Damn it, Let Go!

Gershon Baskin


Tuesday, August 09, 2005


Yesterday the Israel Cabinet decided to blackmail the Palestinian Authority. After months of trying to negotiate a deal so that the common customs envelope between Palestine and Israel, which has been in force since the signing of the Paris Protocol in 1995, can remain in force after the disengagement, the Israeli Cabinet pulled a rabbit out the its hat in the form of a “deal”. If the Palestinians agree to move the border to the Kerem Shalom triangle between Israel, Gaza and Egypt, then Israel will agree to retain the common customs envelope. Sounds a bit complicated – not so – here’s what it’s really about.


The common customs envelope maintains a system whereby there is “free” movement of goods between Israel and Palestine without any customs tariffs or checks on rules of origin. Furthermore, under the regime established, Israel collects customs on direct import of goods for Palestine and then transfers those revenues to the PA Ministry of Finance. Those tariffs, in addition to common VAT clearances, have amounted up to 50% of the PA’s income. Supporters of this regime claim that with all of the security checks already involved in clearing goods across the Israeli-Palestinian borders, additional customs clearances and checks will completely destroy the chance of increasing commerce between the two. For Palestine, it is nearly a death blow to the economy.


On the other hand, the Paris Protocol has many holes in it.  The main hole being that Israel still has the right to stop all shipment of goods for security reasons, real or imaginary, and to hold and check those goods for as long as it want.  Israel also has the right to impose closures and to prevent all goods from moving.  This policy has paralyzed the Palestinian economy many times since 1995 and especially over the past 5 years.  The Paris Protocol also fails to deal with all kinds of revenue leakages such as indirect imports, purchases taxes, and more.


I have been a strong advocate of the Paris Protocol and the idea of a common customs envelope.  I have believed that Palestinians must make every effort to seriously penetrate the Israeli economy and to view the Israeli market as their primary target for their export market.  I have believed that any form of customs regime other than the common custom envelope would seriously harm the Palestinian economy.  Because I believe that economic welfare and even prosperity are essential elements in peace making, I have advocated the highest possible levels of economic cooperation between the two sides.


The IMF, the World Bank and IPCRI have all strongly recommended that the common customs envelope regime remain in tact following the disengagement. Due to the lack of trust between the parties, Israel has stated that it fears that the Palestinians are stationed at the Egyptian-Gaza border; Gaza will be flooded with substandard merchandise which will make its way into Israel.  If Gaza and the West Bank are one economic zone, then movement of goods between Gaza and the West Bank would enable smuggling of the substandard goods directly to Tel Aviv and other Israeli markets. Because Israel will not leave its custom inspectors at the Rafah border after Israel leaves the border, Israel proposed moving the border south to the Kerem Shalom triangle.


The Palestinians and Egyptians immediately rejected the proposal.  Palestinians stated that they would no longer agree to allow Israel to hold the key to the border crossing. The IMF, the World Bank and IPCRI all proposed having a recognized international firm, such as the British Crown Agents, which has recognized international experience in customs monitoring and collection, to take charge of the customs station at Rafah.  The Palestinians agreed that the same rules under Paris would be applied by Crown Agents.  Crown Agents agreed to all of the conditions and negotiations were under way regarding the costs.


But Israel said no, Israel cannot trust Crown Agents or anyone else.  Only Israel knows how to monitor and to collect customs.  It should be pointed out that this arrangement and the Israeli refusal has nothing to do with security, because Israel will still maintain complete security control of all of the crossings between Gaza and Israel and every single tomato or shoe or dress or piece of furniture crossing the border will be examined, x-rayed, and sniffed by Israeli security personnel and technology.


Israel’s insistence to move the border has only one real explanation – continued control. Israel cannot imagine having a relationship with the Palestinians without it being based on Israeli control over Palestinians. Israel is leaving Gaza but Gaza is not leaving Israel. The Palestinians have had many reservations over the years regarding the common customs envelope.  The leading Palestinian economists, businessmen and politicians have many times advocated ending the Paris Protocol and moving into another form of trade regime. They said that there is no reason to keep adhering to system which has not provided them with the trade benefits and at best has only supplied an efficient system of revenue collection and transfer. This is not a small matter, but when faced with all of the non-tariff barriers that Israel has established since Paris and the reality that the Palestinians are not really partners in determining common trade policies, as is the norm in custom unions, why not try something new?


In light of the disengagement, the Palestinians had to finally make a choice and that choice was to continue the common customs envelope.  It was a wise and courageous choice. Israel, realizing that the Palestinians had recognized the importance and the value of the common customs envelope to the Palestinians, decided now to blackmail the Palestinians into agreeing to move the border.  This is one of the most cynical decisions the Israel cabinet ever made. Even the peace maker, Shimon Peres, was party to this cynical decision.


In the face of having to make a choice between the continuation of the common custom envelope and the continuation of Israel control, the Palestinian decision is an easy one to make. Bye bye common customs envelope.


Israel should be ashamed.