THE Arab boycott began before the creation of the State of Israel and has from the outset been both anti-Jewish and anti-Israel. In 1945, following the defeat of the Nazi powers, the Arab League announced that "Jewish products and manufactured goods shall be considered undesirable to Arab countries." As subsequently applied to Israel, the boycott has been touted in the Arab world as an economic weapon to be used in wiping Israel off the map.In its application, the Arab boycott has gone far beyond the internationally recognized right of sovereign states to boycott other sovereign states by not engaging in direct commerce. This is the primary boycott, but the Arab nations boycotting Israel have tried to force companies in other countries to refrain from dealing with Israel (secondary boycott) and even from dealing with other companies that are on the boycott list (tertiary boycott). As a result, thousands of United States companies are on the Arab boycott list. For many years the major trading nations of the world, including the US, did nothing to combat the boycott other than give polite lip service to the principle of free trade. This was largely out of fear of the Arab oil weapon. During the Ford administration, Secretary of State Henry Kissinger and Treasury Secretary William Simon were vocal in opposing legislation prohibiting US companies from participating in the boycott, from fear that this would damage our country's political and economic ties to the A rab oil-producing states. But in 1977 Congress passed the anti-boycott amendments to the Export Administration Act, making it illegal for US companies to participate in secondary and tertiary boycotts "against a country friendly to the US or against any US person" [read Jews]. As one who participated in discussions on the anti-boycott legislation between business and Jewish community leaders, I well remember the dire predictions of Arab retaliation against American interests. Yet the Arab oil producers kept selling their oil to American companies, filling their coffers with US dollars. At the same time, Saudi Arabia and the other Persian Gulf nations looked increasingly to the US for protection from Soviet-inspired instability in the region, especially after the Soviet invasion of Afghanistan in 1979. Regrettably, with very few exceptions such as the Netherlands, the world's other major trading countries have remained largely on the sidelines, tut-tutting about the boycott's continued interference with the principles of free trade but unwilling to confront the boycott head-on for fear of damaging their markets in the Arab world. In the aftermath of the Persian Gulf war, one would have expected that the US and its allies would have made a demand for an end to the secondary and tertiary boycotts. After all, 500,000 Allied troops had gone to the Middle East to save Saudi Arabia from Iraqi invasion and to expel the Iraqi army from Kuwait, while Israel had refrained from responding to 39 Iraqi Scud missile attacks in order to hold together the US-formed coalition. Saudi Arabia and Kuwait have been leaders in enforcing the boycott. To date, the results have been both disappointing and misdirected. For example, Japan lost its favored position among the Persian Gulf oil-producers because of its lukewarm support for the anti-Iraq coalition and is now seeking to be heard elsewhere in the Middle East, including Israel. Yet the Japanese government still insists that it is up to individual Japanese companies to decide whether to adhere to the boycott. More significant was the action taken by the Group of Seven leaders at their recent summit meeting, in issuing a declaration calling for an end to the Arab boycott, as well as an Israeli agreement to a freeze on new settlements. Israel's settlement policy is an issue to be taken up in the peace process, when questions of territory and Israel's security will be negotiated. This will be the appropriate forum to deal with the primary boycott as well. But it is regrettable that the G-7 did not meet the secondary and tertiary boycott challenge head-on without linking it to one of the issues that will be taken up directly between the negotiating parties in the peace process. With the peace process unfolding, the G-7 nations should have taken an unequivocal stand against the secondary and tertiary boycotts. There has been no slowdown in Arab boycott efforts. In May, the Arab Central Boycott Office added 110 companies to its blacklist, 104 of these partially owned by British media owner, Robert Maxwell, who is both Jewish and a one-third owner of an Israeli newspaper. It has been 43 years since the creation of Israel. Israel is not going to go away, and the Arab world needs to halt challenges to its legitimacy. Ending the secondary and tertiary boycotts would be a good beginning. However one looks at it, the boycott is an obstacle to peace. Trade between countries is the norm. Business people traveling from country to country help to integrate economies and markets. Ideas are exchanged, leading to greater cooperation and better understanding. If trade existed between Israel and her Arab neighbors, the prospects for peace would be enhanced.