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The Dollars and Sense of BDS

Ron Skolnik
October 6, 2016


by Ron Skolnik

from the Autumn 2016 issue of Jewish Currents

THIS PAST JULY, while American eyes were glued to the commencement of the Democratic Party convention in Philadelphia, Israeli Prime Minister Binyamin Netanyahu issued an unexpectedly triumphalist declaration: Israel, he crowed, had “beaten” the international BDS movement.

His remarks came in an address to a Knesset panel that was examining the efficacy of Israel’s public diplomacy, following a State Comptroller’s report that had bemoaned the inadequacy of the government’s response to the BDS (Boycott, Divestment and Sanctions) challenge. Dismissing the report, Netanyahu boasted that he and his government were “handling BDS,” that BDS supporters were “on the defensive” and “taking hits on many fronts,” and that their very right to boycott Israel was now being challenged — an apparent allusion to pro-Israel lobbying campaigns in the U.S. (at both statewide and federal levels) and in Europe that seek to impose legal restrictions and even financial consequences on BDS efforts.

What a difference a few weeks can make! Only four months prior to Netanyahu’s statement, Israel had held its first-ever anti-BDS conference, organized by the mainstream Yediot Ahronot newspaper and featuring an all-star cast that included President Reuven Rivlin, top-tier opposition leaders (MKs Yitzhak Herzog, Tzipi Livni and Yair Lapid), corporate moguls, journalists, academics, performing artists, and seven government ministers, a full one-third of Netanyahu’s Cabinet. Notable among these ministers was Gilad Erdan, Minister of Strategic Affairs, who is in charge of the government’s anti-BDS campaign.

While Erdan and others urged attendees not to “overemphasize” the power of BDS, journalist Mairav Zonszein astutely noted in +972 magazine that the conference “was a tell-tale sign that [BDS] has become significant enough to warrant such an event . . . a clear admission that Israeli politicians, journalists, security experts, businesspeople, and lay leaders feel compelled to do something about the damage — to Israel’s economy and image — that the BDS movement is creating.” Indeed, the rather melodramatic invitation extended by the conference organizers warned that the BDS movement packed an “explosive payload,” was “conquering a growing number of strongholds in Europe, the United States and elsewhere,” constituted a “palpable threat,” and was already inflicting “severe damage” on Israel in both the economic and diplomatic spheres.

In May, just two months prior to Netanyahu’s “mission accomplished” remarks at the Knesset, Israel’s United Nations Ambassador Danny Danon, in an interview with The Jewish Press, had cited BDS as a “threat” that “the Prime Minister takes . . . very seriously” and that was having a “chilling effect,” causing potential investors in Israeli businesses to “think twice.”

Danon’s comments came ahead of an anti-BDS “summit” he convened in New York on May 31, in partnership with a plethora of “pro-Israel” groups that included the Anti-Defamation League, Hillel, the Zionist Organization of America, StandWithUs, B’nai B’rith International, CAMERA, and the World Jewish Congress. Standing before a gathering of some 2,000, Danon sounded the alarm, warning that BDS (“the true face of modern anti-Semitism”) had already “infected . . . even the UN.” Here he was referring to a UN Human Rights Council resolution to compile a database of all business enterprises operating not in Israel but in the West Bank settlements beyond Israel’s sovereign border.

Two weeks later, the Israeli government issued what might have been its strongest signal yet how concerned it was about BDS by reaching out to the once-treyf J Street for help. J Street’s annual conventions have traditionally been boycotted by Israel’s diplomatic corps, and in late 2009 Israel’s ambassador to Washington had infamously intimated that the organization was not even committed to the country’s survival. But speaking this past June at the prestigious Herzliya Conference, Minister Erdan indicated that his government now had bigger fish to fry and that he was particularly in need of allies to his left who had established their credibility by speaking out against Netanyahu government policies. Three days earlier, in fact, Erdan had held a preliminary sit-down with Yael Patir, who runs J Street’s office in Israel, “to examine the possibility of working together against [BDS] on U.S. campuses,” as Haaretz reported.

SO TO WHAT DEGREE is the BDS movement actually affecting Israel? Is it truly an enemy so dangerous that common cause must be made with political archrivals? Or is it merely a minor, manageable irritant, as depicted by Israel’s prime minister?

social-media-pngFortunately, economic data are now available to supplement the statements and spins offered by the political leaders. According to a recent Bloomberg News economic analysis, despite some high-profile successes for BDS — such as stay-aways from Israel by scientist Stephen Hawking and singer Lauryn Hill — “The Boycott Israel Movement May be Failing,” as the article was entitled. Foreign capital-flow into Israel had never been stronger, Bloomberg reported, noting that, compared to the year 2005, when the BDS call was first issued by a long list of Palestinian civil society organizations, foreign investment in Israeli assets had nearly tripled, and Israeli startups had raised the most cash from non-Israeli investors in a decade.

The overall economy in Israel does not seem to have been affected either. While Israel’s economic activity has slowed of late, its growth still exceeds that of both the U.S. and the European Union (EU), and its currency, the shekel, is strong. Israel’s per-capita GDP, according to World Bank figures, rose roughly 75 percent in U.S. dollar terms, to over $35,000, between 2005 and 2015. (U.S. per-capita GDP rose about 25 percent, to $55,800, in the same period.)

Significantly, even Israeli companies with prominent links to the settlements and to what is known as “the Occupation economy” — such as Elbit electronics, Africa Israel Investments, and the country’s major banks — have, in recent years, registered an increase in the percentage of their ownership held by non-Israelis.

The data gathered by Bloomberg match the findings of a January 2015 report put together by the Knesset Research and Information Center, which concluded that BDS efforts had “not hurt the Israeli economy on the macroeconomic level.” The export of Israeli merchandise to the EU had nearly doubled over the previous ten years, the report stated, and foreign direct investment in Israel had accelerated. Meanwhile, Israeli exports had become less reliant on the U.S. and EU, where BDS pressures have been stronger, with a greater share of exports now going to emerging markets in Asia and to non-EU countries in Europe.

The Knesset report also helps explain one of the obstacles the BDS movement is facing: the difficulty of staging a meaningful consumer boycott of Israeli products. A major share of the country’s exports, the report notes, are not items that end-users will ever see in their brick-and-mortar or online stores. Instead, they are “intermediate products, like electronic components that sit inside the final products of well-known global companies.” As Yonathan Mizrachi observed recently at +972, “The chances that [Israel’s] security, diamond, chemistry and technology industries will be harmed due to a consumer boycott are slim. Consumers may buy fewer dates from the Jordan Valley, but they won’t buy fewer weapons.”

This is not to say, of course, that BDS has failed to make any inroads on the economic front. In March, G4S, the London-based global security firm whose services had included providing screening equipment at checkpoints and a military prison in the West Bank, announced that it would be selling all its Israeli business interests. In September 2015, Veolia, a French infrastructure corporation whose involvement in the Israeli market had included the controversial Jerusalem Light Rail, which runs to Jewish settlements beyond the Green Line, likewise sold off the last of its investments in the country. While the two companies denied that their moves came as a result of boycott-divestment pressures, BDS activists took credit for both.

social-media-jpgOther developments are harder to categorize and classify. Since the BDS movement targets the whole of Israel, not just the settlements or the occupation, how should observers define, for example, the decision by SodaStream, the maker of carbonated drink dispensers, to remove its production plant from the West Bank and place it within the Green Line? Is this a success for BDS or not? SodaStream’s relocation was, in fact, cited as a victory by the BDS movement, yet it resolved nevertheless to keep up the boycott of the company due to its presence in the Negev region —which, activists claim, makes it complicit in the dispossession of the area’s Bedouin population.

Similarly, a variety of pension funds, sovereign wealth funds, asset management firms and mainline American Protestant churches have, in recent years, divested from (or banned investment in) selected Israeli firms that are seen as complicit in settlement and occupation. With a glass half-full approach, BDS leaders have hailed these developments, yet they might just as easily be considered a rejection of the movement’s demand that divestment be applied to all of Israel.

PERHAPS, TOO, the effectiveness of BDS simply cannot yet be properly measured. Even though the BDS call was made more than a decade ago, both sides seem to realize that they are playing the long game. Prominent BDS leader Omar Barghouti, for example, recently acknowledged that the process is slow and pointed out that the anti-apartheid boycott of South Africa required a generation before entering its decisive stage of government-imposed sanctions. BDS, he said confidently, is running ahead of schedule. Palestinian activist Professor Nada Elia suggested similarly that the primary aim of BDS was not to “bankrupt Israel” but gradually to reframe the narrative, so that international public opinion would come to view Israel as the victimizer rather than the victim.

At least some Israeli officials, it seems, are worried by just such an approach. While an internal report released last year by the Israeli Finance Ministry expressed confidence that “to date” the BDS campaign was merely “a nuisance” in the diplomatic, economic and cultural spheres, the authors cited with concern the steady decline in Israel’s image internationally. They warned that “in the globalized era, worldwide public opinion has become a factor that is more and more significant in international relations.” Noting the general correlation between a country’s image and its economic strength, the report focused attention on what it perceived to be the underlying BDS strategy:

One of the principal goals of the delegitimization campaign being run by the BDS coalition is to create an image of Israel as a pariah state that has a protracted conflict that harms human rights, similar to the image of South Africa in the apartheid years, so as to damage the Israeli economy indirectly.

The authors outlined a number of different scenarios that could emerge from the BDS campaign, each with a different economic impact on Israel. Those scenarios considered more likely, such as EU labeling of settlement products and even an official EU boycott of such products, were seen as not particularly damaging to the Israeli economy, since less than 1.5 percent of Israel’s exports to the EU originate in the West Bank settlements. But the Ministry report did note more dangerous scenarios that could deal Israel a significant blow. These included an EU decision to revoke its free trade agreement with Israel or even to declare an embargo on all Israeli products. While the respective probability of these two scenarios was defined as “very low” and “low to the extreme,” the authors would not rule them out entirely and warned that they could potentially cost the Israeli economy dearly. Former Finance Minister Lapid noted in 2014 that such action by the EU could cause Israel to lose billions of dollars each year and lead to ten thousand layoffs just in the near term.

A 2015 study by the Rand Corporation has gauged the potential power of BDS to be even greater, suggesting that it could potentially shave 2 percent, almost $9 billion, off Israel’s projected 2024 Gross National Product. Yet Rand, too, notes that at present “the international BDS movement has not reached a participation threshold that imposes a significant cost on the Israeli economy.” So far, in other words, it’s been more bark than bite.

The Rand study indicates, furthermore, that if the BDS movement wishes to ever make a significant dent on the Israeli economy, it will have to move well beyond the stage of voluntary consumer boycotts and divestment pressures and involve the international community in a system of financial sanctions and “extensive” export restrictions. The report does not assign this scenario a high probability: “[T]hough it is likely that the BDS movement may pick up some momentum between 2014 and 2024,” it concludes, “the total impact . . . is likely to be modest.”

Based on the evidence available at the moment, therefore, it seems that neither side is poised to score a decisive victory any time soon. The BDS movement, while growing, lacks clout. And Israel, notwithstanding Netanyahu’s bravado, is unlikely to cause the BDS movement to vanish — certainly as long as the occupation and settlements continue to tarnish the country’s reputation in the eyes of the world.

Ron Skolnik is associate editor of Jewish Currents. His writing has been published in Haaretz, The Jerusalem Report, Tikkun, Palestine-Israel Journal and elsewhere. He previously served as political adviser to the British Embassy in Israel and as director of Partners for Progressive Israel (formerly Meretz USA). You can follow Ron on Twitter at @Ron_Skolnik.