Cover of a report titled "Trading Away Peace: How Europe helps sustain illegal Israeli settlements," featuring two individuals looking towards a settlement.

Trading Away Peace: How Europe helps sustain illegal Israeli settlements

Executive Summary

The European Union’s position is absolutely clear: Israeli settlements in the occupied Palestinian territory are “illegal under international law, constitute an obstacle to peace and threaten to make a two-state solution impossible”. Yet this report shows how European policy helps sustain the settlements. It reveals that the EU imports approximately fifteen times more from the illegal settlements than from the Palestinians themselves.

Israeli settlements are communities established on territories occupied by Israel since 1967. Today more than 500,000 Israeli settlers are living across the occupied West Bank, including East Jerusalem. Settlements control more than 42% of the West Bank’s land and the majority of its water and natural resources. Their daily encroachment on Palestinian territory undermines the feasibility of the two-state solution promoted by the European Union.

Over the past two years, settlement expansion has accelerated with more than 16,000 new housing units announced or approved. Meanwhile, the demolitions of Palestinian structures – including those funded by European donor support – are on the rise, displacing over a thousand people from their homes in 2011, almost twice the number in 2010.4 The last two years have also seen unprecedented numbers of violent attacks by settlers against Palestinians.

A discriminatory two-tier system

Through the establishment of settlements, successive Israeli governments have created a discriminatory two-tier system in the West Bank with settlers enjoying all the rights and benefits of Israeli citizenship, and Palestinians subject to Israeli military laws that deprive them of their fundamental rights.

Movement of Palestinians within the West Bank and access to essential services, including hospitals, remains hampered by some 542 obstacles to movement, including roadblocks and checkpoints, despite limited easing in the last years. Access to water also remains hugely unequal with Israel over-extracting West Bank water resources while restricting Palestinians from drilling new wells and developing their water infrastructure. In some cases, pumping of groundwater to irrigate export crops on settlement farms has dried up nearby Palestinian wells, limiting Palestinians’ ability to cultivate their own lands.

The two economies of the West Bank

Settlement farmers and manufacturers benefit from wide-ranging Israeli government subsidies and enjoy easy access to international markets via government-built roads that bypass Palestinian populated areas.

In stark contrast, the Palestinian economy is severely constrained by Israeli restrictions on access to markets and natural resources, the annual cost of which has been estimated at EUR 5.2 billion or 85% of the total Palestinian GDP. As a result of these restrictions, Palestinian exports have declined from over half of Palestinian GDP in the 1980s to less than 15% of GDP in recent years, effectively negating any benefits of the EU’s preferential trade agreement with the Palestinians.

This has helped create a situation where the Palestinian Authority is dependent on large amounts of funds from the EU and other foreign donors and is currently facing an acute fiscal crisis.

The contradictions of Europe’s trade with Israeli settlements

The most recent estimate of the value of EU imports from settlements provided by the Israeli government to the World Bank is $300m (€230m) a year; this is approximately fifteen times the annual value of EU imports from Palestinians. With more than four million Palestinians and over 500,000 Israeli settlers living in the occupied territory, this means the EU imports over 100 times more per settler than per Palestinian.

The most common settlement products sold in Europe include agricultural products, such as dates, citrus fruits, and herbs, and manufactured products including cosmetics, carbonation devices, plastics, textile products, and toys.

Despite its firm position that settlements are not part of Israel, Europe has been accepting imports of these settlements products with origin designated as “Israel”, thus acquiescing to Israel’s extension of its sovereignty over the occupied territory. Many of these products are also sold in European stores under the misleading label “Made in Israel”, denying consumers their right, under existing EU consumer protection legislation, to make informed decisions when they shop. As a result, many European consumers are unwittingly supporting the settlements and the attendant violations of human rights.

Beyond the trade in settlement goods, some European-owned companies have invested in settlements and related infrastructure or are providing services to them. Cases that have been reported include G4S (UK/Denmark), Alstom (France), Veolia (France), and Heidelberg Cement (Germany). Others, such as Deutsche Bahn (Germany), AssaAbloy (Sweden), and Unilever (Netherlands) have already ceased their activities in the West Bank in recent years, setting an example for the companies still doing business in the settlements.

Adding to the contradictions at the heart of EU policy towards Israel’s illegal settlements, the EU has failed to fully exclude settlements from the benefits of its cooperation programmes and bilateral agreements with Israel. In several cases, EU public funds for research and development have been used to directly support activities in settlements. The newly ratified EU-Israel Agreement on Conformity Assessment and Acceptance of Industrial Products (ACAA) is another example of the EU’s failure to insist on a firm distinction between Israel proper and the illegal settlements.

The way forward

The many linkages with settlements are inconsistent with Europe’s obligations under international law, which stipulates that third parties, including European governments, have the duty not to recognise, aid, or assist settlements as well as the duty to effectively oppose them. By trading with settlements and contributing to their permanence, the EU is also undermining its years of political and financial investment in Palestinian state-building efforts.

There is a growing awareness among European governments of the need to close the gap between their rhetoric on settlements and their practice. The British and Danish governments have already taken concrete steps by adopting guidelines for the correct labelling of settlement products. But there is much more that national governments and the EU can do to ensure their policies do not directly or indirectly support settlements and the associated injustices.

Recommended measures (for national governments and the EU as appropriate)

Sales and imports of Israeli settlement products

  • Ensure correct consumer labelling of all settlement products as a minimum measure, as done by the UK and Denmark, but also covering manufactured products.
  • As a further measure, discourage businesses from purchasing settlement goods and from all other commercial and investment links with settlements, by means of formal government advice.
  • As a more comprehensive option, ban imports of settlement products, as called for by Ireland.

Excluding Israeli settlements from EU and national relations with Israel

  • Exclude settlement products from preferential market access by insisting that Israel starts designating the origin of settlement products differently than ‘Israel’.
  • Exclude settlements from bilateral agreements and cooperation instruments with Israel by means of explicit legal provisions and safeguards.
  • Exclude settlement products and companies from public procurement tenders.

Financial transactions with Israeli settlements

  • Remove organisations funding settlements from tax deduction systems, as done in Norway.
  • Prevent financial transactions to settlements and related activities by means of applying restrictive measures, as a more comprehensive approach.

Other measures

  • Discourage citizens from buying property in settlements by means of formal advice, as already done by several EU member states.
  • Issue guidelines for European tour operators to prevent support for settlement businesses.
  • Draw up a list of companies misstating the origin of settlement goods as ‘Israel’ as requested by the European Parliament.
  • Insist that Israel disaggregates settlement data provided to the Organisation for Economic Co-Operation and Development (OECD).