Tuesday, January 31, 2006

Live by the Boycott...

The small, ordinarily non-troublemaking country of Denmark is in hot water because one of its newspapers printed a series of cartoons depicting the prophet Muhammad. Many Muslims all over the world found them grossly offensive. (Not without reason, as some of them are grossly offensive, not just to Muslims but to anyone who objects to mocking other people’s religious beliefs.) The newspaper published them, its leaders said, to underline the importance of freedom of expression. In particular, it was a response to the inability of a Danish author to find anyone willing to risk violent retaliation if they illustrated the author’s book about Muhammad.

What makes this of interest to me is the reaction of Arla, a company based in Denmark that is a major producer of dairy products. According to a story on the company’s own web site, it is now the subject of a boycott by consumers in Saudi Arabia, Kuwait, Qatar, Bahrain and the United Arab Emirates. Its leadership naturally views this as unfair, with one PR official telling the BBC that the food company is not the newspaper, and so laments having to pay for the newspaper's deeds. As an aside, the boycott will be very costly as well. Saudi Arabia is the firm’s most important non-European overseas market, and Arla's products have apparently vanished from the shelves in many Persian Gulf countries.

But ironically, it appears that Arla itself might be (it is hard to say for sure yet) a longtime practitioner of this type of “unfairness.” According to its annual report, it has operations in Saudi Arabia and the UAE. But it does not have any sales or operations of any kind in Israel, which is by Middle Eastern standards a relatively small but very wealthy market. A search of its website using the term “Saudi” yields over 50 results, and a search using the term “Israel” yields none. This refusal to do business in Israel may be because of the longstanding practice of Arab countries (with the exception since their peace agreements of Jordan and Egypt) of not allowing companies that trade with Israel to trade with them. The Arab League’s official boycott of Israeli imports and of companies that contribute to Israel’s military and economic development is now often not vigorously enforced, but the legacy – a reluctance to do business with Israel for fear of offending Arab nations – remains.

To be fair, there are other possible explanations for Arla's absence from a small but wealthy market. One might not expect dairy products to be a big import for a mostly Jewish state. However, most Israelis are secular, and the International Dairy Foods Association complains about their inability to get greater access to the Israeli market because of Israeli protectionism. Israeli firms themselves certainly produce a large number of dairy products, and intentional avoidance of the Israeli market by foreign firms for fear of alienating Arab consumers is historically a common practice.

There is no obvious moral objection to a voluntary boycott as long as one doesn’t believe that what is being boycotted is itself moral, although a boycott enforced by a government is a different matter. (Indeed, U.S. law actually punishes U.S. firms that participate in the Arab League boycott of Israel.) But there is a certain comic justice in seeing a company that appears to have unofficially embraced one boycott being damaged by another, and lamenting the injustice of it all. For business reasons, they appear to have elected not to sell to customers in Israel who were willing to pay. But tending to some short-term bottom-line concerns turns out to affect the bottom line in unexpected ways.


Anonymous Anonymous said...

Hi there - I just want to say that selling foods and drinks to Israel is very hard, as they do not accept production lines to have been used for anything, that is not kosher. I work for a Danish food and drink company (not Arla), and we have been aproached by the Israelis out of interest for our products.... but unfortunately the market IS too small for us, to go out and invest in a whole new production line just to cater for Israel.

12:55 PM  

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