Economic Relations
The Palestinian economy is presently unable to perform to its full potential. For decades, Palestinians in the West Bank and Gaza Strip have lived under harsh economic conditions, with little power to improve their lot. Since winning some powers of self-rule in 1995, the Palestinian National Authority (PNA) has introduced numerous economic reform efforts. Still, much remains to be done to provide Palestinians with the basic human right of economic self-determination. The PNA and the Palestine Liberation Organization (PLO) are committed to negotiating with the government of Israel the best terms possible for the Palestinian economy.
Following its military occupation of the West Bank and Gaza Strip in 1967, Israel instituted economic policies designed to eliminate economic independence of the Palestinians living in the Occupied Palestinian Territories. These policies served Israel well-not only did Israel gain a supplemental market for its goods, it also gained a vast pool of cheap labor that did not reside in Israel and, accordingly, could not access Israel's social benefits. While serving Israeli economic interests, these policies led to the creation of a dependency relation on Israeli for Palestinians.
In 1994, the PLO and the government of Israel signed the Protocol on Economic Relations, or the Paris Protocol. The protocol affirms that economic matters are key to relations between the parties and are vital to the establishment of a "just, lasting and comprehensive peace." With an eye to developing better economic relations, the Paris Protocol gave the PNA control over economic policy in the Palestinian Territories. The Paris Protocol also guaranteed the "principles of mutual respect of each other's economic interests, reciprocity, equity and fairness."
Palestinians had high hopes for economic growth following the Paris Protocol. Many of these hopes were rooted in the Palestinian economy's structural advantages-an abundant supply of inexpensive, highly educated labor and pent-up growth potential. To a small degree, these hopes have been realized.
Unfortunately, Israeli restrictions continue to stunt Palestinian economic growth. One policy is particularly detrimental-namely, unchecked military closures of the Occupied Palestinian Territories.
According to a 1997 UNSCO report, almost a quarter of all working days for Palestinians were eliminated by Israeli military closures. The World Bank estimates that every day the Palestinian economy is closed by the Israeli military costs the Palestinian economy $4-6 million.
UN Special Coordinator Chinmaya Gharekahn estimated that total losses to the Palestinian economy in 1997 due to Israeli military closures that year reached $230 million, more than double the total annual amount of donor funds to the Palestinians!
Other Israeli restrictions and discriminatory practices hamper Palestinian trade and undermine the viability of investment projects. Not only do these policies violate the Paris Protocol's requirement that the parties accord each other's economic policies and goals respect, reciprocity and fairness, they also damage long-term economic interests of Palestinians, and, indeed, the Middle East as a whole.
The Palestinian Position
Accordingly, the PLO seeks in the peace process full control over its economic borders and customs territories. The PLO also seeks a guarantee that Israel will not arbitrarily close off Palestine from its trading partners and will not apply other restrictive practices contrary to international economic law. To protect Palestinian interests, the PLO seeks a neutral arbiter of all Palestinian complaints of arbitrary Israeli closures and other discriminatory practices, as well as provision for damages from such actions.
Looking forward, the PLO is dedicated to establishing Palestine as an open, progressive economy that is attractive to foreign investment. The Palestinian Territories have already proved appeal to foreign investors-multinational corporations such as Coca-Cola and Motorola are striding in to reap the benefits of the Palestinian market. The PLO is focusing on the future in its negotiations with Israel to ensure that Palestinians have every means possible at their disposal for economic growth and prosperity.
