Israeli exports hit hard by Palestinian boycott, World Bank says

Palestinians call for boycott of Israeli goods in the West Bank city of Nablus in June 2012.
Nedal Shtieh APA images

The Palestinian campaign to boycott Israeli goods has exacted a major cost on Israel’s exports to the occupied West Bank and Gaza Strip.
This victory is quietly acknowledged in a World Bank report released this week.
Palestinian imports from Israel dropped by 24 percent during the first quarter of 2015, the report states.
The World Bank explains that the drop “is the result of reduced economic activity, but also a growing trend among Palestinian consumers to substitute products imported from Israel by those from other countries, as a result of which non-Israeli imports were up 22 percent.”

Captive market under occupation

Israel controls the movement of people and goods to and from the West Bank and Gaza Strip. Those territories are a captive market for its goods and one of Israel’s primary export destinations.
The value of Israeli goods sold to the West Bank and Gaza Strip stood at $3.4 billion in 2013, according to Israeli government statistics. In 2014, it fell to $2.9 billion – a drop of almost one fifth.
The further fall in 2015, indicated in the World Bank report, suggests the boycott by Palestinians alone could cost Israel hundreds of millions of dollars a year.
Despite the drop this year, Israeli goods still represent 58 percent of total imports to the West Bank and Gaza Strip.
The World Bank adds that the Palestinian trade deficit declined by 6 percent during the first quarter of this year relative to the same period in 2014.
But the trade deficit stands at 38 percent of GDP, which is “extraordinarily high.”
The trade deficit describes when a country’s imports exceed its exports.
Meanwhile, sales of Palestinian goods from the West Bank and Gaza Strip to the rest of the world “remained very low averaging about 15 percent [of GDP] in recent years due to the low productive capacity of agriculture and industry that is held back by Israeli restrictions,” the World Bank explains.
Gaza’s exports are currently only 6 percent of what they were prior to Israel’s imposition of the blockade in 2007.

Stagnation in Gaza

Production in Gaza has ground to a halt after years of closure. Israeli bombing last summer left 247 factories and 300 commercial establishments there fully or partially destroyed. This is on top of the destruction of hundreds of other productive facilities during earlier Israeli attacks.
Businesses in Gaza say “they are hesitant to invest in capacity expansion to reach export markets because of the extremely uncertain political outlook and the related likelihood of another war or restrictions being reimposed,” according to the World Bank.
Put more simply, few in Gaza are willing to spend scarce money building a business only for it to be destroyed by Israel, or its products warehoused at the border.
The economic standstill in Gaza has resulted in an astonishing unemployment rate of 42 percent — one of the highest in the world. Among youth the rate soars to 60 percent.
The World Bank says that in both the West Bank and Gaza, “Palestinians are getting poorer on average for the third year in a row.”
Meanwhile, “competitiveness of the Palestinian economy has been progressively eroding since the signing of the Oslo accords” by Israel and the Palestine Liberation Organization in the mid-1990s.

Israel must pay a price

The World Bank warns that “the status quo is not sustainable and downside risks of further conflict and social unrest are high.” The international body calls for increased aid to the Palestinian Authority to offset this.
It also recommends that Israel lift its restrictions on the movement of Palestinians and their goods. But it fails to call for any measures to pressure Israel to do so.
“Granting Palestinians access to production inputs and external markets and enabling unimpeded movement of goods, labor and capital … would drastically improve growth prospects of the Palestinian economy,” the World Bank states.
In other words, an end to the Israeli military occupation would allow for Palestinian prosperity. Yet the World Bank studiously avoids use of the word “occupation” in its report, instead referring to Israeli “security” measures.
This gives the false impression that the pernicious impact of such measures is incidental, and not by design of Israel’s system of control over the Palestinians.
There is no reason to believe that Israel will change its behavior unless there is a penalty for it.
And as the World Bank has had to acknowledge, the boycott, divestment and sanctions movement is beginning to exact that price.