Vice Prime Minister and Minister for the Development of the Negev and the Galilee Silvan Shalom threatened Tuesday to impose sanctions on the Palestinian Authority for its organized boycott of Israeli products, which consists of a ban on all products made in settlements and a prohibition against working in Israeli factories in the West Bank.

"If the boycott continues, the government will have to make the right decisions," Shalom said on a visit to the Ariel college. He said the Ministry for the Development of the Negev and the Galilee and the Industry, Trade and Labor Ministry were discussing the issue.

Shalom has suggested sanctioning the Palestinian Authority with higher taxes on products made in its territories and by blocking the transfer of goods into Israel. Another of his suggestions is to compensate Israeli factories with money intended for the Palestinians.

On Sunday Deputy Foreign Minister Danny Ayalon told the Knesset's Economic Affairs Committee that Israel would urge the Palestinians to cancel the boycott at a preliminary stage of the proximity talks.

He added that Israel was also acting to prevent the Palestinian Authority from joining the World Trade Organization (WTO) as an observer, and to block some of the European donations transferred to the Authority – estimated at $150,000 monthly – if those are used to fund the boycott.

Chairman of the Manufacturers Association of Israel Shraga Brosh proposed to respond to the boycott by closing Israel's port to imports and exports of raw materials and goods from the Palestinian Authority.

"Our port is their oxygen tube and closing it will only hurt them, not us. As far as we are concerned, they can transfer their activities to Jordan and Saudi Arabia. This way, we will show them that after their slap in the face, we will not turn the other cheek," he said.

Brosh claimed this measure will harm the Palestinians themselves, especially in light of many efforts by Israeli elements to restore the Palestinian economy as a solid basis for a peace agreement.

"At the moment they are shooting themselves in the foot. They are aware of this, and have said during conversations we've held. The Israeli factories in the West Bank create workplaces for the Palestinians, which in turn support their economy. This is why it is appropriate to demand a high price, similar to what they are demanding of us," Brosh added.