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Arab states still clinging to Israel boycott: The 45-year-old trade embargo of the 'Zionist state' persists despite the recent peace accord, writes Charles Richards

IN AN elegant stuccoed building in London's Belgrave Square, officials of the Arab-British Chamber of Commerce help British exporters to sell to the Arab world - and avoid the Arab economic boycott of Israel. Officials at the Chamber of Commerce insist, however, that their task is purely technical. They verify certificates of origin and ensure conformity with standards or requirements of the importing country.

Since the signature of the peace accord between Israel and the Palestine Liberation Organisation on 13 September, the boycott has once more become an issue. On 21 November the United States House of Representatives passed a resolution condemning the boycott as an impediment to peace. The following day, the secretary-general of the Arab League, Esmat Abdel Meguid, said the boycott would continue until Israel withdrew from all occupied Arab land.

The two stands reflect diametrically opposed views on how to achieve a lasting peace between Israel and the Arabs. For the Israelis and most of the Western world the boycott is an anachronistic violation of principles of free trade. Lifting the boycott would be an expression of good intention by the Arab world and indicate a desire to achieve a lasting and meaningful peace. They want the boycott suspended before there can be real peace. The Arabs see it as possible only once a comprehensive settlement is reached. For the Arabs the economic leverage of the boycott is about its only remaining negotiating card, given the absence of any military clout to force concessions from Israel.

There has been some relaxation of the boycott. In the summer Kuwait announced an end to the secondary and tertiary boycott of companies dealing with Israel. There have also been persistent reports that Israel and Qatar are discussing the building of a gas pipeline from the Gulf to the port of Eilat.

The Arab boycott of Israel was initiated by the Arab League just after the establishment of the state of Israel. It was an attempt to prevent the development of the embryo state. According to the British-Israel Chamber of Commerce there are several elements to the boycott.

The primary boycott bans member states of the Arab League from doing any business with Israel. Egypt, by virtue of its 1979 peace treaty with Israel, is exempted.

The secondary boycott embraces commercial companies not party to the dispute. It prohibits non-Arab third parties from trading with Israel. Companies which have a branch, agency, factory or plant in Israel are put on the boycott blacklist, controlled from Damascus. According to the British-Israel Chamber of Commerce, more than 10,000 companies are on the list and names are still added and struck off.

The tertiary boycott is against companies that deal with blacklisted firms and which, out of fear of being blacklisted, refuse to trade with Israeli companies.

In practice the boycott does not apply to large or strategic companies. The US authorises the sale of similar state-of-the-art weapons to Saudi Arabia and Israel and their manufacturers are not blacklisted. For years Coca- Cola was on the boycott and only Pepsi was available in the Arab world. Now Coca-Cola is made under licence in many Arab countries and in fiercely anti-Israeli Iran. Japanese companies, for long wary of entering Israel for fear of jeopardising their lucrative Arab markets, are now the second largest foreign investors in Israel after the US.

Many countries have legislation, but not Britain, that forbids companies from complying with such a boycott. Although the Government regularly expresses its condemnation of the boycott it is opposed to domestic legislation to ban it. It says companies should make their own choices about overseas markets.

The US has the strictest legislation. Companies found complying with the boycott of Israel risk losing tax concessions and can be fined.

As a political weapon the Arab boycott of Israel has achieved nothing. Its declared objectives have not been achieved. Israel's decision to withdraw from Sinai did not stem from any economic straitjacket. The structural weaknesses in the Israeli economy come from a hangover from ill- judged socialist policies and the burden of huge defence expenditure.

At the time of 1973 Arab-Israeli war Arab oil producers imposed an oil embargo on the Western world to try to put pressure on Israel to withdraw from territories occupied since the 1967 war. The cuts in production were lifted the next year, by which time the Arab oil producers had made windfall gains from higher oil prices. Again, the oil weapon failed to achieve either of its declared political objectives. Israel did not withdraw from lands conquered in 1967; nor were any advances made to secure Palestinian rights.

Now many Arabs fear that the end of the boycott would lead to a swamping of their markets with Israeli goods. Jordan is especially sensitive. Yet Israel's main exports are in hi- tech, for which the Arab world has limited need. In the long term, peace within the context of a comprehensive regional settlement can lead to far greater economic co-operation. In the short term the boycott will remain as it always was: a blunt, rather ineffective political weapon, rather than an economic one.