Australia / Israel Review

Austrade’s ‘Complicity’ in the Arab Boycott of Israel

Allon Lee

Twenty years ago, the Arab League’s economic boycott of Israel was pervasive – as was the pressure exerted on Australian companies to comply.

The formal establishment by Arab states of an economic boycott against the Jewish economy in Mandatory Palestine commenced in December 1945, i.e. one year after the Arab League’s formation and, critically, two-and-a half-years before Israel was created.

Furthermore, the staggeringly comprehensive nature of the boycott was not limited to targeting the Jewish community in Palestine and later Israel, but included threats against overseas businesses that dared trade with the Jews and even businesses that traded with businesses that broke the boycott.

The historic role played by the boycott resonates in today’s nasty and atavistic Boycott, Divestments and Sanctions Movement (BDS Movement). But for many people today the old fashioned Arab League economic boycott is considered, if not dead and buried, then certainly marginalised.

So it may come as a surprise to learn that the website of Austrade – the government agency which advises Australian companies on exporting – hosts material on how to comply with the boycott and offers no explicit demurral saying doing so is against both official Australian government policy and World Trade Organisation regulations.

Information on how to comply with the Arab League boycott can be found under the “doing business in” section of Austrade’s entries for Bahrain, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi Arabia, Syria, and the United Arab Emirates.

As best as AIR can ascertain, the material on the Austrade website appears to be longstanding. It does not appear to reflect any differences in policy between federal governments led by either of the two major political parties over the years.

The Austrade material stands in marked contrast to the situation in the United States where it is has long been illegal for American companies to comply with the boycott.

Indeed, an Austrade spokesperson told AIR that Australia “doesn’t really support this idea of the US trying to exert itself legally in an extraterritorial way. But that’s for DFAT (Department of Foreign Affairs and Trade) to explain.”

On the larger issue of boycotts, a DFAT spokesperson told AIR that “the Australian Government does not support boycotts that impede legitimate trade between states, including with Israel”.

But in light of Austrade’s statement, Australia’s official opposition to boycotts does not seem to include any concrete steps to express that opposition. Indeed, as noted, finding even a verbal statement of opposition seems all but impossible.

Moreover, investigations by AIR have revealed that until at least March 18, when the material suddenly disappeared, the Australia Arab Chamber of Commerce and Industry’s (AACCI) website stated the organisation was validating compulsory certificates of origin that explicitly rule out Israeli involvement for exporters wanting to sell to certain Middle Eastern countries. Moreover, the AACCI website featured DFAT and Austrade logos, implying endorsement.

Certificates that certify that a product has not been manufactured in Israel, nor contains parts or material sourced from Israel, nor was transited through an Israeli port are known as “negative certificates of origin.”

On the Austrade website, negative certificate of origin requirements are not mentioned on the Qatar and Saudi Arabia pages, but there is a reference to exporters ensuring that suppliers of their compulsory insurance have no connections to Israeli companies. The insurance is required to guard against non-payment.

Some of the information on the Austrade website seems questionable, including the assertion that Lebanon “theoretically adheres to the Arab League Boycott of Israel, although boycott enforcement is selective and rare.”

Today, Lebanon is considered one of the strongest supporters of the boycott.

According to the website of the Lebanese embassy in Canberra, an exporter needs a certificate of origin that states “they do not contain any material or ingredients from Israel, they are not of Israeli origin, are not manufactured by it and they are not exported from it either. Moreover the ship is not Israeli owned nor is registered in Israel nor it will call at any Israeli port.”

 

Austrade: “No Knowledge of Certificates of Origin”

Austrade categorically denied to AIR that it validates certificates of origin with the exclusionary clause.

Austrade also categorically denied any knowledge that negative certificates of origin are or have been used or circulated over the last five years.

Further, Austrade claimed a record of strong support for maturing economic ties with Israel, operating an office in the Australian embassy in Tel Aviv.

But, through the sin of omission, Austrade can be criticised for tacitly complying with the boycott through its exclusion of Israel at the operational level from its Middle East and North Africa desk or MENA for short.

According to the Austrade website:

“MENA covers an area extending from Morocco in northwest Africa to Iran in southwest Asia, north up to the Levant markets of Lebanon, Syria and Jordan and south to the Arab States bordering the Gulf. For Austrade operational purposes it also includes Turkey (but not Israel which is managed out of our London office).”

An Austrade spokesperson told AIR “it is more practical to have a reporting line from Tel Aviv to London because its head office is in Dubai”.

Asked to define the expression “more practical” the spokesperson conceded that the Arab League boycott means Australia needs to deal with Israel in another regional grouping that is handled by the London office.

 

The Great AACCI mystery

AIR contacted DFAT in Canberra to ask the extent of its knowledge of the Arab economic boycott and where Australia fits in.

DFAT was informed on March 18 that the AACCI website had the Israel-exclusionary clause advice for exports to certain Middle East countries and explicitly stated that the Chamber of Commerce validates negative certificates of origin.

It was pointed out to DFAT that the symbols of DFAT and Austrade are prominently placed on the AACCI homepage, suggesting official government endorsement for validating negative certificates of origin.

DFAT did not comment on this issue in response to our query but at some point between March 17 and March 22, the explicit information on negative certificates of origin regarding Israel was removed from the AACCI website. However, AACCI failed to remove instructions that the “certificate must state the company is not included in the blacklist established by the Arab League Boycott office” on its Bahrain, Qatar and Saudi Arabia pages.

Contacted on March 24, AACCI declined to talk to this magazine about the issue of the Arab League’s economic boycott of Israel or the alteration of its website.

Curiously, although AACCI removed the material, DFAT defended including related advisory information on the Austrade website stating:

“Information provided on the Austrade website is general in nature and not intended as professional advice nor endorsement, and such inference is disclaimed on the site.”

AIR pointed out that we had trouble finding such disclaimers, and there certainly were none on the pages explaining procedures for complying with the Arab Boycott. The Austrade spokesperson elaborated saying: “there is a site disclaimer, granted it’s not on every page. It is a very large website.”

DFAT declined to provide specific answers to similar questions.

Background to the boycott

Historically there have been three levels to the boycott. The primary boycott consists of an outright prohibition of trade between Arab League member states and Israel. The secondary boycott forbids trading with any company with business ties to Israel, while the tertiary boycott targets companies that have ties with companies doing business with Israel.

Other extreme aspects of the boycott policy extended to including blacklisting a company if the CEO or president was an open or conspicuous Zionist.

The Office of the Arab Boycott (OAB) whose head office is in Damascus maintains a master blacklist of global companies that trade with Israel or shipping that docked at an Israeli port. It is believed that at the height of the boycott 8,500 companies were on the blacklist.

 

Australian story

Up until the early 1990s the OAB was known to send out letters to Australian businesses warning them of the consequences of breaking the boycott. It was also fairly standard practice for Australian chambers of commerce to issue negative certificates of origin.

Embassies, such as the Saudi Arabian embassy required local exporters to sign certificates of origin providing assurances both that the exports were not sourced from Israel and that the company had no ties with Israel. Failure to comply would prevent legalisation of the compulsory certificate of origin and, ipso facto, prohibit export.

As noted, state chambers of commerce would happily validate certificates of origin with the exclusionary clause, and some chambers were known to have a pro forma stamp embossed with the required statement.

 A 1991 Australia-Israel Chamber of Commerce trade group to Israel struggled to fill its available spots, with representatives from major Australian corporations declining to participate over concerns at jeopardising commercial ties with Arab League member states.

Jewish organisations raised the matter with successive Australian governments and received sympathetic hearings in the Fraser, Hawke and Keating Governments.

Despite this unequivocal support, successive Australian governments made it known in the 1980s and ’90s they would not consider anti-boycott legislation similar to that which has existed in the United States since 1977.

Today it is fair to say that there is considerable unofficial Israeli trade with Arab and Muslim countries which are nominally in a state of war with Israel. In today’s globalised world, the increasingly critical role Israel plays in value added industries like hi-tech makes it extremely difficult to avoid at least indirect relationships with the Jewish state and companies associated with it.

For Arab League countries wanting Israeli products the primary boycott is obviated through third countries.

But as recently as 2006 the OAB informed Swiss food giant Nestle that it was being added to the blacklist through its majority ownership of the Israeli food manufacturer Osem. Nestlé was given one year to divest itself of its Israeli investment.

To its credit, Nestle declined and noted that it employs 23,000 people in Muslim countries in 51 factories and 151 sales and distribution offices.

 

US Office of Antiboycott Compliance

The period following the first Gulf War and the Oslo Accords may have seen the largest decline in the boycott, but it was the 1977 legislative move by the US Congress to make it illegal for US companies to cooperate with the boycott that laid down a marker.

The Office of Antiboycott Compliance in the US Department of Commerce maintains a keen watch on US companies that have been approached to comply with the boycott.

Congressional Research Service reports warn that illegal compliance with the boycott can attract civil penalties of up to US$50,000 per violation. Criminal penalties imposed for each violation can include a fine of up to US$50,000 or five times the value of the exports involved, whichever is greater, or imprisonment for up to five years, or both. Wilful violations, where the violator has knowledge that the items are also intended for any country to which exports are restricted for national security or foreign policy purposes, are punishable by fines up to US$250,000 or imprisonment for up to ten years.

The year-to-year statistics indicate that there is definitely a recent upward trend in the requests for compliance.

According to an August 2008 US Congressional Research Service report, for the US financial year of 2007, ten companies paid US$194,500 to settle allegations they violated US antiboycott provisions. In January 2007, the New York branch of the National Bank of Egypt was fined US$22,500 for allegedly providing four commercial invoices in 2001 and 2002 to the al-Issar Trading Company of Syria that declared the goods had not been manufactured or produced in Israel.

In 2007, there were 1,633 such boycott requests made of US companies, with the UAE topping the list at 682 followed by Lebanon making 114 requests, Qatar 94, Syria 79, Iraq 72, Saudi Arabia 65, Kuwait 56, Libya 50, Bahrain 24 and Egypt 1. Algeria, India, Iran, Malaysia, Nigeria, Oman, Pakistan, Tunisia and Yemen made 396 requests between them

Interestingly, in 2006 Jordan made three requests and Egypt made five – yet both are Arab countries that have signed peace treaties with Israel. The relatively large number of requests by UAE, Qatar, and Kuwait also seem to jar with their image of “don’t ask, don’t tell” mercantilism.

The significance of Saudi Arabia appearing on the list is also instructive, coming as it did after the kingdom promised to drop the boycott of Israel as a condition of entry into the World Trade Organisation in 2005. Subsequently, Saudi Arabia recanted and insisted publicly on maintaining the primary boycott but clearly still enforces the secondary one too.

In toto, these figures represent a significant increase on 2005 figures.

 

The more things change…

Over the years the Arab League’s reasons for backing the economic boycott of Israel have changed but at its heart beats the same fundamental inability to openly accept the existence in the Middle East of Israel’s presence.

The reasons proffered for the boycott may vary – “it’s only about the occupation since 1967”, the settlements, the “apartheid wall” etc – but the boycott came into force in 1945; over two years prior to Israel’s establishment, before there were any wars or a Palestinian refugee crisis.

The claims made by Arab League states that they don’t seek Israel’s disappearance or are opposed to recognising Israel because of its blockade of Hamas shows the double standard – they have been effectively blockading the Jewish economy and state since 1945!

As the Office of Anti boycott compliance shows, efforts at normalisation even with Arab countries like Egypt and Jordan that have signed a peace deal with Israel are stymied by countless boycotts at the coal face through unofficial bans on imports such as medicines. Even basic Israeli to Arab interaction is not tolerated by Egyptian and Jordanian trade unions which blacklist Arab professionals who dare to travel to Israel or meet visiting Israelis.

The Palestinian-sponsored BDS Movement’s Apartheid slurs and calls for cultural, academic and sporting boycotts of Israel are an ugly and offensive spin-off from the original boycott set up by the Arab League.

Israel has spent the last 17 years trying to negotiate a peace deal with the Palestinians to resolve all the outstanding issues, and lead to their own independent sovereign state, thereby removing the need for such terrorism-busting measures like the security barrier on the West Bank.

Apartheid was a racialist political system with no caveats or sunset clause which does not at all resemble contemporary Israel.

But then as NGO Watch’s Gerald Steinberg has succinctly noted, the calls for boycotting Israel are often so unbalanced and extreme that they cannot be about promoting specific changes in Israeli policy, but rather the delegitimisation of the country’s very existence.

Seen in this light, surely removal of the material from Austrade’s website would not only end Australian complicity in a boycott which is both against Australian government policy and in violation of the rules of the World Trade Organsation, but also send a powerful message that the Arab League boycott of Israel is not conducive to peace in the wider Middle East.