Khaled Abu-Aker: In the Palestinian territories, relations with Israel were always seen as those between occupier and occupied. Then, following the growing campaigns in the Arab world after Oslo against normalization with Israel, certain groups started to see relations with Israel as normalization. Yet, the reality is different and relations between Palestinians and Israelis cannot be compared to those between Jordanians or Egyptians and Israelis. Where are we heading?

Hanna Siniora: There are difficulties in coordination and cooperation with the Israelis at the moment caused by the lack of progress in the peace talks. Is the talk of normalization a serious phenomenon among the Palestinians? The Oslo Declaration of Principles very clearly mentions joint ventures between Israelis and Palestinians, and even pinpoints the Dead Sea area, the Jericho area, for joint ventures. We are now in a different situation than the one prevailing before the Palestinian Authority came into existence. Then we were occupiers and occupied adversaries; to some extent you could call us enemies at war. Now we are in a process of creating a peace treaty between the two peoples. In this process, economic cooperation is of the utmost importance, especially since we are already tied together by the Paris Economic Protocol and a customs union with Israel. Our situation is different from that of other Arab countries, although there is opposition to the process of normalization in Egypt and Jordan, especially among the unions, federations and syndicates. However, it is a fact that Israel and Egypt and Jordan have signed peace treaties, and there is some commerce between them.
For us also, it was important that, during the Intifada, we sometimes had over 100,000 people working in Israel, some even in Israeli settlements in the occupied territories. Is this normalization, or is this a situation that existed as a result of the war, as a result of living together in the same country? We want a separate Palestinian identity, a Palestinian state, with proper political and economic relations between the two peoples. However, I differentiate between dialogue and normalization. You can call normalization what is happening between Israel and the Gulf States where, without a peace process, trade is carried on, and sometimes there are representation offices. With the three countries that have relations with Israel - Egypt, Jordan and Palestine - what is happening is actually a de facto result of living together. Especially in the field of the economy, I believe we are, in a way, profiting from working closely with the Israelis.

Khaled Abu-Aker: Prof. Arnon, there were high expectations, especially after Oslo and after the treaty with Jordan, people spoke of a vision of a bright future for economic cooperation in the region. But nothing was achieved on the ground. Can you tell us why?

Arieh Arnon: Maybe I should note that we are speaking today in mid-June, and by the time this is published, everything could change. I think it is good to start from Oslo, as Mr. Siniora just did. The fate of the Oslo process and of economic cooperation all depends on what will come out of the next few weeks or months of the political process. We may even go back to some sort of confrontation between the two sides.
Oslo opened up the debate and raised expectations - from clear occupiers and occupied, we hoped slowly to move to a different relationship. One obstacle to the Oslo vision was that the process was very provisionary in its nature. The two sides knew ahead of time that they were not talking then about permanent solutions, so they left lots of things open to battle over. Maybe the worst thing that happened after Oslo in terms of the economic relationship was the closures, which had a huge impact on the Palestinian economy. On the Israeli side, many people - not all, but many - described them purely as a security measure. On the Palestinian side, they were seen as collective punishment or pressure to be used during the negotiations. The entire framework of the Oslo economic protocol was based on assumptions that were not fulfilled - political stability and calm, free and open economic relations and open borders, the whole area between the Jordan River and the sea flourishing. At the time, I criticized the basic assumption that no economic borders should be created between the two economies.
I worked with a group of economists in Beersheba throughout the 1990s on the Palestinian economy, and we published a book criticizing the Protocol vision, not because we are against integration and prosperity, but because we thought that, given the political realities, it would be impossible, without a political agreement, to jump from what we called the "imposed integration" of the occupation - the pre-1993 arrangements - to a voluntary economic integration to which the two sides would agree. A political agreement will have to be an agreement between two sovereignties, two states. In such an agreement, if both sides - but one side suffices - would have clear political borders, which would include economic borders, I think that would provide a better framework for economic development. Borders do not mean that we stop interacting and moving from one place to another, but that we do very clearly define the movement.
The people who had the vision of a political agreement without borders - something described in the Israeli political vocabulary as a functional agreement - understood that there could only be such an agreement if it were enlarged to include not only Israel and Palestine, but in the near future - or in the long run - also Jordan, then Egypt, and maybe one day Syria. The whole idea of the new Middle East, in a way, revolved around the model of the Israeli-Palestinian agreement. This cannot work because of the opposition to normalization in Egypt and in Jordan that existed before an Israeli-Palestinian agreement. That is, they were against normalization before there would be an agreement between Israel and Palestine. The opposition to normalization in Palestine is, in a way, imported from Egypt and Jordan under very different political and geographical circumstances, and it is a totally different phenomenon. It is impossible to have no relations - pure de-normalization - under the existing circumstances.

Khaled Abu-Aker: The closing of borders between Palestinians and Israelis, and economic hardships caused the politicians and negotiators to suggest industrial parks on the borders between the Palestinian territories and Israel. Can this solve the problem of closures and bring economic development to the area?

Niron Hashai: In my opinion, the solution to the Israeli-Palestinian dispute should be separation, and I am not the only one saying this.

Khaled Abu-Aker: For you, separation might even mean a fence. Do you mean divorce?

Niron Hashai: A physical fence, yes, because I think what the Israelis are looking for is security and what the Palestinians are looking for is independence. Separation is the way to achieve both aims. Divorce, yes. I am a great believer in cooperation, but I really do not think that agreement between the governments will be achieved in the near future. Regrettably, I am not optimistic. The parties are not serious; they are playing games. I do not think the solution is for something like 25 percent of the work force of Palestinians to keep working in Israel. Currently it is inevitable, but in the long run - let's say five years - the Palestinians should gradually have enough independent industry of their own so as not to have to come to work in Israel in such numbers.
Why is cooperation important? First, because it sustains peace. Businessmen will have vested interests in cooperation and this can strengthen the peace. Second, I think that the Israelis and the Palestinians need each other. If the Palestinians want to develop an industry of their own and start being exporters - since today we are in a global world, they can get the help of the Israelis with regard to marketing infrastructure, know-how, creating brand names, etc. The Israelis also need the Palestinians because of certain comparative advantages that exist on the Palestinian side.
The only way to maintain cooperation with separation is through industrial parks. Karni is one great example of a working industrial park. Several Israeli companies have established themselves there, and several Palestinians are working exclusively for the Israeli Kitan Textiles. The border itself is very sophisticated to control security. No weapons can pass through. So the notion of an industrial park with a secure border is working.
I am involved, from the academic side, in the binational park that is projected for Rafah. If Karni is so-called low-tech, this park will be for clean industries. We are also talking about creating a hi-tech park in Tulkarem, which will be close to hi-tech centers in Israel. An industrial park in Jenin is being planned jointly by Israelis and Palestinians. Separation is necessary. It also means that the customs union that exists according to the Paris Protocol will not last. We will have to go to a free trade agreement or to some other trade regime. Personally, I think it would not be so bad - even though economists say this is a sacred cow - if the Palestinians would protect their infant industries.
One more remark about cooperation. There is a lot of border trade between Israelis and Palestinians. Every Saturday we hear that there are traffic jams near Bidya. I think something like 1.5 billion shekels is being spent by Israelis on Saturdays and weekends in all the Palestinian cities on the borders - Qalqiliya, Bidya, even Nablus, etc. There is a lot of interaction there. It frightens me somewhat because I am not sure how it can last in the long run. But there we can see another trend towards cooperation.

Riad Malki: Why do we talk about cooperation at the same time as separation? I understood from what I have just heard that you mean individual separation: Palestinians separated from Israelis in terms of human contact, to the Israeli benefit. This precisely fits the Israeli position of trying to exploit to the maximum a situation where, on the one hand, you have the political perspective of total human separation, while at the same time maintaining the economic connection through so-called industrial parks as a form of cooperation. What is an industrial park? Sites within Palestinian controlled areas, where Israeli companies open plants and employ Palestinians. Why do these companies decide to come to Palestinian areas in the first place? Obviously, because of cheap labor. A businessman is not really interested in cooperation between Israel and Palestine on a national level. He is interested in how much money he can make by moving his plant to Madaba or Irbid or Karni or somewhere near Jenin. He wants to benefit from cheap Palestinian labor and from the chaotic economic laws and regulations that exist in the Palestinian areas. These permit, to a certain degree, the movement of goods, personnel and money without checking and without taxation over a certain period of time, as an encouragement to investors. I see this as a form of exploitation.
A joint project should benefit both sides. It is said to benefit the Palestinians because we are creating jobs, upgrading the standard of living, etc. However, this is not a basic investment in Palestinian infrastructure, but an economic loan given by the Israelis to the Palestinians. The moment that investing in the Karni or the Jenin industrial park is no longer profitable, the Israelis will immediately withdraw their plants from these areas and move somewhere else more profitable. This does not build a strong solid base for the Palestinian economy. What we are doing here is accommodating Israeli economic needs at the expense of the Palestinians.

Hanna Siniora: It is exploitation.

Riad Malki: This is exactly how I see it. Are we really investing in a solid Palestinian economic infrastructure, or are we solving Israel's economic needs by means of solutions that might, at first glance, appear attractive to Palestinians, because they provide employment?

Khaled Abu-Aker: We want also to talk about regional cooperation. After the treaty with Jordan, we saw Israeli factories moving to the Madaba or Zarka industrial areas, and, on a small level, joint ventures with Jordanians, some of which have succeeded and some others which have failed. One of the ideas of Israeli industrialists was to open the borders via Jordan to the Gulf and to other countries.

Arieh Arnon: These topics are really at the heart of the problem, and hopefully the negotiators will reach the point where they will also tackle them. It is a fact of life that wages paid to Israeli workers are much higher than those paid to Palestinians. The same applies to other places, like Egypt. I do not like the metaphor of divorce for describing the reframing of the relationship between Israelis and Palestinians. I do not think it is a good recipe for peace.

Riad Malki: There was no marriage in the first place.

Arieh Arnon: What we are talking about in the political framework is whether we prefer what we used to call a two-state solution or a one-state solution. In economics, we want to know whether we are going to regulate the flow of economic goods - including labor, trade and capital between the two sides - or whether we leave this to what economists describe as the market process, to be dictated by profit and interests. I prefer (for a while, not forever) what I call open borders; that is, borders with good gates. I do not want to separate. I do not want to stop human interaction. On the contrary, I want human interaction, but I want regulated borders. I think this is the best strategy for reaching - one day, in the not too distant future - a convergence between the two sides. Otherwise there will be only exploitation, as there has been over the last 30 years.
As to industrial zones, I do not prefer them to development within the Palestinian economy. But industrial zones were created as a second-best or third-best solution under the Oslo circumstances. When it became clear that there was no flow of goods between the two sides and that the closures really stopped development, then the World Bank, as well as many Palestinians and many Israelis, thought that we had to do something and established industrial zones.
In the future, when there are two states, Palestinian workers can continue working in the Israeli economy, but with regulated passages - not under a system of exploitation, but under a system whereby the two sides will agree whether it benefits them or not.

Riad Malki: If we take the Israeli budget of 200 billion shekels in comparison to ours, the difference is so wide that it would be naive of both sides to look for ways to cooperate. We are talking about the big brother that has everything, possesses everything, and the little brother that has nothing and is just starting out. That is why it is very important to see if we are really combining economic development with political stability. If separation comes as a result of the need for security, and if we talk about political stability related to economic development, then it is important for us to see how the Israeli economy - and the political establishment behind it - could find ways to help the new Palestinian economy to develop in order to improve Palestinian living conditions.
That, by itself, would allow for a certain political stability within Palestine, and would affect regional relations with Israel and with the rest of the countries. Here we see the connection between economic development and political stability. What is important for Israel today is to find ways to invest in developing the Palestinian economy so as to promote its prosperity and help it find its own character and independence. Only when we reach the level where the Palestinian economy can stand on its own two feet and develop and compete regionally and globally, can the Palestinians look to the Israeli economy for joint ventures, investments and so on. We cannot close our eyes to the reality that for the last 30 years - and even before the Israeli occupation of 1967 - the Palestinian economy has been totally dependent on Israel. It needs to develop now not only through separation, but also through assistance, and not through industrial parks where Israeli industries move into Palestinian territories. International companies, Palestinian investors from the Diaspora, Arab and, sometimes, also Israeli investors, should be encouraged to invest in the Palestinian economy so that it will be able to sustain itself.

Khaled Abu-Aker: With regard to economic cooperation, we have not witnessed any breakthroughs with neighboring countries. Despite isolated cases in Jordan and maybe in Egypt, we have not seen any real economic cooperation in the region. As one of those involved in these failed attempts, how do you see this, Mr. Siniora?

Hanna Siniora: The way separation is being preached now - especially by Israeli political leaders, and foremost among them the prime minister - it is really another form of what has been called collective punishment. Today, between official and unofficial permits, we have more than 100,000 Palestinians working in Israel. Separation, the way it is being preached now, will create hardship. We saw this already when the Palestinian Authority came into power, with the closure policies of the Likud and the Labor governments. Between 1994 and 1996, our economy declined by 25 percent. So if we are going to have separation, the Israeli side has to think seriously about helping us create at least 100,000 new jobs inside the Palestinian area.
Today we are talking about industrial zones. So far, there is only one very modest industrial zone, and it is in Gaza. It has not created many jobs, and it is an industry with no future. Most of the joint ventures that are taking place, even with Jordan, are in textiles, and textiles have no future in this region because of the competition coming from Southeast Asia, and specifically China. Today, textiles, leather and shoes are being imported from China and this is killing all the local industries. I believe that those who signed the Paris Economic Protocol made a grave mistake because, as Prof. Arnon said, you cannot have a customs union between a very developed country and a still underdeveloped country. There is a big difference in per-capita income between the two countries. In Israel it is about $16,000 to $17,000. In the Gaza Strip it is about $1,200, and in the West Bank about $1,800.
I also believe that what we have to develop is a kind of free trade agreement between the Palestinian and the Israeli economic entities. And it is essential that Israel help raise the standard of living in Palestine by creating, and helping the Palestinian Authority to create new jobs. When we have this kind of parity, then we can think about a customs union. Meanwhile, the present arrangement is detrimental. In a way, we are slowly ending what we called occupation in its old forms, but under this customs union, we are falling into an economic occupation. This has to stop. An example of economic cooperation where the cooperating countries enjoy the same level of economic progress is the Benelux arrangement between Holland, Belgium and Luxembourg. This is not a federation, but a form of economic cooperation or union based on the fact that these three countries, with small populations and very well-developed economies, could not compete individually with their bigger brothers such as France or Germany. In our case, we have the opposite - an arrangement between the haves and the have-nots, resulting in continued exploitation.
I do not believe in a fence. I would like to have completely open borders to allow for economic movement of people and goods. Otherwise, there will be no investments, even by Israelis, in the future Palestinian state. And if the Israelis do not invest, then there will be no foreign investments. We are already seeing a slowdown of Arab, and even Diaspora Palestinian investment in Palestine because of the restrictions and borders and checkpoints. The creation of more of these will lead to deterioration rather than an improvement in the Palestinian economy.
On the issue of regional cooperation, it is premature to try it, or even to talk about it. We tried in tourism, but there is still no free movement of tourists. Border crossings in this region are a big problem not only between Israel and Egypt or Israel and the Palestinian areas, but also among all the countries of the region. There are even problems crossing from Egypt to Gaza. In America, you can move freely through the 50 states. You can move freely through the 15 European Union countries. In order to promote the economy of our region, we need something similar.
One way of preparing the Palestinian economic entity to have economic cooperation with Israel is exactly the way the European Union is doing it when it invites in new members. When Greece, Portugal and Spain entered the European Union, they were given a two-year grace period in which to prepare their economic house, and there were huge investments made by the European Economic Community into the economies of these three countries. Something similar has to happen here.

Riad Malki: About regional cooperation, the question is what comes first, cooperation or peace. Does cooperation bring peace or will peace bring cooperation? Obviously, if we take the last three or four years since Oslo was signed, we see very clearly that signing peace agreements does not in itself bring about regional cooperation. Regional cooperation cannot be achieved without preconditions and prerequisites, the first of which is that peace should be comprehensive. It is not enough to sign a peace treaty with Jordan or with Egypt. The key to reaching peace with the Arab countries is reaching peace with the Palestinians. Secondly, signing peace with leaders does not mean that peace has really been achieved. Take for example the cold peace with Egypt. Israel signed a peace treaty with Egyptian leaders, but has not achieved peace with the Egyptian people. We have to be creative enough to find ways to bring the collective civil society as partners in peace and regional cooperation.

Khaled Abu-Aker: It is obvious that the key to any cooperation in the region is a political solution for the whole conflict. But everybody thinks of Israel as dominating the Arab world economically, culturally, and educationally - a form of colonialism. Do you think it possible that the main issue is not cooperation, but fear? That the Arabs in general are afraid of Israel's domination?

Riad Malki: Yes, it is possible. But you have to see it from a different perspective. If the Arabs are not prepared to engage in real cooperation with Israel and to invest in regional cooperation, and if they are not ready in terms of their infrastructure and economy, obviously Israel, with its advanced economic development and with its superior information technology and so on, will dominate.
But if Israel does not dominate, somebody else will. France will take advantage and try to do so, or the British or the Germans. The problem is that we are mixing two things - Israel the former enemy and Israel the potential economic partner. What we have here is our fault as Arabs. It is our fault that we are not ready to have Israel as an economic partner. We are still imprisoned in our own past in terms of how we perceive Israel. We still see Israel as an enemy. The moment we take this out of our minds and start looking at it as a potential partner in our economic development, then we will start considering it as we do France or Japan.
Because we see that our economy is inferior to that of Israel, obviously we fear that the Israeli economy will be dominant.

Niron Hashai: I would like to comment on this point of so-called Israeli colonialism. I think it is only in the eyes of the Arabs that Israel wants to use economic means to take hold over them. The concept that there is no potential for a developed country like Israel to be tied to developing countries such as the Arab countries is basically not true. Look at the examples of Mexico and the United States, of Japan and China, of Germany and Hungary. The collaboration between a developing country and a developed country has great potential. Seventy-five percent of the exports of Mexico go to the States. Thirty percent of Hungarian exports go to Germany.

Hanna Siniora: Eighty percent of our exports go to Israel.

Niron Hashai: This is very valuable.
The second point is to understand that cooperation helps the Arabs to develop their own exporting industries. Take the example of Korea. The Americans came to Korea 30 years ago and built factories. At that time, the Koreans were saying that the Americans were dominating them, building factories, and as you said just now, exploiting their labor. But the Korean government said, Wait, we will get know-how from them. We will get manufacturing techniques. We will get marketing facilities, slowly and gradually, and then we will develop these by ourselves. And after 30 years we have Samsung and Datsun and many similar Korean companies and a flourishing economy. One of the reasons for this was cooperation with the United States.
I believe that Israeli-Arab cooperation can help the Arabs get a short cut to the world's leading markets. It is not that Israelis will be exploiting them. Of course, businessmen always go wherever it's cheap. What should matter is how many work places are opened up and what know-how is transferred so that, in the long run, the Palestinian who today is a subcontractor of an Israeli company, in five years will open his own software or whatever company and will export by himself. You can learn these facts from business history all around the world.

Hanna Siniora: An example is the way agriculture in Palestine has profited from developments in Israel and the transfer of technology. Although the land area has decreased in Palestine because of political factors, there has been a growth in agricultural products and we have become competitive. Today there is even a lobby inside Israel to prevent Palestinian agricultural products from entering Israel because now we are being perceived as a threat to the survival of the Israeli agricultural sector.

Khaled Abu-Aker: The Israeli attempt not to move technology into the Arab world, but also to open new markets for its own industries raises Arab fears, and they also say it is too early as long as there is no political solution.

Arieh Arnon: Let's assume for the moment that there is a political solution. We should then distinguish between the level of trade in commodities and the level of economic relations in factors of production. This is an important distinction.
One illusion, when Oslo was created and the peace process started rolling, was that suddenly there would be enormous trade among the various partners. It was exaggerated because the partners do not specialize in the same things. And there is not much chance that Israel, for example, will buy and sell a lot to the Arab world or that an Arab country will buy and sell a lot to Israel. Israelis will look for markets. And Arab entrepreneurs will look into the Israeli market such as in agriculture, and say, We can do it better and cheaper, so let's compete in agriculture. That is natural, and it is okay.

Hanna Siniora: This is actually the future.

Arieh Arnon: I do not think there will be a lot of trade of this sort, at least for the near future. I would prefer that the Palestinians have their own trade protocol. Then we need a free trade agreement and we cannot have an open customs union. But on the level of factors of production, we should convince the Europeans that we are not even at the stage of Portugal and Europe yet. It will take us a long time. We are in the Mexican-American schedule where there is a free trade agreement with borders and a lot of things moving. The borders are not closed; they are open. But Mexico maintains its trade protocol, and I think this is the right way to go. By the way, the ratios of the US to Mexico are very similar to the Israeli-Palestinian ratios - population, GDP, etc. We are both much smaller, but the ratios are similar. They have a free trade agreement, and I think we should too.

Niron Hashai: And industrial zones.

Arieh Arnon: But let's go to the difficult field of factors of production - labor and capital. Here again, the potential is much smaller than many people think. It is not the case that lots of Israeli capital will run to Jordan. There are a few cases, and they will build textile factories there, but I do not think it will become a big movement. I think it should be regulated because of political fears. That is, people will describe it as a form of exploitation and I do not think it is worth the price. It would be better if international capital and joint ventures, rather than Israeli capital, would move first into either the Palestinian or Jordanian or Egyptian economy - maybe joint ventures with locals, maybe together with Europeans, but under the agreement of the sovereigns in the various places. Otherwise, the concept of exploitation by an ex-enemy - I hope ex-enemy - will distort things. I think all sides should be very careful about regulating those types of economic relations.

Hanna Siniora: Another example is the way the Israeli economy has developed since 1948. It opened markets in Europe and in the United States, and not in the Arab countries. Certainly there is some trade with Arab countries, especially in the Gulf, but it is minimal and should not create a fear that we are going to be economically exploited by Israel. Also, when our market is opened to Israeli and European goods, sometimes the European goods are cheaper than the Israeli products of the same quality. However, I gave the example of agriculture to
illustrate that when we really use modern technology, we can compete with Israel.

Riad Malki: Most of the Arab countries that are using sophisticated technology in terms of software and so on may not even know that parts of this software might have been developed by Israeli companies.

Khaled Abu-Aker: When the peace treaty was signed with Jordan, instead of an Israeli invasion, we started witnessing a kind of invasion of laborers from Jordan to Israel, some legal and many illegal, and they have created a competition with the foreign and Palestinian workers. When you talk about fences or separation, do you think that Israel will replace Palestinians with foreign workers? Do you see Arab workers invading the Israeli markets as a solution to the separation you are talking about?

Arieh Arnon: This is a major issue. After the Oslo treaty when there was a lot of tension and violence, Israel opened its gates to foreign - that is, non-Arab, non-Palestinian - workers, from Rumania and Thailand and the Philippines. In a matter of two or three years, their number grew from 10,000 or 15,000 to nobody knows exactly how many - 100,000 legal, and maybe another 100,000 or more illegal foreign workers in the Israeli labor market. At first we thought, they are substituting - and this was a fact - for the Palestinian labor, as you all know. But since then, a lot has changed.
First, Palestinians came back into the Israeli labor market. Today, according to the Palestinian Central Bureau of Statistics, there is something like 120,000-130,000 Palestinians working in the Israeli economy. Only 50,000 or 60,000 are legal, and the rest are illegal, mainly from the West Bank, not from Gaza. This is one important factor. And this is in spite of the fact that something like 100,000 non-Arab foreign laborers are still present in the Israeli economy. We know that there is a small stream of Arab laborers from Jordan and from Egypt entering into the Israeli economy. I heard cries last week from Palestinians who live within Israel, within the Green Line, complaining about competition from Jordanians working in construction and taking their places. Here again, they are cheaper and they are good workers. As an economist - albeit not an orthodox one - that is exactly where we have to say that the rule of the market, of profit and price, has to be put aside and the government should be the sovereign. Otherwise, we will immediately have a huge - and justified - outcry from all those who will be hurt. And these are not usual circumstances. It might be reasonable for a laborer in Jordan to work for $200 or $300 a month. For Palestinians and Israelis it is not reasonable.
This is why I say we have to regulate the labor market, and the only way to regulate this aspect of the labor market is to regulate borders. I do not mean you have to close the Israeli labor market. Palestinians should work in the Israeli labor market, but under regulated conditions, and that might be one of the best contributions that Israel can make to the development of the Palestinian economy. Israel should guarantee that it will continue to let Palestinians work in the Israeli labor market, and maybe Israel should cut the numbers of foreign non-Palestinian, non-Arab laborers. This would be a contribution to the peace process and a contribution to the development of the Palestinian economy.

Riad Malki: And the Israeli economy.

Hanna Siniora: And Israeli society.

Arieh Arnon: Let them come in, but the long-term strategic, political, and, perhaps, also economic considerations should be taken into account and the labor borders regulated. However, it is hard to convince people to regulate labor borders.

Khaled Abu-Aker: If there is a peace treaty, will there be a wave of Arab workers coming into Israel?

Arieh Arnon: It is a very real fear. Sixty-five million Egyptians live on an estimated $800 per capita. We can say, okay, from the humanitarian point of view, let's bring them in. Let's open the gates for everybody, for the whole world.

Niron Hashai: I do not think there is a real fear that, at the moment, Egyptians or Jordanians will come in substantial numbers. Political pressures will regulate this, and I do not think the Palestinians have to fear it.
As I said before though, in the short run, I think Palestinians can and should continue working in Israel. And in the long run, we should see how, for the Palestinians' sake, we could reduce the number of Palestinians working in Israel and develop the Palestinians' own industry so they can work there.

Khaled Abu-Aker: Regional cooperation is not only in the field of the economy. Economy may be the main factor, but there are other aspects as well.

Hanna Siniora: We have two problems now that cannot be solved on a bilateral basis, but only on a regional basis. One is water and the other is the environment. And that is why both of them are part of what we call the multilateral talks. Today, for the first time, Israel awoke to the fact that water is going to be scarce this year and they might be forced to import water from Turkey. This actually should not have happened because, in both the Palestinian area and in Israel, desalination should have been started five years ago. I also believe that there is still an injustice between us and them in the distribution of water. But even if we put that aside and just talk about the shortage of water in the region, it has to be solved through regional management. We have to create water treatment networks, better water management, and joint management of resources.
In this way we will be able to create goodwill where today there are bad feelings between the parties. When we talk about occupation, we bring to the fore that we are not getting a fair share of our water resources, that the water resources are completely in the hands of the Israelis, that water is being given in greater quantity to the settlements, and some settlements in the Jordan Valley even have swimming pools while the villages next to them are dry. There is also a disparity in the pricing system. We pay more than the Israeli farmers and consumers. In addition, the Israelis consume three times as much water as the Palestinians.
Today we are being asked to retrench in our usage of water, while if there were fair distribution per capita, even under the present dire conditions, there would be an increase in water distribution to the Palestinian area.

Khaled Abu-Aker: Even though there is a peace treaty with Jordan, there is no cooperation on that.

Hanna Siniora: Last year a Jordanian minister of irrigation was fired because of this issue of water distribution. The other area is the environment. Today in the Israeli press, Environment Minister Dalia Itzik is saying that some 50 percent of the water reservoirs are contaminated because of the pollution seeping to the aquifers.

Riad Malki: The impact of the environment goes beyond borders, and regional cooperation is required in order to overcome such problems. The environment is one problem, but there are many others. I believe that the moment that conditions for peace are present, then immediately people will start thinking on a higher level of cooperation. Then different perspectives and ideas about regional cooperation will start feeding our discussions. People will immediately start setting different priorities with regard to regional cooperation. I believe that with peace this will come about naturally.

Khaled Abu-Aker: Our opening question was about the situation in the Palestinian territories in general and the importing of the idea of normalization with Israel from other Arab countries. How can we explain the demonstrations against what is called normalization?

Hanna Siniora: What we used to call dialogue became normalization.

Riad Malki: When people are really frustrated with the lack of progress in the peace process, they start looking for victims. One of those will immediately be Israeli-Palestinian dialogue, Israeli-Palestinian projects and Israeli-Palestinian NGOs that are working to promote peace and understanding between the two peoples. Nobody talks about normalization. From my perspective, when countries are in a state of war, they may try to normalize their relations. In the case of Israel and Palestine, no one can talk about normalization because we are still in the process of negotiations at the official level. There are still Israeli soldiers stationed on Palestinian soil. Without equality and parity between the two sides how can we start a process of normalizing relations?
Israel's relations with Jordan and with Egypt allow for a process of normalization. But for Palestine and Israel, it is still premature, even if people in some circles would really like to see it come about. Israelis and Palestinians have been engaged for a long time in a process of dialogue, of trying to meet and understand each other and to see the human element in each of us as individuals. This is a very important precondition for whatever will come later.

Hanna Siniora: This supports the peace process.

Riad Malki: Efforts have been made by civil society organizations on both sides to normalize the ground for the political leaders. This facilitates the process of negotiations in order to achieve a political solution to the whole Israeli-Palestinian conflict. But there is a need to distinguish between a process of dialogue and one of normalization.