Barriers and the Boycott

July 2010

By Fay Ferguson

Syria was finally granted observer status in the World Trade Organization (WTO) in May, nine years after it first attempted to join. The door to the global trade body opened after the US and Israel dropped their long-held vetoes against the country’s bid. As Syria gears up for perhaps a decade of long, torturous negotiations with the WTO about the conditions of its membership, the extent of the country’s adherence to the Arab League’s boycott of Israel will slowly come under scrutiny. But will Syria’s path towards greater global economic integration come at the expense of championing the cause?

The Arab League boycott of Israel was officially launched in 1951 in support of Palestinian national rights following the creation of the Jewish state in 1948. In Western interpretations of the boycott, its principles are commonly broken down into three tiers. According to a report prepared for the US Congress in 2008 by Martin Weiss, a specialist in international trade and finance, “the primary boycott prohibits citizens of an Arab League member from buying from, selling to, or entering into a business contract with either the Israeli government or an Israeli citizen”. Meanwhile, “the secondary boycott extends the primary boycott to any entity worldwide that does business in Israel” and “the tertiary boycott prohibits an Arab League member and its nationals from doing business with a company that in turn deals with companies that have been blacklisted by the Arab League”.

The boycott, although not legally binding, was vigorously enforced in its early years by the majority of Arab League countries. In recent decades, however, compliance with the boycott has severely declined due to peace deals struck between Israel and its neighbours, as well as the difficulty of practically enforcing a trade ban in an increasingly interlinked global economy. Egypt formally withdrew from the boycott when it signed a peace agreement with Israel in 1979 and Jordan followed suit in 1994. In that same year, the Gulf countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE announced they would only enforce the primary boycott.

Essential security interests

In the Middle East, only Lebanon and Syria, which hosts the Arab League Central Boycott Office, remain wholeheartedly committed to politically upholding all three tiers of the boycott. As Syria prepares to join the WTO, which as a core principle requires members to remove any discriminatory barriers to trade, the boycott is likely to be a topic of fierce debate. The US in particular, which has long deplored all aspects of the boycott and its enforcement, is expected to flex some muscle. When Saudi Arabia was granted WTO membership in 2006, it was pressured into officially dropping the primary boycott, publicly stating that it would “treat all member states equally”. Every time the country champions the primary boycott to win favour at home, it is in breach of the WTO’s membership rules – breaches often publicised by the international media.

Citing national security interests, Syrian officials are confident that unlike Saudi Arabia, the country will not be forced to officially drop the primary boycott as it negotiates its way into the WTO.

“According to the WTO rules, we have a right to enforce the boycott because we are in a state of war and our land is occupied,” Salma al-Sayed, director of the World Trade Organization Directorate at the Ministry of Economy and Trade, said. “So our political stance will not change even when we are accepted as a member.”

To continue upholding the boycott, Syria is expected to invoke an article from the security exceptions in the rules and regulations of the 1947 General Agreement on Tariffs and Trade (GATT) which is incorporated into the WTO’s legal framework. Article XXI, section b (iii), states that a member nation’s agreement with the WTO will not “prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests taken in time of war or other emergency in international relations”.

Although the term “essential security interests” has generated criticism within WTO working party circles for being too vague, a number of boycotts from member states have nonetheless been sustained under the provisions of Article XXI. Citing national security, the US invoked the article in 1985 as a justification for prohibiting the import and export of goods to and from Nicaragua. US leaders have also referred to it in the past as a justification for the country’s trade embargo of Cuba. By invoking Article XXI in its political wrangling with the WTO, Syria is likely to be able to continue rigidly enforcing the primary boycott.

“This text in the GATT gives countries the freedom to apply boycotts and use sanctions when they feel that their national security is jeopardised,” Hisham Kayat, senior business development consultant at the Syrian Enterprise and Business Centre, said. “This legal text is often used. When Algeria joined the WTO, it stated in the agreement that it would not trade with Israel for security reasons.”

Mohamed el-Tayeb Boussalla, commissioner-general of the Arab League’s Central Boycott Office, said that as a member of the WTO, Syria will still be able to continue blacklisting certain foreign companies which do business with Israel. This, he claimed, is because the Arab League only blacklists foreign companies which aid Israel’s war effort, thereby jeopardising the security interests of league members.

“The Arab League has never boycotted companies which have normal trade relations with Israel, so this will not be an issue,” he said. “From the beginning it has always been a boycott against foreign companies which support Israel’s war efforts, have factories and assembly plants in Israel or shares in an Israeli company. If a company supplies Israel with clothes or cars, it is not in violation of the boycott’s rules, so that’s why they are able to enter Arab markets.”

Difficult to enforce

The boycott may be subject to global debate, but its success on the ground is questionable. The Gulf states have long been accused by regional observers of simply paying lip service to it while quietly striking deals with Israeli companies and opening their markets to blacklisted goods. Syria, on the other hand, has maintained a strong reputation for its genuine commitment to the embargo.

Despite these efforts, Boussalla conceded that Israeli goods still find their way into the Syrian market. Intel, for instance, houses manufacturing and research and development facilities in Israel that employ some 4,000 Israelis. Despite, according to Boussalla, the computer-chip maker being officially banned in Syria, laptops with Intel chips are easily purchased in the country.

This happens due to the fact that products are simply checked off as boycott compliant when their certificates of origin state that they have not been manufactured in a place or by a company on the blacklist. The certificates of origin do not, however, state where the product’s components were manufactured, or by whom. In practical terms this means that although a product may have been officially manufactured in the US by a non-blacklisted company, it could still contain Israeli-made components.

“A new foreign company is allowed to start trading in the region once we have fully investigated its activities to make sure that it does not violate the boycott rules,” Boussalla said. “Sometimes, however, cracks in the system occur. A tractor entering Syria may have a legitimate certificate of origin, for example, but it might be the case that the tires of its wheels were made in Israel and we didn’t know about the contract. In such instances, the tires must be destroyed.”

Significantly, in other cases, Boussalla said the boycott office strategically exempts certain companies which do not comply with the boycott if its products are perceived as beneficial by member states to their economies. Microsoft’s Windows Arabic, which was made in Israel and is used in Syria and the rest of the Arab world, is a case-in-point.

“We were going to ban Windows Arabic when we discovered it was made in Israel, but many member states said it was in our interests to keep it so we did,” he said. “It made logical sense.”

In an increasingly complex and globalised economy, Syria will likely find it ever more difficult to continue implementing the boycott effectively. This could have an impact on its position in its final negotiations with the WTO in years to come. Whatever the costs to the practical implementation of the boycott in the future, however, Boussalla said Syria will remain committed to enforcing the embargo’s political message.

“The boycott is a peaceful and legitimate weapon against Israel, it is not meant to be an instrument which harms our interests,” he said. “The most important thing for the Arab League member states is to uphold the message of the boycott which says to the world that we will not rest until our land is returned.”

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