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EU, Israel Make No Progress in Customs Dispute - 2002-10-21

The European Union and Israel have failed to make significant progress in a long-running dispute over customs duties on goods made by settlers living in occupied territories. A European diplomat says the EU is running out of patience with the Jewish state, while Israel publicly plays down the dispute. The EU foreign ministers met in Luxembourg.

At issue are goods worth about $200 million a year that enjoy preferential tariff terms because they are labeled "Made in Israel." But the goods actually come from settlements in the occupied West Bank and Gaza Strip.

About $7 million in customs duties could be imposed on that trade.

While the amount is not large, Israeli officials fear that uncertainty over the issue could scare away importers in the EU, which is a huge market for Israel. Diplomats also say the issue cuts to the heart of regional politics because it concerns the legitimacy of Israel's borders.

Israeli Foreign Minister Shimon Peres acknowledges that the problem is much more political than financial.

"The trade between the European Union and Israel is something like $20 billion a year. Two-thirds are exports from the European Union to Israel. One-third is exports from Israel to the European Union. The whole story is $7 million dollars," he said. "So let us not talk so highly about financial problems."

Israel gets preferential terms for its exports to the European Union under what is called an Association Agreement. The dispute over the goods from the occupied territories has put that arrangement in jeopardy.

Danish Foreign Minister Per Stig Moller, whose country holds the EU presidency, says a new round of talks among technical experts to resolve the issue should be concluded early next year.

"Here I stressed that Israel must live up to its obligations under the Association Agreement and engage in constructive talks with the aim of finding a solution," he said. "It is unacceptable that Israel does not respect the agreement. In this regard I was pleased that Mr. Peres confirmed that Israel would work toward finding a solution, which we will find in the beginning of the new year."

One EU diplomat said the organization is losing patience with Israel on this dispute, which has been ongoing for several years.