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To get the Palestinians’ GDP to $10,000, let them trade
By DANIELLE SPIEGEL FELD
23/01/2014
The importance of foreign trade to the Palestinian economy can hardly be overstated.
 

Back in December 2012, Foreign Minister Avigdor Liberman raised eyebrows by telling an American audience that if the Palestinians “achieve a GDP of $10,000, we will achieve peace.” Last week, Liberman picked up the economic peace mantle yet again. “We can talk seriously about a political settlement with the Palestinians when their per capita GNP reaches $10,000 – not a day before that,” Liberman said at a conference in Sderot.

Luckily for Liberman, the Mideast Quartet recently revealed an ambitious new Palestinian Economic Initiative, which seeks to dramatically revitalize eight key sectors of the Palestinian economy and inject billions of dollars of private capital into the territories.

But as Quartet representative Tony Blair made clear in introducing the initiative, its success, like that of any other such effort, relies in great part “on implementing large-scale Israeli easing measures” to remove restrictions on economic development in the Palestinian territories.

Writing in The New York Times, Ali Jarbawi pointed out one type of easing measure Israel could take toward that end. Specifically, it could open Area C to Palestinian economic activity. If Liberman and the other “economic peace firsters” are serious about getting the Palestinians to $10,000 per capita, they’ll certainly have to find ways of permitting more open access to Area C, which contains a disproportionate share of the West Bank’s natural resources.

However, there’s another, far less talked about economic constraint Israel will have to scale back if the Quartet’s Economic Initiative is to succeed: the trade barriers that prevent goods and services from flowing in and out of the Palestinian territories.

The importance of foreign trade to the Palestinian economy can hardly be overstated.

In the words of the World Bank, “West Bank and Gaza is a small, resourcepoor economy. Consequently, its growth depends on maintaining open trade with its neighbors.” Today, unfortunately, trade flows are significantly hindered.

On a recent Israel Policy Forum trip to Israel, Jordan and the West Bank, participants heard time and again about the obstacles to trade the Palestinians face.

Some of these obstacles undoubtedly stem from legitimate security concerns, such as the requirement to carefully screen goods. And we heard some positive indications that Israel was working with Quartet officials to find a way to reduce the burden that these security screenings cause.

Other barriers, though, appear suspect.

For instance, we heard complaints from Jordanian officials about the persistent closing of the Prince Muhammad (Adam) Bridge between Jordan and the West Bank, and the insufficient infrastructure at the King Hussein (Allenby) Bridge, which is the only commercial route between the West Bank and Jordan aside from the Prince Muhammad crossing.

We also heard questions about the legitimacy of certain Israeli health and safety standards, with which it could be impossible for Palestinian producers to comply. As an example, we were told that Israeli law requires pharmaceutical products to be inspected by Israeli officials to receive required certification; yet Israeli security regulations typically prohibit Israeli citizens from carrying out inspections in the Palestinian territories. In consequence, the Israeli pharmaceutical market is all but closed to Palestinian products.

The World Bank expressed similar concerns about Israeli health and safety standards, in a report on the Palestinian economy in the summer of 2012.

There’s nothing remotely exceptional about the fact that Israel would seek to impose protectionist trade restrictions in its dealings with the Palestinians. In fact, the World Trade Organization’s dispute settlement body has found the US guilty of similar tactics on innumerable occasions.

What’s special about the Israeli-Palestinian context, though, is that unlike the overwhelming majority of states in the world, including most developing states, the Palestinian Authority is not a member of the WTO. As such, the PA cannot bring complaints against Israel to the WTO’s dispute settlement body, which means the international legal norms that keep trade free and fair between states don’t constrain Israel’s dealings with the Palestinians. And given the PA’s relative weakness compared to Israel, it has few extra-legal means of recourse to turn to instead.

Perhaps as a result of all these power asymmetries, the share of Palestinian exports in their economy has steadily declined over the past 20 years. If the Quartet plan has any chance of succeeding, this trend will have to be reversed.

Hopefully Blair or US Secretary of State John Kerry will succeed in convincing the Israeli government that the benefits of liberalizing Palestinian trade routes outweigh the costs.

But if not, maybe Liberman will lead the charge?

The writer is associate director of research and policy at the Israel Policy Forum. She holds a JD from New York University School of Law (2010) and was a research fellow at the University of Copenhagen’s Faculty of Law from 2010-2012, where her research focused on the law of the World Trade Organization.

 

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