements

"This is a political directive, which was taken for political reasons, and its field is politics," an economic source told "Globes". "The question now is whether Israel will sign new agreements with EU states, when there is certainty that the West Bank will be excluded from them. At the macroeconomic level, there is no immediate damage, but with this directive, the EU is drawing a clear line in its diplomatic position toward the Israeli occupation. When politics are mixed with economics, there is always reason for concern, since political interests contaminate the current outstanding economic relations. It's a pity that the EU states have used this method, and it's a shame that they are not making the desirable separation." He added that one of the agreements that the directive will apply to is the R&D cooperation agreement with the EU which is due to be signed in 2015.

Industrial sources noted that, ever since Ehud Olmert was prime minister eight years ago, enterprises in settlements in Judea and Samaria, east Jerusalem, and the Golan Heights, have been excluded from trade agreements between Israel and EU member states. One source said that, for this reason, enterprises in these areas which export to the EU pay customs duties on their good. "The European customs system can already differentiate between goods originating in communities within the 1967 border and settlements beyond the border. For manufacturers in those areas, the EU directive has no practical effect," said one industrialist.

Nonetheless, he raised concerns about the directive and initiatives by anti-Israeli and pro-Palestinian organizations in some EU states to mark Israeli goods originating in the occupied territories. "The case of the origin of goods label is an attempt to provide consumers in those countries transparency so they can decide to boycott goods from the settlements. We're not there now, but that does not mean that these initiatives won't become real and turn into directives," he said.

The EU is Israel's biggest trading partner

According to the Export Institute, the EU is Israel's biggest trading partner, with $36.6 billion in trade in 2012, down 1% from 2011. Imports from EU countries totaled $22.4 billion in 2012, up 3% from 2011, while exports to the EU fell 7% to $14.2 billion. Israel's main exports to the EU are pharmaceuticals, chemicals and refined oil products, machinery and electrical equipment, plastics and rubber products, and food and beverages.

Israeli trade with the EU totaled $15.2 billion in the first half of 2013, down 5% from the corresponding half of 2012. The Export Institute attributes the drop to a 10% fall in imports from the EU to $9 billion.

Published by Globes [online], Israel business news - www.globes-online.com - on July 16, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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