Publication Inequality / Social Struggles - Analysis of Capitalism - State / Democracy - Economic / Social Policy - Palestine / Israel A Captive Market

The Paris Protocol’s implications for the Palestinian economy

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Eness Elias,

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The Barkan industrial area in the West Bank, 2016. Photo: Activestills

An annex to the Oslo Accords hardly known to the public, the Paris Protocol brought the Palestinian economy into permanent institutionalized dependency on Israeli interests. The Palestinian economic system in the West Bank and Gaza Strip today was basically established by Israel after the 1967 War. The policies and practices introduced by Israel since the war integrated the Palestinian economy into the Israeli economy and created the former’s dependency on the latter.

It was widely assumed that the Oslo Accords and in particular the annex “Protocol on Economic Relations” (1994), also called the Paris Protocol, were meant to lead the Palestinian economy gradually towards independence. Yet the opposite has occurred: today, the Paris Protocol is the basis for an increase and institutionalization of Palestinian dependency on Israel.

Eness Elias is a political activist in Israel and regularly writes for the Israeli daily Ha’aretz. In the past she worked at Who Profits, a research centre dedicated to exposing the commercial involvement of Israeli and international corporations in the ongoing Israeli occupation of Palestinian and Syrian territories. This article was originally published by the Rosa-Luxemburg-Stiftung’s Israel Office, and was translated by Ursula Wokoeck Wollin.

As a result, 85 percent of the goods exported from the Palestinian territories were destined for Israel, and 70 percent of Palestinian imports came from Israel in recent years. Most of the money Palestinians earn thus flows back into the Israeli economy in one way or another. At the same time, the situation of the Palestinian economy has deteriorated continuously. Between 1995 and 2014 the gross domestic product per capita rose in real terms[1] from 1,435 to 1,737 US dollars, there was no increase in productivity, and the unemployment rate rose from 18 to 27 percent.

The following article seeks to show how the Paris Protocol has institutionalized and even intensified the Palestinian economy’s dependency on the Israeli economy. The focus here is on the West Bank, given that the situation in the Gaza Strip has been shaped to a large extent by the blockade imposed by Israel during the last 12 years.

Birth of the “Captive Market”

Since the occupation of the West Bank and the Gaza Strip in 1967, Israel has employed a number of mechanisms for “capturing” the Palestinian market. The most decisive mechanism is the creation of a unified customs system, solely under Israeli control. That customs system also became the basis for the Paris Protocol, as will be explained below. First, however, I will briefly sketch out developments under the Israeli occupation until the Oslo Accords.

From 1948 until the 1967 War, the West Bank (including East Jerusalem) was under Jordanian control, and the Gaza Strip under Egyptian. At the time the agricultural sector was the most important sector of the Palestinian economy in the West Bank and Gaza Strip, as is still the case today. No significant industrial sector developed in East Jerusalem or other cities in the West Bank such as Hebron and Nablus.[2]

After the 1967 War, Israel annexed East Jerusalem and the surrounding area, including the Palestinian villages there, while the rest of the West Bank and Gaza Strip were placed under military governance. During the first decade of the occupation, Israel integrated the Palestinian economy in the West Bank and Gaza Strip into its own. At the time the Israeli economy was about ten times the size of the Palestinian economy; the range of products was much broader in Israel and the share of the secondary (manufacturing) sector in Israel’s gross domestic product was four times larger than the Palestinian one. Relations between Israel and Palestine were thus based on an obvious disparity: on the one side, a relatively developed and wealthy country with considerable economic power, and on the other a comparatively poor and underdeveloped country with little economic capacity.

In the first decade, integration was advantageous for the Palestinian economy. It grew faster than the Israeli economy, and there was a significant rise in the standard of living of the Palestinian population in the occupied territories. Although the Gaza Strip was totally cut off from Egypt, in the West Bank the bridges to Jordan were soon re-opened and trade with Arab states in the East and South could resume. Thus, exports and imports to and from the occupied Palestinian territories increased between 1971 and 1977. Many Palestinians earned their living by working in Israel, mainly performing physical labour. The wages they earned were higher than the usual wages in the West Bank and Gaza Strip. The rising income boosted the Palestinian economy and let to a higher standard of living. In addition, the Palestinian agricultural sector underwent modernization through the use of advanced Israeli technologies, which resulted in a rise in the export of Palestinian agricultural products to Israel.

The Israeli Chemical Factory Geshuri adjacent to the Palestinian town of Tulkarem in the West Bank. The factory was previously located in the Israeli coastal town of Netanya, but was forced to close down because of the serious environmental pollution it caused. Photo: Activestills

But this economic upturn did not last. Israeli occupation policies, such as the expropriation of land and water resources, the establishment of Israeli settlements in the occupied Palestinian territories, and the expulsion of Palestinians from their places of residence had their effect on economic life in the West Bank and the Gaza Strip. Agriculture was most severely affected by the direct impact. According to the World Bank’s data for 1993, irrigated (and therefore agriculturally usable) area decreased by six percent, while prices for land and water greatly increased. Inflated real estate prices in combination with Israeli authorities’ prevention of any development and extension of Palestinian towns and villages in the occupied territories led to very high construction costs, especially for industrial enterprises, which severely hampered Palestinian industrial development. The inability to compete with the lower prices of Israeli companies as well as the limited Palestinian production due to a lack of demand, resources, and raw materials have led to the complete disappearance of many Palestinian industrial firms.

Israel also took administrative measures to prevent development of the Palestinian economy’s productive capacity: all economic activities of the Palestinians were subjected to military governance in the occupied territories and every economic activity required a permit. The plans of Palestinian businessmen and -women to establish a new company or expand an existing one were often hampered by delays in issuing permits or even thwarted by denials of permits. Palestinians required permits for all activities connected to the purchase of real estate, the construction of buildings, the transport of goods, as well as export and import. Moreover, taxation of commercial activities in the occupied territories was very high. Palestinian businesses had to pay VAT on all raw materials imported via Israel. They should have received a refund for the VAT paid, since the raw materials only passed through Israel. Yet there were long delays in the refund, which caused severe liquidity problems and high financial losses for the Palestinian companies.

Since the beginning of the occupation in 1967 until today, all Palestinian exports and imports are handled through Israeli ports and airports. For that purpose, a Palestinian business needs an Israeli company as go-between, which thus profits from the Palestinian economy, reducing the already low yields even further. The unified customs system increases the production costs for Palestinian companies causing Palestinian exporters to lose their competitive edge in their traditional markets in neighbouring countries. Though exports from the Gaza Strip and West Bank to Jordan and from there to other Arab countries did increase in the late 1980s and early 1990s, export rates still remained very low. The Israeli state permitted these exports because it gained financially from the exchange rate when the Israeli currency (shekel) is bought, and because much of the Palestinian earnings from exports were invested in the import of Israeli goods.

In addition, the financial system in the occupied territories hampered economic growth and the realization of economic initiatives. Since the 1967 War there has virtually been a vacuum in the financial sector, as the Jordanian banks had to close their branches including the Arab Bank, which was considered the most important Palestinian bank. It was only in the late 1980s that Israeli authorities permitted the opening of two small branches of the Cairo Amman Bank. Most of the banking business in the occupied Palestinian territories was transacted via Jordan, but that was insufficient to boost the Palestinian economy.

Due to their size, technological strength, and their access to resources and government support, Israeli companies were able to undermine small Palestinian businesses producing for the local market and push them out. Though the per capita income in the occupied territories is much lower than in Israel, there is nevertheless a demand from millions of Palestinian consumers for basic and even luxury goods. The limited productive capacity and inability of Palestinian industry to compete with its prices and products in the Israeli market let to a flooding of the Palestinian market with cheap and sometimes better goods from Israeli companies. In that manner, the unified customs system prevented the development of a strong independent Palestinian economy and turned the occupied Palestinian territories into a market for the sale of Israeli goods.

The Paris Protocol: Institutionalizing a Dependent Economy

After the signing of the first Oslo Accord (1993) and the establishment of the Palestinian Authority (PA) in parts of the West Bank and Gaza Strip in May 1994, there was hope for improvement in the economic situation, support for local businesses and firms, international investments, and regional economic cooperation. The commitment of Western states and Saudi Arabia to participate in the funding of the reconstruction programme and the peace process provided the necessary capital.[3] The World Bank also agreed to support specific projects, in particular for the development of the infrastructure such as constructing roads and housing.

In the framework of the Oslo Accords, the two parties signed the “Protocol on Economic Relations between the Government of the State of Israel and the P.L.O., representing the Palestinian people” in Paris on 29 April 1994. The so-called Paris Protocol regulates economic relations between Israel and the Palestinian territories in the West Bank and Gaza Strip with regard to customs, taxation, work, agriculture, industry, and tourism. The main economic institutions of the PA were established on the basis of the protocol: the Ministry of Finance, including the Budget Department, the Monetary Authority, and the Central Bureau of Statistics. Like the Oslo Accords, the Paris Protocol was only meant to be valid for a transitional phase of five to seven years, but is still in place today more or less unchanged.

Due to its conception and implementation, the Paris Protocol did not lead to the desired economic development. The institutions of the PA were unable to attain the degree of autonomy that would have allowed them to pursue a long-term economic policy promoting development. Since the signing of the Paris Protocol, the Palestinian economy has repeatedly been exposed to economic crises due to the impact of the Paris Protocol, Israeli occupation policies as well as other political and security problems. The Paris Protocol institutionalized and intensified the dependency of the Palestinian economy on the Israeli economy, especially by institutionalizing the unified customs system, which was de facto introduced already in 1967.

As Professor Arie Arnon has documented,[4] during the negotiations on the Paris Protocol the Palestinians favoured a so-called “free-trade area”, where there is no common external border and each party is allowed to independently pursue its trade relations with the rest of the world. Such an arrangement would have necessitated establishing a clear border for trade between the Israeli and Palestinian territories, which Israel firmly rejected. The Israeli negotiating team suggested maintaining the unified customs system, trying to convince the Palestinians that the absence of such a trade border would result in fewer restrictions and obstacles and thus provide better opportunities for building a thriving Palestinian economy. In the course of the negotiations, the Israeli delegation offered to accept the concept of a free-trade area but only under the condition that there would be no freedom of movement for workers between the occupied Palestinian territories and Israel. In other words: Palestinian independence in determining their trade policy would come at the price of severely restricting the employment opportunities for Palestinians in the Israeli labour market. The Palestinians were so dependent on the Israeli market that they could not afford to forgo the opportunity to work in Israel. Therefore, they ultimately accepted the institutionalization of the unified customs system.

The Paris Protocol is based on an economic model envisaging the free movement of goods and labour across the Green Line within a common customs territory. The World Bank and other economic actors saw the unified customs system as a positive arrangement, assuming that the small Palestinian market would be attractive due to its vast cheap labour force and lower production costs, and that it would at some point be able to compete with the Israeli market. This assessment completely ignored the power relations between Israel and the PA, as well as the lack of freedom of movement for Palestinians. In practice, the Paris Protocol guarantees the free movement of Israeli goods, namely their tax-free and duty-free import into the Palestinian territories, while hampering the free movement of Palestinian goods within and out of the occupied territories.111 (June 2001), pp. 291–308.

Palestinians on their way to work in Israel. Bethlehem Checkpoint in the West Bank, 2017. Photo: Activestills

Freedom of movement for people also applies to the Israeli side only, not to the Palestinians. The Paris Protocol stipulates that the movement of labour between the occupied territories and Israel must be guaranteed and must not be interrupted permanently. Yet in practice, Israel arbitrarily restricts the work opportunities in Israel for Palestinians by means of its strict conditions and examinations. General “closures” of the occupied territories time and again prevent Palestinians from going to their workplaces in Israel. In 2000, prior to the Second Intifada, some 140,000 Palestinians worked in Israel; during the Intifada their numbers declined to 40,000, and remained low, around 50,000, until 2009. According to estimates, their numbers rose again to some 113,000 by 2016, but about 40 percent of them have no permits to enter Israel.

Political instability and continuing restrictions on the freedom of movement and access to trade are the main obstacles hampering economic growth in the occupied territories. The private sector that should be the driving force of local production in the occupied territories cannot play that role mainly due to the frequent “closures” imposed by Israel as well as political instability and economic uncertainty. Palestinian industry suffers from problems in infrastructure such as recurring power outages and fuel shortages, and is therefore unable to develop a real alternative to Israeli goods and services. As a result of all these factors, the rate of private investments is one of the lowest worldwide. The fragmentation of the occupied territories into small enclaves does not allow for economic cohesion. In the wake of continuing restrictions, the Palestinian economy underwent a process of de-industrialization and the share of the secondary (manufacturing) sector declined over the years: from 18 percent of the Palestinian gross domestic product in 1995 to 10 percent today. The share of the primary (agricultural) sector in the Palestinian economy declined by 50 percent, and there was also a decline in local production further reducing the export potential of the Palestinian economy. Very high unemployment and a decline in purchasing power in the Palestinian population further aggravate the situation.

The following section describes in some detail the impact of the Paris Protocol on Palestinian trade. and shows that the Palestinian market depends almost exclusively on trade relations with Israel.

The Palestinian Trade System in the Wake of the Paris Protocol

Since the beginning of the occupation in 1967 the Palestinian economy was characterized by very low export rates and limited local production, as well as very extensive imports, particularly from Israel. The huge gap between extensive imports and limited exports and production led to a structural trade deficit, which still accompanies the PA’s negative balance of payments until today. In 2015 the Palestinian trade deficit amounted to US $ 1.45 billion. International aid played an important role in financing those deficits. In recent years there has been a considerable decline in aid, which further increased the dependency of the Palestinian economy on the Israeli one.

The Paris Protocol institutionalized that dependency by means of the unified customs system. It enables Israel to completely control Palestinian exports and imports and thereby exert direct influence on Palestinian production. The protocol stipulates that Palestinian exports and imports must pass through Israeli ports or airports, or through border crossings under Israeli control. The movement of goods, raw materials, and means of production for the Palestinian market is subject to harsh Israeli restrictions such as import quotas, strict standards, administrative regulations, and technical hurdles which prevent Palestinian goods from reaching the Israeli, let alone international market.

In agriculture, for example, the largest sector of the Palestinian economy, Israeli restrictions imposed on Palestinian farmers have led to their inability to earn a living from their agricultural produce. The ongoing reduction of available agricultural land, due among other things to the establishment of Israeli settlements on Palestinian territory as well as the water shortage and lack of infrastructure, have led to a situation in which Palestinian businesses are unable to compete with big Israeli companies, which enjoy free access to the Palestinian market and flood it with cheap agricultural products. As a result, hardly any agricultural products from the West Bank and Gaza Strip are sold in Israel, while a considerable portion of Israeli agricultural products are consumed in the West Bank and Gaza Strip.

The procurement of raw materials needed by Palestinian companies is hampered by numerous obstacles, in part due to restrictions imposed by the Israeli authorities and their policies, and in part due to the Paris Protocol. The latter contains a list of specific goods that Palestinian manufacturers are permitted to import. It is noteworthy that the Paris Protocol reduced the range of goods permitted to import in comparison to the situation prior to the agreement. Israel justifies such lists with security concerns. There are long lists of raw materials, goods, and machinery, the import of which is prohibited, including, for example, certain chemicals required for the pharmaceutical industry. In addition, there are restrictions on the import of so-called dual-use products, meaning products that apart from their civilian usage may also be used for military purposes. Almost all industries are affected by these constraints and therefore have to settle for less suitable or less good materials.

Piles of waste next to the industrial area of the Israeli settlement Nitzanei Shalom near the Palestinian town of Tulkarem in the West Bank, 2012. Photo: Activestills

Moreover, the Paris Protocol stipulates that all Palestinian companies must obtain import permits from the Israeli Ministry of Health for all commodities they intend to import, regardless of where they come and for what purpose they are meant to be used. By contrast, Israeli companies need such permits only for certain commodities. In addition, Israelis can get a permit that is valid for an entire year, whereas Palestinians need a separate permit for each shipment. That means that for every shipment, a Palestinian company must obtain and pay for a permit from the Israeli customs office as well as for permits from the Israeli and Palestinian ministries of health, which is a lengthy bureaucratic process that can take days, and at times even many weeks. Afterwards, strict Israeli security checks ensure that every shipment to the occupied territories will be further delayed for days or weeks. The extensive bureaucratic procedures also impair the ability of companies producing for the international market to commit themselves to prices and delivery dates and to participate in international tenders. This generally hampers the export activities of Palestinian companies.

According to the Paris Protocol, all Palestinian imports to the occupied territories have to be handled by Israeli freight, storage, and transport companies, which profit from this provision and other constraints. In addition, Palestinian importers have to pay an Israeli company for the certificate of the Israeli security check required for each shipment to the occupied territories. The certificate is issued within about a week after the arrival of the goods in an Israeli port and costs approximately between five and ten percent of the value of the shipment. Payments for the port fees, for the security checks themselves, and VAT increases the costs of the goods by another 14 percent. The system of taxation laid down in the Paris Protocol thus generates annual revenues of over 310 million US dollars for Israel. By contrast, Israeli goods and services exported to the occupied territories are duty-free and the VAT rate to be paid for them is much lower, which promotes trade with Israel.

There are certain products, including fuel, where the Palestinian population and Palestinian businesses have no choice at all. As the PA is not allowed to trade with states that have no diplomatic relations with Israel, Palestinians cannot import oil from Arab states, but have to buy more expensive fuel from Israeli companies. The situation is even more complicated with regard to pharmaceuticals. The unified customs system entails that low-cost generic drugs produced in India, for example, which are widely used in emerging economies, cannot easily be imported due to Israel’s higher standards for the approval of drugs. In addition, due to the unified customs system, the major global pharmaceutical companies consider the Palestinian territories to be part of Israel. Consequently, they demand the same high prices as in developed countries rather than the discount prices they offer in emerging economies, as would be appropriate for the Palestinians. The Palestinian pharmaceutical industry cannot benefit from these unreasonably high prices of their competitors, given that it has to overcome enormous bureaucratic hurdles and longer distribution channels increasing the costs if it wants to sell its products outside the occupied territories. This also holds true for the Israeli market, despite the unified customs system. At the same time, the Palestinian pharmaceutical industry is not allowed to export to many Arab countries, which would be its “natural markets”. This impairs the industry’s competitiveness, and it has to settle for an extremely small market. The highly developed Israeli pharmaceutical industry benefits from that weakness. It enjoys unrestricted access to the Palestinian market and thus considerable competitive advantage.

The Palestinian Monetary System

The term “monetary system” usually refers to the national banking system of a country. Since there is no economic or political independence in occupied territories, the Palestinian monetary system is subject to considerable restrictions. The Palestinian authorities are not able to pursue their own economic policy. The Palestinian monetary system is actually controlled by the Bank of Israel and the Israeli commercial banks.

The monetary policy of the Bank of Israel is also implemented in the occupied territories. The Palestinian monetary system is thus affected by controversial Israeli policies, such as the interest rate policy, foreign currency purchases, and export-oriented economic strategies. This has implication for Palestinian businesses and households, without any possibility for Palestinian institutions to influence Israeli policy in the matter. The constraints imposed by Israel hamper the development of the Palestinian monetary sector and undermine the ability of many Palestinian banks to provide adequate services to their customers.

According to Article 9 of the Paris Protocol, which deals with monetary issues, the Palestinian Authority for Monetary Affairs was set up to steer the Palestinian economy. According to the protocol it has the task of determining and implementing the monetary policy, but it is unable do that because of the occupation. The Authority for Monetary Affairs has only a small part of the powers of a central bank, without which economic independence is impossible. A central bank has two main functions: leading an independent economic and monetary policy, as well as supporting, regulating, and supervising the domestic banking system. The Palestinian Authority for Monetary Affairs cannot really fulfil these two functions, and at present its role is limited to supervising Palestinian banks.

One of the major powers of a central bank is the power to create and regulate the country’s own currency. The Paris Protocol denied such power to the Palestinian Authority for Monetary Affairs. Israel objected to that option because the existence of such a currency would allow for some monetary independence, beyond Israeli control. The Palestinian Authority therefore depends on several foreign currencies: the Israeli shekel, the Jordanian dinar, the US dollar, and the euro. The share of the shekel in the Palestinian financial market is particularly large due to several factors, including tax revenues, in particular customs duties and VAT that Israel levies on behalf of the PA, wages paid to Palestinians working in Israel or in Israeli settlements in the occupied territories, as well as exports and imports mainly to and from Israel. The imbalance in financial translations between Israel and the Palestinian Authority for Monetary Affairs is striking: cash transfers from Israel to the Palestinian financial market constitute about 80 percent of the Palestinian Authority’s transfers, whereas only 20 percent are transferred from Palestinian banks to Israeli ones. In absence of a national currency, Palestinian fiscal policy remains ineffective and subject to fluctuations in the Israeli currency.

Palestinian workers blocking a road in protest against high fuel and food prices, Bethlehem in the West Bank, 2012. Photo: Activestills

The Israeli currency mainly enters the occupied territories through wages paid to Palestinians working in Israel. In addition, Palestinians buy goods and services such as electricity, gas, fuel, food, and medical services mainly from Israel, for which they have to pay in shekels. For example, payments for electricity from the Israeli electrical company consumed by the PA amounts to some 70 to 80 million shekels (about 20–23 million US dollars) per month; between 500 and 600 million shekels (about 140–170 million USD) per month have to be paid to Israeli fuel suppliers; and 25 million shekels (about 7 million USD) per month for Israeli medical services. These payments are made by Palestinian banks on behalf of the purchasers, who pay the Israeli suppliers through Israeli banks.

Despite the shekel’s absolute predominance in the occupied territories, Palestinian banks do not have direct access to the Israeli clearing system and must purchase clearing services from Israeli banks. Two Israeli banks, Bank Hapoalim and Discount Bank, have agreements with Palestinian banks and provide clearing services to them. These agreements include strict conditions raising the costs of the shekel for the Palestinian banks. By contrast, other foreign banks are not subject to the same strict conditions for clearing services.

Not all Palestinian banks are permitted to transfer shekels to Israeli banks. Newly established banks, which are not party to the agreements, have a particularly hard time. Israeli banks demand a very high security deposit, more than one billion shekels (about 284 million USD) in cash, from a Palestinian bank for the provision of clearing services. In addition, Israeli banks have introduced various restrictions that increase the costs and risks for the Palestinian banks. For example, Israeli banks limited the amount that Palestinian banks are allowed to transfer in one transaction. Since they charge a fee for each transfer, the limitation increases the costs for the Palestinian banks. But even under these difficult conditions, there are not always sufficient clearing services available. In February 2016, Bank Hapoalim announced that it intends to cut back its involvement in such transfers. The Palestinian banks are at the mercy of the Israeli banks and their whims because they are totally dependent on them.

Conclusion

The Paris Protocol was based on the assumption that investments by the private and public sector in the Palestinian economy and job opportunities for Palestinians in Israel would lead to full employment. That was meant to be achieved through the financial services of the developing Palestinian banking system under the supervision of the Palestinian Authority for Monetary Affairs. The plan was to strengthen the public sector and create an efficient tax system. International aid was supposed to help develop the required infrastructures. All that did not happen. Instead, the impact of the Paris Protocol has been a worsening of the economic situation in the West Bank, while Israel continues to derive great profits from its economic relations with the Palestinian market.

The institutionalization of the unified customs system in conjunction with Israel’s control over the Palestinian labour market and the absence of a Palestinian currency pose severe limitations on Palestinian independence and reinforce the great dependency of the Palestinian economy on Israel and its economic policy, which Israel, of course, conceives according to its own interests. The prevailing economic and political instability blocks urgently needed investments that could lead to long-term economic growth. At the same time, Israeli goods are flooding the Palestinian market, leaving Palestinian consumers hardly any choice. They are virtually at the mercy of Israeli and international products, while Palestinian businesses are unable to compete with Israeli ones and to develop the Palestinian economy.

The Paris Protocol was not negotiated and signed by two equal partners. The regulations and mechanisms enshrined in the agreement are an expression of the unequal power relations between the two parties. Moreover, they are due to the fact that the Paris Protocol was originally meant to be a temporary arrangement. While in other economic agreements, such as the one on which the European Union is based, regulatory mechanisms aim at giving small countries more weight than what corresponds to their economic power, the Paris Protocol is designed to favour the already much stronger Israeli party to the contract.

The Paris Protocol is not very detailed: it only comprises 20 pages. In particular, the agreement lacks enforcement mechanisms. Israel can violate the agreement without fear of significant sanctions. For example, if the Israeli government limits the access of Palestinian workers to Israel or refuses to transfer tax revenues the PA is entitled to receive according to the Paris Protocol, there is nothing the PA can do about it. By contrast, because of its permanent deficits and Israel’s political and military power, the PA must strictly adhere to the Paris Protocol and even agree to changes that the Israeli government decides to introduce from time to time. In this context it is noteworthy that these changes are kept secret for no apparent reason, although any change to the protocol should be made public. All attempts by various organizations and institutions to obtain information on the changes to the Paris Protocol have so far been in vain.

Demands to fundamentally change or completely abolish the Paris Protocol have been raised time and again. In 2015, for example, Palestinians protested against the rise in fuel prices and the VAT rate that was first implemented in Israel and then in the occupied Palestinian territories. On the other hand, hardly any attention is paid to the Paris Protocol in public discourse, and political actors and decision-makers seem unaware of the enormous importance and impact of the Paris Protocol and its implementation.

It is important to emphasize that the Paris Protocol is disastrous for the Palestinian economy. As long as there is no fundamental revision, no improvement in the trade conditions, no Palestinian central bank, and no Palestinian currency, cosmetic changes will not really strengthen the Palestinian economy.


[1] Based on the value of the US dollar in 2004.

[2] R. Wilson, The Palestinian Economy and International Trade, Working Paper, Durham: University of Durham, Centre for Middle Eastern and Islamic Studies, 1994, p. 10.

[3] The foreign ministers of the EU provided guarantees for US $ 600 million in donations and low-interested loans through the European Investment Bank. The US set up a relief fund of approximately US $ 590 million, to which Saudi Arabia contributed US $ 200 million. R. Wilson, The Palestinian economy and international trade, Durham: University of Durham, Centre for Middle Eastern and Islamic Studies, 1994, p. 26.

[4] A. Arnon and J. Weinblatt, “Sovereignty and Economic Development: The Case of Israel and Palestine,” The Economic Journal