Because of its violations against human rights.
Again...he said this in Syria.
He is encouraged by the worldwide BDS movement, which regularly announces successes but has in fact failed spectacularly.
I do not know whether the Arab League encourages the PA to stop all trade with Israel, or to demand that Gaza stop its imports of humanitarian aid and consumer goods from Israel.
The Arab boycott of Jewish businesses in then-Palestine started as early as 1909, some 39 years before the state of Israel was established.
It is notable that Saudi Arabia and Bahrain have officially ended their boycott - the Saudis to enter the World Trade Organization and Bahrain to take advantage of a free trade agreement with the US. Nevertheless, the Saudi boycott is still in effect.
Despite this, there is trade between Israel and Arab countries worth tens of millions of dollars annually.
Wikipedia, quoting UPI, mentions an earlir boycott conference in Syria.
On May 16, 2006, after four-day conference of the Arab Boycott Bureau in Damascus, Syria, a "source close to the conference" reported that "the majority of Arab countries are evading the boycott, notably the [Persian] Gulf states and especially Saudi Arabia. ... The boycott deteriorated a lot, regressed and even almost collapsed... We should not lie on each other, because the boycott is quasi... paralyzed.