EU Reconsiders Its Free Trade Agreement with Israel Due to the War in Gaza

EU foreign ministers have decided to explore the possibility of cancelling the EU-Israel Association Agreement due to allegations that the war in Gaza is raising doubts concerning Israel’s commitment to the safeguarding of human rights. The UK, which is not a member of the European Union, announced earlier that it was suspending further talks with Israel on a free trade agreement, for similar reasons.

Israel and the EU have long-standing trade relations. In fact, the first major trade agreement that Israel signed with any country was its trade agreement with the EU back in the 1960s. The relations between Israel and the European Union have developed since then and, in 2000, the EU-Israel Association Agreement came into effect.

The EU-Israel Association Agreement significant[ly?] upgraded the EU’s economic relations with Israel and includes zero tariffs on most products being traded between the countries, enables reciprocal service provisions and outlines a framework for cooperation in a wide range of areas, such as aviation, tourism, communications, environmental issues and more. The European Union became Israel’s main trading partner based on this agreement. The volume of trade between the countries reaches nearly EUR 50 billion annually. Imports from the European Union account for more than 30% of all imports to Israel, and more than 25% of Israeli exports are to the European Union.

From the perspective of EU member states, the political aspects of the agreement are perhaps its most important element. The agreement stipulates that the parties will hold regular political dialogue to address, inter alia, issues of peace, security and democracy. Article 2 of the Association Agreement states that “the relations between the Parties, as well as all provisions of the Agreement itself, shall be based on respect for human rights and democratic principles … which constitutes an essential element of this Agreement.” The political element was included in the agreement at the request of the European Union. In fact, it can be said that in exchange for full access to the European market, Israel agreed to European involvement in political issues, particularly in relation to questions concerning Israel’s safeguarding of human rights.

This stipulation, which makes Israel’s access to EU markets contingent upon Israel’s human rights policy, is still in effect today. Many European countries have, for quite some time, expressed considerable objections to the way Israel is waging war in Gaza, especially with regard to Israel’s restrictions on the entry of humanitarian aid. In recent weeks, many European leaders, such as the French president and the British prime minister, have even begun voicing their criticism publicly. From these leaders’ perspective, it is only natural for their rancor to be translated into actions, such as reconsidering the economic agreements between Israel and the European Union and suspending talks on the new trade agreement between Israel and the UK.

At this stage, the European Union’s decision should be seen as a kind of “yellow card” to the State of Israel. Israel’s allies in Europe will probably block the suspension or cancellation of the free trade agreement. But if Israel continues its current policy in this war, especially with regard to humanitarian aid, and primarily – if Israeli politicians continue voicing their support for violations of international law, such as starving the population or expelling all Arab residents of the Gaza Strip – it is plausible that the free trade agreements between Israel and European countries will be canceled. The outcome would be a steep drop in Israeli exports to the European Union, because Israeli manufacturers would lose their advantage over competitors from other countries and find themselves in an inferior position vis-à-vis European manufacturers. In other economic sectors, such as high-tech and banking, the cancellation of the agreement could have substantial adverse impacts.

The Israeli economy is already contending with a protracted war and the imposition of tariffs by the United States. The cancellation of the free trade agreement could jeopardize its stability.