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Export Chill Descends On The Settlements

Export Chill Descends On The Settlements

Six months into new EU labeling guidelines, businesses shifting strategies but bracing for problems.

Jordan Valley, West Bank — The headquarters of the Jordan Valley Regional Council looks out onto groves of palm trees whose sugary dates are shipped to Europe — one of the biggest exports of this settlement farming region. Despite the idyllic view, the strip of farms along the border is one of the main fronts in a battle over labeling Israeli products from the West Bank.

Nearly half a year after the European Union stiffened regulations requiring retailers to label merchandise from Israeli areas in the West Bank and Golan Heights as Israeli settlement products, some executives say they are feeling a chillier business environment in Europe — even though Israeli trade officials say there’s been no discernable impact on overall exports.

To illustrate, the council chairman, David Elhayani, reads a text message from an herb farmer from the Jordan Valley settlement of Mehola about cancelled orders from small distributors in Germany and Switzerland.

“He wrote, ‘David it’s getting worse and worse,’” Elhayani said. “They requested that on the merchandise from the Jordan Valley, that it be clearly written: ‘Product from the Occupied Territories by the Government of Israel.’”

Elhayani argues labeling of settlement products is a form of a boycott, which he claims is driven by anti-Semitism. The regional council chair said he recommended that farmers refuse the labeling demand. “We’ll find someone else who wants to buy.”

The labeling guidelines are the latest move in a years-long effort by the EU to differentiate its policy toward Israeli settlements and businesses in areas captured by the military after the 1967 war. It sparked a furious political campaign by Israeli politicians denouncing the move as unfair punishment of Israel. And it was a morale boost to the Boycott, Divestment and Sanctions (BDS) movement, which has already successfully pressured settlement companies like SodaStream to relocate its operations from the West Bank to Israel.

What exactly is the macro fallout from the EU labeling guidelines? The director of the Israel Export Institute, Ofer Sachs, said that the private-public organization isn’t seeing any hard evidence of a negative impact on sales to Europe. He also said that a survey by Israel’s Economy Ministry found no fallout.

“There’s nothing new here. It’s more of the same. The market is mainly about quality, availability and price,” he said. “Most of the clients in the EU put that first.”

Despite the outrage by the Israeli government, few expect the labeling to impact the overall economy: Israeli industry by and large has remained within the Green Line: settlement businesses account for no more than 1.5 percent of some $15 billion total exports to the EU. Consumer retail products affected by the labeling requirement are an even smaller percentage of total exports.

Sari Bashi, the Human Rights Watch director for Israel and the Palestinian territories, which released a report on settlement businesses in January, said the labeling guidelines would serve as a red flag for consumers and other businesses mulling activity in the settlements. “Other companies will see the challenges raised to the legitimacy of settlement businesses and will be less likely to initiate new investments, partnerships or acquisitions,” she wrote in an email.

Indeed, Sachs did acknowledge that the labeling demands complicate the marketing efforts of the settlement retailers. “They know it’s something they have to deal with.”

Few, if any, of the businesses across the Green Line label their goods as a product of a settlement. Dates from the Jordan Valley are marketed under the “King Solomon Dates” label, and the box also reads “Jordan River.” Despite the vagueness of the box, retailers get the precise information about product origin.

Along with the Jordan Valley produce, major Israeli consumer brands with operations in the settlements include Ahava Dead Sea cosmetics and Golan Heights wineries — both of which sell their products in Europe.

A spokeswoman for Ahava said the EU guidelines have not affected the company’s business, but declined to answer questions as to whether any of the company’s products are labeled as produced in a West Bank settlement. The daily newspaper Haaretz reported this month that Ahava plans to build a new factory outside of the West Bank.

Golan Heights Winery CEO Anat Levi said it’s still too early to measure any impact, but that the company’s merchandise in Germany is being labeled as a product of an Israeli settlement.

Israeli winemakers in West Bank settlements say they are anticipating difficulties even though the regulations have yet to be fully implemented.

“The first question you ask yourself with wine is where is it coming from; everybody understands if it’s labeled ‘West Bank, Israeli settlement,’ it’s like a warning,” said Yaakov Berg, the owner of the Psagot Boutique Winery. For now, Psagot wines are still labeled as a product of Israel. But European marketing companies are starting to get cold feet. “Distributors are saying that we are going to have problems,” he said. “The big marketing channels don’t need these problems.”

Shamir Salads Ltd. is an Israeli hummus dip manufacturer based in the Barkan settlement industrial zone and ships about 60 percent of its exports to Europe — with more than half going to France. The company’s chief executive, Amiram Guy, said Shamir’s products aren’t being labeled as settlement products, but that’s because they are sold at kosher food retailers whose owners are ignoring the directive. When asked whether the EU policy would make Shamir reconsider exports to Europe, he said that the company wants to diversify its exports and is trying to break into Asian markets.

Farmers in the Jordan Valley have been pursuing a similar coping strategy for some time, said regional council head Elhayani. Over the last five years, exports from the Jordan Valley — which totaled 460 million shekels ($115 million) in 2015 — have shifted dramatically. While they had been almost exclusively destined for Europe, today only 20 percent of exports go to the continent. The remaining 80 percent now goes to Russia.

That’s because products from the Jordan Valley have been targeted by boycott groups and are subject to tougher EU regulations going back at least a decade. Jordan Valley growers have been the focus of critical reports from Israeli human rights groups alleging exploitative work conditions for the thousands of Palestinian laborers who the farmers say are a major beneficiary of the sales.

Settlement products no longer benefit from the customs-free status that Israeli exports enjoy as part of a free-trade pact with the EU. Years before the EU guidelines decision, the Tesco supermarket chain in Great Britain began labeling Elhayani’s fresh herbs as a product of the West Bank settlements.

Elhayani said the shift in exports to Russia has allowed the Jordan Valley growers to continue to expand sales, though he added that sales to Russia are less lucrative. Prices are lower and sales costs are higher because of an absence of large marketing companies there. He estimated the net costs of the shift to Russia at 100 million shekels over the last three years.

Jordan Valley growers have sought to offset that hit by selling to the domestic market, boosting their growing technology and finding other cost-saving measures.

Elhayani claimed that businesses in the Jordan Valley and elsewhere are being punished because of the breakdown of peace negotiations, but he remained defiant. The dates from the palm trees across the street from the regional council building continue to be strong sellers in Europe — despite being targeted by pro-Palestinian activists for a boycott.

“Most of the clients care about quality and shelf life,” he said. “The market talks, and the market is stronger than any boycott.”

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