Israel and EC dispute rights of Palestinian farmers. Europeans pressure Israel to allow Gaza West Bank, to export produce directly

A pending economic showdown between Israel and the European Community is being watched with unusually keen interest in the Israeli-occupied West Bank and Gaza Strip. Israeli and European Community (EC) officials are at odds over whether Palestinian farmers living in the occupied territories should have the right to export their products from Israeli ports directly, instead of through state-run Israeli marketing companies.

The stakes for Israel in this otherwise minor dispute are largely economic. EC officials say that unless Israel agrees to the principle of direct Palestinian exports from Israeli ports, Israeli flower exporters could lose their preferential access to the lucrative European market. (Floral exports bring in about $85 million a year to Israel.)

But for Palestinians in the occupied territories, the stakes are potentially much larger, going to the heart of the issue of the occupied lands' political identity.

``What we want is not just technical access to foreign markets but our own marketing identity,'' says one West Bank Palestinian. ``This is the real issue behind the issue.''

Giving Palestinian farmers direct access to overseas markets, an Israeli official says, ``would break an important link between Israel and the territories.''

An EC spokesman describes the standoff over direct marketing as the ``crux'' of negotiations held last week. He says Israel's rejection of the proposal will now be taken back to EC headquarters in Brussels. ``But this does not mean we accept this [Israeli] statement - far from it,'' adds Gwyn Morgan, EC representative in Israel.

Analysts say the EC's position on the trade agreement is partly the outgrowth of increased concern over the future of the occupied territories. The EC does not recognize Israeli or Jordanian sovereignty over the territories, which Israel captured in 1967.

The EC may also be using the issue as a bargaining chip to force Israel to abolish an existing tax on EC imports.

According to a recent report issued by the US Agency for International Development, many products from the territories are kept out of Israeli and Jordanian markets, while West Bank farmers and manufacturers often have to cope with discriminatory taxes and regulations.

Agricultural exports from the West Bank and Gaza through Israeli ports to third countries have to be channeled through one of two Israeli marketing organizations, which limit the type and quantity of goods that can enter the world market.

Israeli and EC officials agreed last week that Palestinian exports will no longer be identified as products of Israel but carry the name of the closest West Bank city as the place of origin.

But the larger issue of whether Palestinian farmers can sidestep Agrexco, the main Israeli marketing body, and export directly to foreign markets is unresolved. Agrexco marketing of Palestinian produce has reportedly grown from 370 tons in 1986 to 600 tons, and may exceed 2,000 tons in 1988.

Direct Palestinian exports are unlikely to hurt Israel's market position in Europe. Israeli officials are more concerned that if Palestinians are allowed to bypass Agrexco, Israeli farmers may seek to do the same.

Several EC governments have made it clear that they intend to hold the Israeli-EC trade agreement hostage until Israel agrees to allow Palestinian growers direct access to the world market.

Even if Israel does concede the point, however, growers may find it difficult to do without Agrexco's sophisticated marketing operations.

But Khalid Kuttab, head of the largest West Bank agricultural cooperative, says Palestinian farmers should be allowed to compete: ``Agrexco made lots of mistakes before it became what it is today. We want our chance to gain experience ....''