Targeting Israel, Hitting Palestinians

A ruling by the European Union’s highest court yesterday is a perfect example of the law of unintended consequences. The court ruled that the EU’s free trade agreement with Israel does not apply to the West Bank, and therefore, goods made by Israeli firms in the West Bank are subject to EU import taxes.

Legally speaking, it’s hard to quarrel with the ruling: even Israeli law doesn’t view the West Bank as Israeli, as it does East Jerusalem and the Golan Heights. But for years, European countries ignored this detail and exempted Israeli firms in the territories from import duties. What has changed is not the law but the politics: seeking to persuade Israelis that “the occupation” doesn’t pay, EU countries recently began taxing such imports. A German importer then sued his country’s tax authorities, prompting yesterday’s verdict.

But as the Associated Press noted, the biggest victims may well be not Israelis but Palestinians. Many Israeli firms moved to the West Bank because they could export to the EU duty-free while also benefiting from cheaper Palestinian labor. Thus, if the new import taxes lower these firms’ profits, hundreds of Palestinians could lose their jobs. And because “Palestinians are largely barred from working in Israel and have few job opportunities in the Palestinian-controlled areas of the West Bank, jobs in settlement factories are sought after.”

Moreover, European efforts to tax these companies have already persuaded some to move back to Israel, and yesterday’s ruling is likely to accelerate the trend. That would throw thousands of Palestinians out of work — while benefiting the unemployed Israelis such firms would have to hire instead.

Europeans are obviously entitled to put principle above the consequences for Palestinian employment; countries make such decisions all the time. But the fact remains that once again, the biggest victims of efforts to advance the “peace process” will be ordinary Palestinians.

Thousands of Gazans, for instance, used to work for Israeli firms in the Erez industrial zone on the Israel-Gaza border. Today, Erez is a ghost town with no prospect of ever reopening: having withdrawn from Gaza, Israel could no longer protect these firms, and the Palestinians would not.

Moreover, tens of thousands of Palestinians used to work inside Israel; today, almost none do. The second intifada made a massive flow of Palestinians into Israel too risky, and Israelis felt no obligation to employ residents of a state-in-the-making that was waging nonstop physical and diplomatic warfare against them. The Palestinians, after all, cannot simultaneously demand independence from Israel and jobs inside Israel. The result is unemployment that now totals 18 percent in the West Bank and 39 percent in Gaza.

Israel is the region’s strongest economy; it will be years before the Palestinian Authority can match its employment capacity. So unless those who favor Palestinian statehood think that massive unemployment somehow contributes to this goal, they ought to be encouraging Israeli firms to hire Palestinians. Instead, Palestinian terror and international pressure have steadily combined to do the opposite.

If that sounds counterproductive, it is. Unfortunately, the EU clearly doesn’t get it.