The Multinational Monitor


L E V I S   I N   A R A B I A

The Boycott Debate

Where Politics and Trade Meet


Dr. Clovis Maksoud, chief representative of the Arab League in the U.S., in support of the Arab boycott.

Multinational Monitor: Why was the Arab boycott of Israel initiated?

Dr. Clovis Maksoud: The Arab boycott of Israel was initiated soon after the state of Israel came into existence as part of the declaration of the state of war between the Arab states and Israel.

A boycott of Israel constitutes an additional incentive for Israel not to pursue its discriminatory policies against non-Jews inside Israel and against Arabs under occupation.

The Arab states boycott Israeli goods and business establishments that conduct business directly with Israel or with any institution that enhances the warmaking capacity of Israel. It's like the U.S. boycott of Cuba.

[A boycott of Israel is necessary because Israel] keeps on making settlements in occupied territories. It is undoing the national existence of the population of the West Bank, East Jerusalem and Gaza. It annexed the Golan Heights. It refuses to withdraw from South Lebanon.

Monitor: Those who oppose the Arab boycott of Israel argue that while all countries have a legitimate right to impose a primary boycott, the Arab states have instituted secondary and tertiary boycotts, that is for example, refusing to do business with businesses trading with Israel. How do you justify such a boycott?

Maksoud: As long as we are in a state of belligerency with Israel, any company in the United States, Europe or anywhere else that-through its business with Israelis enhancing [Israel's] war-making capacities must make a choice. We're doing that as a protective measure and not as a penalty. We do not want to help businesses that will help to underwrite our ultimate military defeat. It is purely pragmatic.

Monitor: In response to the Arab boycott, the U.S. passed laws in 1979 known as the anti-boycott laws. What is the Arab League's view of those laws?

Maksoud: The motivation for those laws-namely that we are conducting boycotts against Jewish enterprises-is totally erroneous. We do not boycott institutions because of the religious or ethnic affiliations of the directors or the executives.

Monitor: But there have been charges that many Arab countries request the names of the directors of companies wishing to do business in the Middle East. Is there any validity to that?

Maksoud: They ask for the names because certain well known board members have contributed to Israeli funds. There is absolutely no policy that is discriminatory on the basis of religious or ethnic affiliation.

Monitor: Are you saying that Jewish businessmen are in fact doing business in the Arab world?

Maksoud: I see no reason why they don't, if their companies comply with the laws of the Arab states regulations in this respect. That someone is Jewish doesn't constitute a bar because this would be discriminatory of people's religious affiliation. We are against racial, ethnic or religious discrimination.

Monitor: If an Arab country were to find out that an American businessman was lending assistance to the Israeli cause, would that be a reason for an Arab country to prohibit that person from doing business there?

Maksoud: Yes, if this assistance to Israel is being undertaken to enhance Israel's capabilities of pursuing its policies of occupation, settlement, and aggression in the Arab countries. This applies also to non-Jews who might contribute to Israel.

Monitor: When will the Arab League lift its boycott?

Maksoud: When we have a comprehensive, just and durable peace in the Middle East, and the rights of the Palestinians to self-determination is insured.


Will Maslow, General Counsel, American Jewish Congress, in support of the U.S. anti-boycott laws.

Multinational Monitor: What is the rationale behind the anti-boycott laws that the U.S. Congress passed in reaction to the Arab boycott of Israel?

Will Maslow: America passed this [anti] boycott law because [the Arab boycott] was interfering with American businessmen and interfering with American trade. The boycott places artificial restrictions on American businessmen who may want to trade with Israel, [but] are afraid that if they do so, they will be placed on an Arab blacklist and they will no longer be able to trade with Arab countries.

There is no great legal quarrel with what is called the primary boycott. That is, if the Arab countries don't want to buy from Israel or sell to Israel, that is their sovereign right. But what they seek to do is involve American businessmen and American banks in enforcing this boycott.

Monitor: How do the anti-boycott laws, which prohibit U.S. businesses from participating in the Arab boycott, work?

Maslow: They provide in effect that American taxpayers who make agreements oral or in writing to participate in or cooperate with the Arab boycott, will forfeit all their foreign tax credits. American taxpayers are required to file a return every year and list any operations they have in boycotting countries and then to state on their return whether or not they made such an agreement.

Monitor: What effect has the anti-boycott law had on U.S.-Arab trade?

Maslow: Arab trade has continued to increase year after year steadily from 1976 until 1984. The fear of some American businessmen that they would lose trade with Arab states turns out to be completely unfounded. Since 1984, there has been a decline in Arab trade, but that has nothing to do with the anti-boycott law. America's share of the Arab market did not diminish.

Monitor: Does that mean the law is not working?

Maslow: No, the law is working. The Arab states, if they want to buy automobiles, will buy them from the United States. They may not buy them from companies that are on the blacklist, but that's only a small proportion of American businesses.

Monitor: Has the Arab boycott, despite the U.S. antiboycott laws, kept U.S. companies out of Israel?

Maslow: Take for example an American bank, like Chase. It has no branch in Israel. It has branches all over the Arab world. Some of them are in small countries that don't have one-tenth the economic activity of Israel. But, the law says that the mere fact that Chase is not doing business in Israel doesn't prove that its failure to do so has been occasioned by the Arab boycott.

We met with David Rockefeller in 1975 and he told us in so many words that it was fear of Arab pressure or retaliation that prevented them from opening a branch. And that is still the case today. Not a single American bank has a branch in Israel. They have not since 1975.

When Israel wanted to explore for oil, it couldn't get a single oil rigging company to explore. They had to set up a dummy enterprise to do the exploration.

Monitor: How effective has the Reagan administration been in enforcing these anti-boycott laws?

Maslow: The Reagan Administration has done very well in the enforcement of these laws. When Reagan began to enforce staff cuts throughout the administration, the Office of Anti-boycott Compliance was not touched. Their budget is about $1.5 million. This staff has not hesitated to go against the largest American corporations. Citibank paid a fine of $300,000. They went after Xerox and issued an order forbidding them from doing business in the Arab world for six months. The [Office of Anti-boycott Compliance] hasn't hesitated to go after very large enterprises.

Trading in the Law

In the mid-1970s the U.S. Congress adopted two laws to keep U.S. firms from participating in economic boycotts or embargoes not sanctioned by the U.S. government. Although these laws-the Ribicoff Amendment to the 1976 Tax Reform Act and the 1977 amendments to the Export Administration Act-apply to all foreign boycotts, they were enacted to counteract the Arab League Boycott of Israel.

The Tax Reform Act applies to U.S. taxpayers and their related companies. Under this law, all U.S. taxpayers with operations in, with, or related to, boycotting countries or their nationals risk loss of tax benefits for certain types of boycott-related agreements.

The Export Administration Act applies to all "U.S. persons"-individuals and companies located in the United States and their foreign affiliates. U.S. companies that sell, purchase, transfer goods or services between the United States and a foreign country are prohibited from participating in foreign boycotts. This covers U.S. exports and imports, financing, forwarding and shipping, and certain other transactions that may take place wholly offshore.

Under the Export Administration Act and the Tax Reform Act, U.S. companies are prohibited or penalized for:

  • agreeing to refuse or refusing to do business with Israel or with blacklisted companies.
  • agreeing to discriminate or discriminating against other persons based on race, religion, sex, national origin or nationality.
  • furnishing information about business relationships with Israel or with blacklisted companies.
  • furnishing information about the race, religion, sex or national origin of another person.

Both the Tax Reform Act and the Export Administration Act require U.S. companies to report all requests they receive to take any action to comply with, further, or support an unsanctioned foreign boycott. Violators of the Export Administration Act risk fines of up to $50,000, loss of export privileges and up to five years in jail. Willful violations of the reporting requirements can result in criminal penalties of up to $25,000 and/or one year in jail.

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