Taxing times for the sun-dried valley farmers

"Life these days in the Jordan valley," says Giora Sela, a laconic, sun-dried farmer who exports grapes to Tesco, "is hard. Life in agriculture in the Jordan valley is even harder. You have to look after yourself down here." The valley, 250 metres (820ft) below sea level, stretches 60 miles from Jericho in the south to the Sea of Galilee in the north. Driving on the one main road, bare, rocky mountains, lacerated with ravines from the winter rains, rear on one side towards Israel and the West Bank, on the other towards the kingdom of Jordan. It is dry, still and above all baking hot: 42C (107F) on a typical June day. The river Jordan is a muddy trickle.

Giora Sela is 51. He came to Beqa'ot, a smallholders' co-operative on the edge of the Judean wilderness, 30 years ago from a kibbutz inside Israel. Beqa'ot, like its 17 neighbouring Jewish settlements, was built on land conquered from King Hussein in the 1967 war and claimed now by Yasser Arafat.

The valley's 400 farmers rely on water piped in by Israel and power from the national grid. Between them they export 4,000 tons of grapes a year to Europe. They also fly dates, off-season salads and flowers there.

But now the European Union is threatening to make their lives harder still. Under a 1994 agreement, hundreds of Israeli industrial and agricultural products enter Europe duty free. But Brussels is proposing to levy duty on imports from the settlements, arguing that the occupied West Bank and Gaza Strip are not Israel and that some of the fruit and vegetables reaching Europe stamped "Produce of Israel" are not covered by the treaty.

The Jordan valley farmers are dismayed. "If we can't export," Mr Sela explains, "we'll have to sell on the local market. That would mean that instead of employing 3,000 Palestinian day labourers, we'd need only 500. The Europeans are more fussy about quality, size and packing. And for that you need more hands."

Israel denounces the EU proposal as politically motivated, and has threatened to take it to international arbitration. The EU is not expected to decide before next month and, privately, informed Europeans acknowledge that taxing settler imports would be tricky and unprecedented. That is especially so in industry, where many of the target companies straddle the old border.

Ahava, a firm making mudpacks and other cosmetics from Dead Sea minerals, illustrates the dilemma. Half the eastern shore of the Dead Sea was part of Israel before 1967. "We are not settlers," its managing director, Benny Raban, protests. "It won't affect our company." Ahava was founded by members of Kibbutz Ein Gedi, on the Israeli side of the line. It extracts its raw material from Sodom, ditto. Its registered office is in Tel Aviv. One of its factories is on an occupied hilltop overlooking the northern end of the Dead Sea. Others are inside Israel. The lawyers would have a field day.

At least discerning tipplers needn't worry about the Golan winery, which each year exports £1m of fine wines to Britain, France and Germany. The Golan Heights, conquered from Syria, are outside the customs agreement. The wines, distributed in Britain by Hallgarten, are already taxed. The customers are willing to pay.