Knesset Report: BDS Movement Has No Impact on Economy

Finds exports to Europe have doubled since launch of BDS movement.

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A BDS demonstration in Melbourne, Australia, 2010.
A BDS demonstration in Melbourne, Australia, 2010.Credit: Mohammed Ouda/Wikimedia Commons

The global movement to boycott the Israeli economy is having no discernible impact even though Israel’s export-dependent economy is vulnerable, the Knesset Research and Information Center said in a report released on Wednesday.

The report noted that the boycott comprised several components, including the long-standing boycott by the Arab League and efforts by the European Union to dent the customs exemptions and other benefits of the free-trade agreement with Israel to the West Bank settlements.

But the report, which the Knesset research body prepared at the behest of Finance Committee chairman Nissan Slomiansky, focused on the global boycott, sanctions and divestment (BDS) movement, which coalesced in 2005 and has had its strongest influence in Europe.

The research center found that Israel’s merchandise exports to the European Union had nearly doubled since 2005. In the decade before, they averaged $7.8 billion annually, and in the nine years that followed they averaged $15.6 billion, despite a sharp drop in 2009 due to the world financial crisis.

“Foreign trade figures, mainly exports to Europe, show that the impact of efforts over the last decade to impose a boycott have not hurt the Israeli economy on the macroeconomic level,” concluded the study written by Eyal Kaufman.

Israel has been concerned that the BDS movement would succeed in rallying consumers, businesses and governments to shun Israeli products and services, and in the case of governments, deny it trade benefits. The movement has chalked up some successes, but the Knesset report said they did not have any broad impact.

Israel also showed no apparent impact from BDS in the form of foreign direct investment. FDI has grown 78-fold since 1990, with particularly sharp growth after 2006. The value of FDI reached $88.2 billion in 2013, from $52.6 billion in 2000, with the pace of growth accelerating to 58% in the last four years, the report found.

Israel is vulnerable to an economic boycott, with a third of gross domestic product generated from exports. Even worse, the EU accounted for 28% of Israel’s merchandise exports in the first eight months of last year, slightly more than exports to the United States.

Export to the European Union as a percentage of Israel’s total exports has declined slightly since 2000. But America’s weighting has dropped even more quickly, to 31% from 41%; meanwhile, non-EU Europe’s share has risen, as has the share of Asia’s emerging economies.

“These figures bear witness to the change in the Israeli export picture in 2000-2013 and the ability of Israeli export over the years to identify new markets,” Kaufman said in the report.

The report went on to say it was unlikely that Israel would be hurt by the boycott in the future, either. While Europe’s share of Israeli merchandise and service exports has grown over the past decade, at the expense of North America, Asian markets have become more important.

The BDS movement has tried to get consumers to boycott Israeli products, such as oranges and other farm products, but they have relatively few goods to target, the report said. “A major portion of Israeli exports are intermediate products, like electronic components, that sit inside the final products of well-known global companies,” it said. “So attempts to boycott haven’t been successful.”

The EU crackdown on exports from West Bank settlements, including denying customs exemptions and requiring labels indicating that products are made in the territories, is unlikely to have any pronounced effect, the report said.

Only 0.7%, or $100 million, of Israel’s non-diamond industrial exports to the European Union in 2013 originated in the West Bank, the Golan Heights or East Jerusalem, the three areas covered by the EU directive. The weighting of farm exports was higher, but amounted to just 2.5%, or $22.1 million, the report said.


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