Palestine-Israel Journal: Let us start by discussing the aim
behind the Paris Protocol. When the Palestinians negotiated and
signed the agreement, what did they expect to achieve from such an
agreement?
Samir Huleileh: Our understanding at the beginning of negotiations
at the end of 1993, in preparation for the economic talks, was that
we were basically signing an interim agreement for five years and
that final-status negotiations would be a different matter with
different political and economic parameters. Unlike the interim
agreement that was based on the Oslo Accords and the aftermath
agreements (Gaza-Jericho First, the Cairo agreement, etc.), the
economic agreement is not a phased one, i.e., it was signed for the
whole five-year Interim period.
Our goal was clear from the beginning: to use the interim agreement
as it vehicle or a means to restructure our economic relations with
Israel, to separate as much as was possible in an interim period,
and to link our economy, as much as we could, to that of the
international community and to the Arab world. We later realized
that was an impossible task, especially in light of all the
political and security constraints by the Israeli government. We
knew it was also extremely difficult to restructure a long-standing
relationship with Israel where we had 120,000-130,000 Palestinian
laborers working in Israel, and where we were exporting primarily
to Israel and very little to the rest of the world, and importing
mainly from Israel or through Israel and not from other parts of
the world.
Of course, during the negotiations we had to consider other factors
in our arrangement with Israel. We could not, for example, consider
comEle~e separation, even as a task for the Interim period, as Arab
East Jerusalem remains a controversial issue and is still annexed
to Israel, meaning that we could not prejudice the final status of
Jerusalem by separating it from the West Bank. So we had to make a
lot of compromises in that respect. The same was true of Gaza.
Israel proposed that we could have any economic system we'd like in
Gaza, but then it would have to be different from that in the West
Bank; we could not do that for obvious political reasons. Also, we
have to remember that, in the absence of political and geographical
borders between the West Bank, Gaza, and Israel, it is virtually
impossible for the Palestinians to have a completely independent or
a separate economic system from Israel.
In light of these goals, then, how would you evaluate the
agreement? What sort of relationship with Israel does it offer the
Palestinians?
The Paris Protocol, signed on April 29, 1994, stipulates a
quasi-customs union arrangement with Israel. Prior to the Oslo
agreement, we were fully integrated into the Israeli market. The
new system and the new arrangement guaranteed that, although we
were keeping a lot of our products within a customs union with
Israel, we still had the freedom to import tens and maybe hundreds
of items, such as foodstuff, electrical appliances and construction
material, from other countries - mostly from Arab countries, in
particular Jordan and Egypt - free of any Israeli restrictions,
especially customs, standards and import policies. Naturally, this
was an improvement. We also achieved a certain freedom in other
fields, particularly in agriculture. We now have the right to
export our agricultural produce to Israel, albeit with certain
quotas that were meant to decrease gradually, leading to
unrestricted export at the end of the five years of the Interim
period. We have also acquired much independence in the banking
sector, where we can monitor and manage our own banks, including
the licensing and supervision of banks in accordance with our own,
independent banking system. We did not manage to have a Palestinian
currency, since this would have meant preempting final-status
issues.
Why, then, has the Protocol been considered a disaster from a
Palestinian perspective and even a retreat from the situation that
existed prior to the signing of the peace agreement?
The implementation of this agreement was complicated by a new
factor that entered the scene after the Protocol was signed. In the
first year or two, Hamas and other fundamentalist groups carried
out suicide attacks against Israeli civilian and military targets,
dealing the peace process a severe blow. Israel reacted by adopting
a preventive policy and sealed off the West Bank and the Gaza Strip
(WBGS) from Israel and East Jerusalem. I would say that these
political and security arrangements that were imposed at the
initial stage of implementation - from March 1995 and on - were a
total departure from what we had agreed upon in the Protocol. I
remember that in the first year, the economic committee that was
discussing the implementation of the economic agreement raised the
issue of closure very vehemently and, at that time, even the
Israelis realized that what they were doing was jeopardizing the
agreement and that a solution ought to be found. What prevented any
amendment or changes in the agreement was a political decision by
Yitzhak Rabin not to restructure, not to renegotiate, not to open
any agreement that was signed in Oslo or after, meaning that any
revision in this agreement would have to be done at the technical,
low-profile level and would not touch its basic concepts.
We realized in the first two years of the Interim period that this
new Israeli policy pertaining to the WBGS threatened two
fundamental principles of the economic agreement, namely, the free
movement of workers and of goods. What was taking place on the
ground was not only prejudicial to the spirit and letter of the
agreement, but was damaging the Palestinian economy as well. We had
a situation where an economic arrangement was superseded by
political and security considerations, and this meant that the
Paris Protocol, at least from this standpoint, could no longer be
implemented properly. The problem was exacerbated when Binyamin
Netanyahu came to power in 1996. We had then to contend with a new
government that did not believe in the peace agreement in the first
place, a government that misused it and tried to use terrorism as a
pretext to seal off the WBGS, preventing Palestinian workers and
products from entering into Israel. To my mind, that is the worst
possible scenario, and the worst possible form of implementation of
an agreement concluded during the last few years.
How do you assess, in concrete terms, the impact this
non-implementation had on the Palestinian economy?
I would say that, despite the problems and difficulties we faced in
the implementation, we have achieved certain results that should be
mentioned. The first is that a banking system was built, monitored
and supervised by the Palestinian side and a Monetary Authority was
established. This is an important achievement. Second, as a result
of the agreement, import and export activities were established
between the Palestinians and the international community,
particularly with Jordan and Egypt, leading to the rise of a new
class of traders. Close to 1,600 new merchants have started
importing and exporting from and to the region and the
international community during the last three to four years; this
was the first chance the Palestinians had of connecting directly
with the world. We have started to have agents, direct
representatives which provide better services to the consumer and
cheaper prices in most cases. Also regarding agricultural exports
to Israel, we now have, at least from the legal point of view, the
right to export all our produce to Israel, although we still have
problems with the Israeli Ministry of Agriculture and some lobbies
here and there, but we have made great strides in that area.
On the negative side, however, I have to admit that the basic
source of revenue to the Palestinian economy, the work force,
suffered heavily during the process. The average number of workers
in Israel decreased from 120,000-130,000 to a maximum of
35,000-40,000; this was a significant decrease. Also, exports to
Israel or through Israel have dropped during the process as a
result of the Israeli siege on the territories. Furthermore,
although investment opportunities in the Palestinian areas were
initially considered highly favorable due to improvements on the
political scene, the situation deteriorated dramatically,
particularly during the Netanyahu government. So, an increasing
number of companies that had registered in the WBGS folded and went
home, and the results that could have been achieved from the peace
process did not materialize.
The conclusion of the three. to four years of the implementation of
the Protocol were marked by a reduction in the Palestinian GDP per
capita and, of course, by a higher unemployment rate. This said, at
the end of the fifth year, we see greater stability in the
availability of a job market for the Palestinian work force in
Israel and, consequently, an increased revenue reaching the
Palestinian areas through its labor force. In 1999, and after five
years of the agreement, the average rate of unemployment in
Palestine has dropped to around 13-14%, whereas it started with
30-35% in 1993-1994. Here, I must mention that the establishment of
a Palestinian public sector, but also the private sector, have been
instrumental in this improvement on the employment scene. At any
rate, from this point of view there has been some progress, but it
is a progress that depends solely on Israel's willingness to open
its borders to Palestinian workers, to issue more permits not only
to workers, but also to traders, industrialists, businesspeople and
so on.
Are there any lessons to be learned here in preparation for
final-status negotiations or for an eventual replacement of the
agreement signed in Paris?
I think the first lesson is that, in this part of the world,
economics, politics and security are completely integrated.
Therefore, we cannot sign an economic agreement that will be more
or less independent of the other agreements. In the Paris Protocol,
we signed, I think, a fairly good agreement, but it was completely
undermined by security and political considerations. This could
happen again. We cannot accept a situation where we will have to
depend on Israel or on an Israeli decision to close borders,
cutting us off from the external world. We must ensure our capacity
to relate to the international community, to the region, or to each
other - Le., the West Bank and Gaza ¬without necessarily
having to obtain Israeli approval or to abide by Israeli rules,
tariffs, import policy, standards, etc. Israel has its own security
concerns; we understand that these must be solved, but not at the
expense of the Palestinian economy. In that sense we have to be
independent of the Israeli system.
Second, we have to try hard to guarantee that a certain number of
workers will keep on working in Israel, irrespective of
developments on other fronts. Some form of economic relationship
between us and Israel has to be maintained for some time, at least
until we are able to build relations with the rest of the world. We
have certain nep.ds; we have certain exports and imports and we
have a labor force. Who is there to replace Israel as a market for
our lab or force or for our products, or to replace Israel as our
exporter? Unless we can find alternative outlets with the Arab
countries and the international community, we cannot go on
negotiating confidently with Israel about these issues. We are
realistic, but what we are saying is that we have to restructure
our relationship with Israel in such a way as to be able to decide
freely on a lot of issues. We can be independent politically, but
economically we will always be partially dependent on other
countries, as is the case with even very well¬established
states. We have to build a system where we can have a relationship
with Israel that is based on parity, fairness and an equitable
treatment of revenues within both economies.