EXCERPTS OF REMARKS BY FOREIGN MINISTER SHIMON PERES BEFORE THE KNESSET ECONOMIC COMMITTEE ON THE ARAB BOYCOTT

(Translated from Hebrew)

JERUSALEM, FEBRUARY 21, 1994

I would like to take a broader view of the issue of the Arab boycott than that generally taken. The economic boycott is clearly part of war waged by the Arabs against the State of Israel, and the Arab states have yet to abolish the state of war with Israel.

In fact, Israel loses to the Arab boycott everything that it receives from the United States. Israel loses about 3 billion dollars annually to the boycott, equal to the amount we receive in financial aid from the United States. But the problem is much broader. Let us, for once, look at it not from the Israeli perspective, but from the Arab point of view.

The major issue is: what kind of economy will there be in the Middle East? An outmoded, feudal, nationalist economy? – which, in my opinion, will harm the Arabs themselves, perhaps more than us. The fact that most of the Arab states today maintain an archaic economy, an economy of national flags instead of an economy of modern markets, prevents the Arab economy, in its present antiquated, inadequate state, from achieving what many Asian economies have accomplished in the past decade Korea, Taiwan, Singapore, and to some extent even Indonesia and Thailand, not to speak of Japan, India and China.

The Arab leaders have doomed their economies to backwardness and reactionism, because of a lack of understanding of the new rules of the economy. These new rules, I believe, are: open borders, free trade, the understanding that the market is more important than the state, the fact that the speed of communications can overcome geographic distances. Let us take, for example, two countries: In Singapore, the banks are open 24 hours a day. It attracts capital, it has flourished thanks solely to its exceptional, modern tempo. The same is true of Japan, which lacks natural resources, and which too is situated, in geographical terms, in a corner of the globe but which has succeeded, through the development of exceptional means of communication, roads, and shipping.

We must once and for all go to the root of the matter and say to the Arab world: ‘The problem is yours, no less than ours. The boycott which you impose is one of those outmoded elements which impede the progress of the Arab people, the Arab economy, and the Middle East.’ This is the truth. We must begin to attack the reactionary forces which exist in many areas, first and foremost in the area of economy.

The new world understands one simple fact: that the time has come to economize politics, rather than politicize economy. What does it mean economize politics? To establish the good of the individual, the good of the economy, as our top political priority, and not such outmoded ideas as prestige, war, nationalism and the like.

The old-fashioned leaders in the Arab world say that Israel seeks to dominate the Middle East by controlling its economy. This is nonsense. In the new economy cannot, no one can dominate through power. One can move forward only through free competition. There is no domination, only competition. For no one can force anyone to purchase a certain product, or a certain service, by pointing a cannon or a gun at him. Either you have a good, cheap, competitive product, or you don’t. Has Japan achieved what it has with warships or missiles?

Israel’s natural markets are not necessarily the Arab states. Our exports to the U.S. this past year amounted to 4.7 billion dollars, almost all in up-to-date, high-tech electronic equipment. In this field, the American market reigns supreme. The distance between Israel and the U.S. does not prevent us from competing with American producers on the American market. They don’t buy from us because they are doing us a favor. It is a matter of competition. To Europe we also export almost 4.5 billion dollars worth, slightly less than to the U.S. We import from Europe even more.

To the Arab economy, the Middle East economy, we offer modern rules: free trades, open borders, competition, cooperation and the opportunity to make full use of the natural advantages of the Middle East in order to raise the standard of living of the people of the region. The standard of living of most of the Arabs in the Middle East is about 1,000 dollars annually per capita; in Israel it is 13 times as much 13,000 dollars. In Europe, the standard of living is 21,000-22,000 dollars, and in the U.S. 25,000 dollars. When the standard of living is 20 times greater, it doesn’t just mean that the people have more money in their pockets. They can create a better health system, a better school system, a better quality of life.

I propose that we wage this battle not on the narrow level of the Arab boycott, but on the broad economic plane. The Middle East must decide what it wants to be: like certain not all of the African states, which have which have suffered serious setbacks, or like certain of the Asian states which have leaped forward. What is a free trade zone? It is an attempt to transform geographical proximity into an economic advantage. But if this proximity is plagued by barriers, by boycott of what use is geographical proximity? The economic distance remains, and we have accomplished nothing.

Let us speak not of the problems of water, but of such problems as infrastructure. The Middle East is lagging behind not only in time, but in pace. All the infrastructures in the Middle East are based on a logic of war, not on economic rationale. As a result, its ability to compete is limited. In my view, this is the challenge of the century in the Middle East: will we have an economy which serves the rulers, or an economy which serves the people? an economy based on modern rules, or an economy along old-fashioned lines? a feudal economy, or a market economy? This is the choice before us and not only for Israel. When the Arabs impose a boycott, they are also boycotting themselves.

This year, in terms of the Arab boycott, was not a bad year for us. Two or three states said that they would cancel the secondary and tertiary boycott namely Kuwait and Qatar. Saudi Arabia also hinted at something of the sort. GATT stated that it would not accept states as members unless they canceled the Arab boycott, and GATT is an important factor in the world economy today. In effect, the U.S. created world competition when it agreed to GATT. GATT reduced American influence on the world economy from 35 to 24 percent, but it helped other economies such as Japan and Europe to recover and become competitive. The U.S. takes a global view of the economy, just as we take a regional view.

There is, of course, also a certain degree of disappointment, because the Arab states said that if Israel would freeze settlements, they would abolish the boycott. To date, they have not done so. On the other hand, there have been statements, and there is progress, slowly but surely. Israel has for the first time entered into a network of relations in which Arab states, too, are involved. We are today already speaking of five Arab states Egypt, of course, but, in the multilateral talks, Tunisia hosted the working group on refugees, Oman is going to host the working group on water, and also Qatar and Morocco. This is certainly a change, not as dramatic as we would have wished, but certainly significant.

As for international organizations, the seven industrialized countries, the G-7, issued a statement against the boycott, as has the European Community. Several companies within the EC have adopted an anti-boycott rule and have begun to apply it. Perhaps the two most important countries in this regard are France, with President Mitterrand’s initiative to cancel the boycott or to prohibit French companies from cooperating with the Arab boycott; and now Germany, which, as of last May, abolished the boybott and forbade Germany companies from surrendering to boycott pressures. Japan, too, has instructed its companies to end the boycott, and Japanese firms have in fact started to come to Israel.

The United States has made an exceptional effort in the struggle against the boycott both the administration and Congress. On the eve of the recent meeting of the Arab League, the U.S. asked that the member states, and the League itself, refrain from adopting once again its traditional position on the boycott. The Arab League indeed did not do so, and in effect told those states which have decided to abolish the secondary and tertiary boycott that they can act as they see fit. The core of the boycott, as we know, is in Syria. For the Syrians, the boycott is a matter of livelihood. From what we know of Syria’s involvement in international trade and economy, it are not a paragon of virtue.

We are fighting the boycott in the broad sense, on two fronts: on the one hand, to put an end to the state of war, of which the boycott is one expression; and to bring modern economy to the Middle East. The Arabs are paying a heavy price. But there are today more and more Arabs with academic degrees, and the young generation is beginning to understand that either they must enter the world game of a new and healthy economy, or they will remain in the galleries with the underdeveloped states. The is the choice the Arabs face.

Israel does not seek a position of dominance. Israel can continue to exist as it does today and expand its markets. Perhaps in this sense, the boycott helped us, because if not for the boycott, we might not have had to cultivate the American and European markets to the extent that we did. As a result of the boycott, Israel did not develop a horizontal economy, across the entire economic board, but an economy of excellence in certain sectors. We chose a narrow sector, in which Israel has achieved maximum success. Thus, while the financial effect of the boycott was negative, it led us to develop fantastic defense industries. We also achieved a free trade zone with the United States, associated membership in the European Community, and a free trade zone with EFTA. We are today negotiating agreements with many other countries.

I say all this because I don’t want the Arab listener to think that they are saving the State of Israel. Israel is not in need of salvation the Arab economy is. The Israeli economy is developed and continues to develop despite the boycott, despite the isolation and despite war. But if the people of the Middle East truly want a modern economy, the first thing that must be thrown out the window is definitely the Arab boycott.

In response to questions, the Foreign Minister added:

Israeli ‘patronage’ Not long ago I had occasion to talk with the President and Foreign Minister of Egypt, and the question of Israeli ‘patronage’ arose. I asked the Egyptian President: ‘For 15 years there has been agricultural cooperation between Egypt, Israel and the U.S. As a result of this, Israel imparted to Egypt everything it knows in the areas of irrigation, seeds, agriculture in general, and Egypt today has excellent banana and citrus orchards, and grows choice strawberries.’ I asked the President: ‘Tell me, where is the Israeli patronage? Where have we taken over anything? We didn’t profit, we didn’t assume control. It is Egypt that profited, the people of Egypt.’ The President replied: ‘You’re 100 percent right.’ And now there is another Arab country that wants to do the same.

In a speech which I valued highly, President Mubarak said: ‘The whole world is chasing after Israel. Who rejects it? The Arab world, in which it resides. Where is the logic? Israel is first in the world in agriculture, Israel is one of the leading countries in the world in the area of technology.’ In technology, we have an advantage over the former Soviet Union, because our technology is more advanced. We have an advantage over the U.S., because our prices are less capitalistic. And we have an advantage over both, because we are a small country and pose no threat. I believe that we must wage a major campaign on this matter.

Agricultural Exports Israel’s entire agricultural exports in fresh produce amount to half a billion dollars annually. During the past year, the Arab states in the Middle East imported 25 billion dollars in fresh produce. This is scandalous. The cost of transport [from abroad] is higher, and Israeli produce is the best in the world, both in quality and in taste. The Palestinians living among us have learned the trade they have learned about plastic and about irrigation and about seeds and they are exporting their produce directly. Therefore, Israel must advocate not boycott vs. boycott, but openness vs. openness. No domination, and no patronage. This is for the good of the Middle East, for the good of the Arabs.

The number of people employed in agriculture in Israel has declined to 2-3 percent. Agriculture is no longer a major economic factor. At the same time, farmers account for 25-30 percent of the Arab economy ten times as much. So why, for example, should the Arab states import fresh produce from Europe, and leave the Palestinian farmers unemployed, instead of there being real openness? Of course, steps must be taken to raise the norms of agricultural exports, especially in the areas of hygiene, of packaging, of quality control. But they will learn, and we are certainly prepared to help.

Standard of Living, Common Market in the Middle East Israel’s gross national product today stands at 70 billion dollars. Jordan, with almost the same population, has a GNP of 4 billion dollars. From the point of view of the Israeli economy, we can continue to live as we have. But, in my opinion, if a free trade zone, or a common market, will not be created in the Middle East, the standard of living of our Arab neighbors will remain very low, and therefore the level of violence will remain very high. There is a correlation between the standard of living and the level of violence. It is one thing when a person earns 1,000 dollars a year. It is a different matter when he earns 10,000 dollars.

The problem in the Middle East is not the number of people in the region, but what is their standard of living. In other words, if the population of the Middle East today is 140 million, and their standard of living is 1,000 dollars per capita, this represents a market of 140 billion dollars. If the income will grow tenfold, then the market will be over 100 trillion dollars. The more competitive you become, the more others learn your technology, the higher the level of consumption and economic interaction. You have to whom to sell, and you have from whom to buy. Hence, the logic, I believe, is to increase the standard of living. The standard of living cannot be raised by turning your back, or by putting up a wall, or by imposing customs duties but by constant competition. Becasue if you don’t compete with your neighbors, you will compete with more competitive countries because you will lose your natural advantage, which is the shortening of transport lines.

The real goal, in my view, is to raise the standard of living. Everyone will profit by it. Let everyone become producers and consumers, rather than needy and idle. This will also have a political effect, lowering the level of military tension.

Water There are a number of things that are on the verge of an explosion. The most important commodity is water. Just as AIDS destroys man, the desert destroys the land. The Arabs have 13 million cubic meters of land; 89 percent of it is already desert. By the end of the century, it is estimated that a quarter of the remaining 11 percent will become desert.

We are interested in a different Middle East not violent, but flourishing. We must be those who press for a higher standard of living for the entire region. And, in such areas as water, we can be pioneers. Water is not political. Water does not read maps of sovereignty. Water does not distinguish between one people and another. Water does not go through customs. Water does not flow along borders. We can either fight over water, or create water. Egypt has the Nile. At the beginning of the century, Egypt had a population of six million today there are 60 million. The Nile hasn’t grown tenfold, as has the population. But if Egypt will follow in our footsteps and begin to recycle water, it will be like having another one or two Nile rivers.

Investment Money is the most spoiled commodity in the world. If it senses the slightest uncertainty, and it has other opportunities why should it come to us? Money goes to safe, tranquil places, where the cost of labor is cheap. The world is based on competition.

Peace Economy The fact that we have adopted a policy of peace has breathed life into the Israeli economy. Since the present government came to power, the Israeli economy has begun to grow, and is now the fastest growing economy in the Western world. It is the spirit of optimism, the spirit of peace, that brought about this unprecedented growth in the Israeli economy.

We are moving forward, with great optimism. We can achieve at least two goals in our lives: economic prosperity and democratic freedom. But neither can be achieved without peace. And once peace is achieved, these two achievements will be the best guarantee that peace will be maintained.

Boycott is a tool of war. When there is peace, all tools of war will be abolished, including the boycott. It is inconceivable that we should make peace, and that the Arab boycott should continue. When we will sit down to talk with other countries, this will certainly be one of the conditions. The United States continues its efforts to abolish the Arab boycott. In this, it has enjoyed some partial success, and some failures.

We shall continue this effort, boldly and vigorously. Peace, too, is a process, not a one-time act. It will take time. But I am confident that we shall achieve both the great objective of peace, and the corollary goals, such as abolishing the Arab boycott.