The "calf war": a trade showdown between Israelis and Palestinians

"A victory for international law." It is in these terms that the Palestinian Authority (PA) welcomed, Wednesday, February 12, the publication by the UN of a list of 112 companies operating in Israeli settlements established in the West Bank.

Described as "shameful surrender" by Israel, this decision comes at a time when the economy has, for several months, been at the heart of a commercial standoff between the Palestinian Authority chaired by Mahmoud Abbas and the Hebrew State.

Five months ago, in September, the Palestinians decided to stop importing calves raised in Israel as part of their policy of political, administrative and economic "disengagement" with their neighbor. A policy decided because of the failure of peace negotiations around the so-called two-state solution coexisting side by side.

The banishment of Israeli calves is the first step in the strategy devised by Prime Minister Mohammed Shtayyeh, an economist by training, who wants to guarantee a certain autonomy to the Palestinian Territories, whose economy depends entirely on its Israeli neighbor.

"We are exercising our natural right to diversify our markets, by encouraging direct imports and by developing our local products in a way that increases the chances of strengthening our economy," said Khaled Al-Assili, Palestinian Minister for the Economy.

Retaliation

Since then, Israelis and Palestinians have engaged in a trade war with retaliatory measures. Pressured by the anger of Israeli cattle farmers, the government of Benjamin Netanyahu responded by suspending, since early February, the import of agricultural products from the West Bank, from where they were largely redirected to Europe.

Having neither a port nor an airport, the Palestinians export their goods via Israeli ports, notably those of Ashdod and Haifa, in accordance with the Paris Economic Protocol of 1994, which governs economic relations between Israel and the Palestinian Territories.

On February 3, the PA responded by banning the entry of certain Israeli consumer products (vegetables, fruit, soft drinks, juice and mineral water) into the Palestinian Territories.

Imports of Israeli agricultural products were around $ 600 million in 2018, and accounted for 71% of imports in this sector, according to the latest Palestinian data. On the other hand, according to the Palestinian Economy Ministry, Palestinian agricultural exports to Israel amounted to around $ 88 million in 2018, which represents 68% of Palestinian agricultural exports.

On February 9, in a statement from Cogat, the unit of the Israeli Defense Ministry that oversees civilian activities in the Palestinian Territories, the Hebrew State announced a ban on the export of Palestinian agricultural products through the passage of Allenby. This passage is vital for the Palestinian economy, as it links the occupied West Bank to neighboring Jordan, from where local products, especially for dates and olive oil, are exported to the rest of the world.

Cogat said the blockage was a response to the "Palestinian boycott of calves, which has severely affected Israeli cattle farmers". And to warn: "The sanctions are staggered and reinforced [...] until the boycott and the crisis are not resolved".

The Palestinian Ministry of Agriculture described the Israeli measures as "very dangerous" and also spoke of "further measures" of retaliation.

"We are fully aware that there will be negative effects that will result from the Israeli measures, but I say with confidence, the negative consequences will also affect the Israeli economy," said Palestinian Minister of Agriculture Riyad Al-Atari. .

Palestinian farmers face big losses

The showdown, dubbed the "war of the calves" in the local media, is therefore likely to continue, while without any possibility of exporting their products via Israel or Jordan, the Palestinian farmers risk suffering great losses.

"We have asked the government to create an emergency fund to deal with this crisis and empower farmers to resist and stay on their land," said Abbas Melhem, director of the Palestinian farmers' union, when asked. France 24.

"Even banning exports is a disaster for farmers, said last week Saeb Bamya, former deputy minister of the economy of the Palestinian Authority, questioned by RFI. Nuts, dates, this represents the vast majority of Palestinian exports - and now is the perfect time to export to Arab countries, just a few months before Ramadan. It is a matter of days now: if farmers cannot export, they will lose a lot. "

For its part, the Palestinian government, which announced this week emergency measures to compensate for the losses of the farmers, intends to internationalize this question and even plans procedures before international courts. The Palestinians have also launched a diplomatic campaign targeting member states of the World Trade Organization (WTO) and friendly countries to end what they call "Israeli economic and agricultural warfare".

However, the PA's financial room for maneuver, which recently suffered from the "tax revenue" crisis with Israel, remains limited. The economic situation, already weighed down by restrictions stemming from the occupation and Israeli settlements in the West Bank as well as the blockade of Gaza, is alarming due to the continuous decline in international aid over the past three years.

Washington has notably cut several hundred million dollars in various aid, after Mahmoud Abbas freeze relations with the administration of President Trump to protest against the American recognition of Jerusalem as the indivisible capital of Israel.

Growth almost stagnated in 2018 and 2019 (around 1%), and the unemployment rate was around 30% in 2018, according to the World Bank, which in April described the economic situation as "unsustainable" in the Palestinian Territories.

The World Bank believes that the Palestinian Territories "can only embark on a sustainable growth trajectory" under certain conditions, including that of increasing their exports of goods and services. A prospect which seems completely impracticable in the current context.

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