The European Commission: Getting Personal

The European Commission's decision to condition Brussels future agreements with Israel on the recognition of East Jerusalem, the West Bank, and the Golan Heights as "occupied territory" is a major event, not because of what it does, but for what it dramatizes.

The new guidelines do not impinge on the free-trade agreement or other agreements governing cultural and sports exchange; for now, Israeli football teams can still play in Barcelona (if they can stand the boos) and Hebrew University professors can still go to conferences in Paris.

Since the time of Ehud Olmert in the Ministry of Industry and Trade, in the mid-2000s, the EU mandated that produce from the territories be marked as such (a move that Olmert advised the government to go along with, which earned him the hatred of Likud rank and file, thus helping to precipitate the founding of Kadima). Right now, there are not many projects initiated from or individuals living in the territories that rely on, or even hope for, funding from granting agencies of  European Union.

But the specific strictures and precedents miss the point. Even if the guidelines do not apply to the actions of individual member states, it sends them a clear signal: a boycott of people, projects, and companies from the settlements is, if not mandatory, then welcome. And given the difficulty of determining just where the boundaries are for Israeli people, projects, and companies, questions might well be raised about all Israelis, and questions are enough to get in the way.

Commerce in technology advanced countries, you see, is no longer an impersonal exchange of goods. It is a building of relationships. One does not have to boycott Israeli "products" to prejudice Israel's economy; where most value is created by scientific interchange, it is enough for a European not to trust, or just not want to hang with, Israelis; enough to have a key member of a marketing or research team who does not want to visit Israel for meetings.

Phillips or BMW products development teams can still strike deals with an Israeli Israeli components maker or software design house. But why would they if it means extra static?  There are plenty of places in the world to get smart engineering.

Natan Linder, a former student, the founder of Samsung’s Israeli technology center--and now at MIT's Media Lab--once put it to me this way: “Israel’s real demographic problem is in India and China. What is their top ten percent— 200 million people? Assume real geniuses are just one percent—that is 20 million people. They have four times more geniuses than we have people. So how does Israel survive in this scenario?"  The point is, distinguishing yourself is hard enough.  You don't need to come up to the plate with a strike against you.

True, if Israelis come up with innovations that nobody else has--great GPS mapping, or new ways of treating diabetes--fewer questions will be asked. But the $40 billion a year "in trade" that Israel does with Europe represents tens of thousands or transactions that are, in the end, personal.

If before the head of a company's product development team (or head of a university department, or technology institute, or medical trial team, or granting non-profit) takes a meeting with you, he or she automatically starts to wonder about where you live, or your key people live, or what the key people on his or her team will say, you just get to be too much trouble. If Prime Minister Netanyahu insists on blurring the border with the territories, ordinary Europeans cannot be blamed for doing the same.

Is this enough to wreck Israel's economy? Not yet. But it is enough to make the difference between growing at 3.5 percent rather than 6 percent, or 7.2 percent unemployment rather than 6.5 percent.  And that difference is enough to account for the difference between a budget surplus or a 40 billion NIS deficit, thus universities that are cutting rather than hiring, thus an innovation engine that revs down, thus people like Linder staying in Boston rather than returning to Herzliya.  As I said, personal.

From Open Zion, a featured section of The Daily Beast, where I have a regular column.