Israel Faces a New Boycott Threat

By presidential decree, Palestinians began boycotting products made in Israeli settlements this month, part of a campaign to end Israel's West Bank occupation. Observers can be forgiven for wondering: so what? Economists estimate that only 2 or 3 percent of Israel's 2009 exports were manufactured in the settlements, and only a small percentage of those ended up in the Palestinian market.

Yet Israel worries that a successful boycott could catch on elsewhere. Europe is the biggest market for Israeli exports, and European countries are often critical of Israel's policies in the West Bank. Economist Shir Hever argues that if Palestinians assemble a list of Israeli companies with settlement ties, that could jump-start a boycott campaign in Europe. Many Israelis also fear that a nonviolent Palestinian campaign is harder to counter than bombings because it's more likely to attract international support. As a result, some politicians and business leaders are suggesting harsh retaliatory measures, including new restrictions on Palestinian imports from other countries. "Our port is their oxygen tube," says Shraga Brosh, head of the Manufacturers Association. "Closing it will only hurt them, not us."