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Holy Cow, Israel and the Palestinians Have Gotten Into a Lose-lose Trade War

The PA’s ban on imports of Israeli calves triggered Defense Minister Bennett to hit back with his own boycott

Sami Peretz
Sami Peretz
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Israel's Defense Minister Naftali Bennett speaks with Israeli cattle ranchers during a protest against the ongoing Palestinian Authority ban on the import of calves from Israel.
Israel's Defense Minister Naftali Bennett speaks with Israeli cattle ranchers during a protest against the ongoing Palestinian Authority ban on the import of calves from Israel.Credit: Elad Gutman
Sami Peretz
Sami Peretz

Two Israeli trucks loaded with calves arrived at the Gilboa crossing Sunday and were immediately told to turn back: The Palestinian Authority refused to let the animals in. The same day, several trucks filled with fresh produce grown by Palestinian farmers and destined for the Israeli market arrived at the Gilboa and Efraim crossings and were similarly turned back.

Thus went the latest battle in the Israeli-Palestinian mini-trade war that threatens to get bigger and meaner.

The war began in September when the PA suddenly decided to bar the import of calves from Israel; the PA never offered an explanation. Some in Israel ascribed it to a general boycott of Israeli cattle ranchers, but the most widely held view was that the PA was acting in the interest of Palestinian cattle dealers, who prefer to import the animals, fatten them and sell them at huge profits.

Israel's cattle ranchers protest a Palestinian Authority ban on the import of calves from Israel.Credit: Elad Gutman

Whatever the reason, the PA ban created a financial crisis for hundreds of Israeli ranches that were stuck with hundreds of unsellable calves that they must feed and care for at a cost of 300 shekels ($87) a month each. Worse, they stood to lose sales equal to thousands of shekels per head of cattle.

It’s a big business: Israeli cattlemen raise 150,000 head for sale to the PA every year worth a combined 800 million shekels.

Since the ban, the cattle ranchers have been pressuring the Israeli government. They say many ranches are on the verge of bankruptcy and will collapse if the PA doesn’t reverse itself. Finance Minister Moshe Kahlon, who has good relations with PA officials, tried to solve the crisis by offering to address other economic issues vital to the PA as a package deal. He failed.

At the end of last year, the Israeli defense establishment’s Civil Administration was brought in, which resulted in a partial lifting of the ban for a month. That gave the cattle ranchers some breathing room before the full ban was reimposed.

The Israeli ranchers say Palestinian butchers aren’t happy about the ban either; they are being forced to buy meat at higher prices from Palestinian importers than they would pay for Israeli calves. They prefer the Israeli product for reasons of quality and health.

The lobbying more recently was directed at Defense Minister Naftali Bennett, who imposed a ban as of this week on imports of Palestinian agricultural products to Israel.

Cows on the Golan heights.Credit: Gil Eliahu

“A few months before I took up my post, imports of calves suddenly stopped entirely,” Bennett said. “We began a dialogue and for one month they allowed [imports] and then stopped them again almost entirely. They’re causing an entire industry and hundreds of ranches to collapse. I want to see a free market, I’m for business and trade relations, but a boycott will be answered with a boycott. My patience has ended.”

Palestinian President Mahmoud Abbas responded angrily and PA officials said they would impose a general ban on Israeli imports into Palestinian-ruled areas.

Bennett believes that if Israel takes a determined stand, imports of Israeli calves will be resumed. But Israeli defense officials say Israel has a lot to lose in a trade war like this. The PA is an important market for all kinds of Israeli farm products and processed foods.

Defense officials cite figures from the Civil Administration showing that Israel sold about 150,000 tons of farm products worth $189 million last year, while Palestinian growers sold 62,000 tons worth about $53 million to Israel. The balance of trade favors Israel.

A ban will hit Israeli growers hard because they have nowhere else to sell their produce, but Palestinians will also come out badly: Agriculture is a key part of the Palestinian economy, employing 300,000 people, or 15% of the West Bank labor force.

Nor does Bennett’s boycott seem to square with his free market ideology. Free market advocates aren’t supposed to use boycotts to force terms on their trade partners. But as Bennett sees it, the boycott of Israeli calves wasn’t the result of consumer choice but was forced on ordinary Palestinians by the PA. That leaves him free to act.

However, there are less costly ways than a tit-for-tat boycott ; for instance, by addressing the duopoly of Tnuva and Dabah that controls the Israeli meat market. Neither company buys from Israeli cattle ranchers and they prefer to import their own calves to fatten and slaughter. Why aren’t they buying locally?

Regulation of the meat market in Israel, of course, isn’t within the defense minister’s authority, but neither is the cattle business. But Bennett could not have gotten involved without his authority over the Civil Administration.

For the cattle ranchers, the boycott is a hard blow – a lot of them won’t survive if the crisis goes on for months longer. But it also raises questions about the reliance of Palestinian cattle breeders on Israeli calves. Traditionally, Israeli cattle ranchers import young calves weighing 180 kilos, fatten them to between 500 and 600 kilos and sell them in the PA. The Israelis do a good job of raising the livestock at low cost and high health standards, but why can’t the Palestinians do it?

Israeli cattle ranchers respond that if the PA had imposed the ban in a planned and gradual way, they could have prepared by reducing the reliance on the Palestinian market.

That sounds like the right solution. If the PA wants to encourage a new sector by limiting imports from Israel, there’s no reason to stop it. But the solution has to be undertaken incrementally to let the market adjust. Now that Abbas and the PA have decided otherwise, an industry as small as cattle breeding shouldn’t be allowed to push Israel into a full-fledged trade war that will cost both sides heavily.

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