I think Peter is wrong to argue for a boycott of products from the settlements, but on the grounds of unfeasibility; his heart is in the right place. I suggest it might be better to shift U.S. defense aid into platforms like the Iron Dome anti-rocket system. That’s the kind of weapons program that, in addition to being awesome, counters Israel’s legitimate security vulnerabilities and creates a strategic fact: it removes a security-based argument for Israel retaining its hold on the West Bank. Then the United States ought to pressure, cajole and coax Israel to unilaterally withdraw from the West Bank.
Withdraw unilaterally; allow the creation of a fact called the State of Palestine; and then begin the agonizing process of negotiating with the Government of Palestine over final borders, dividing Jerusalem, water rights, spectrum rights, and so forth. The world should create a fund to assist the resettling of Palestinian refugees in land controlled by the State of Palestine — that is, not within the State of Israel. The position of the United States ought to be that Jewish settlers who wish to remain in places like Ariel after final-status discussions over borders between Israel and Palestine conclude are welcome to be citizens of the State of Palestine. (Although that’s probably unfeasible, because there would be Arab assaults on the settlements; Jewish reprisal attacks; and Israel would inevitably be sucked into a war that would look like kind of Balkan. But if Israel wants to avoid the difficulties of ordering the IDF to vacate the settlements during a withdrawal, I am sure NATO would jump at the chance to do it for them.)