An Annotated Bibliography on Regional Trade Between Israel, Palestine,
Ahiram, Ephraim, The Past and the
Future of Israeli- Palestinian Trade, paper presented
at a conference "Sustaining Middle East Peace through Regional Cooperation",
in Amsterdam, Netherlands, 19 October 1994.
This paper is an attempt to learn future trade
between Israel and the OT from the past.
The past trade relations between the two countries
has been marked by a one sided custom union, where Israel had no restriction
on exporting goods to the OT, but did impose restrictions on trade
of various industrial and agricultural products from the OT.
Jordan also had a negative impact on the development
of the OT export by using the Arab boycott on Israel. This kind of
limitation makes difficult to appreciate the future trade. Moreover,
thanks to a change in political status and the creation of a new kind
of trade, OT are expected to develop much faster. We can also predict
that because of political ideological considerations, trade will not
be driven by an economic rational judgment. Non very accurate trade
statistics in the OT also makes previsions difficult.
The author gives us the composition and the amount
of the OT external trade till 1986, the last normal year concerning
trade, before the wake of the intifada.
The Paris agreement gives an optimal solution
concerning trade for the interim period. A mixture of a custom union
with exceptions for a list of products which will be traded under
the rules of a FTA.
Contrary to the economic theory, the author advise
import substitution for traditional products and a huge infrastructure
development, which within a few years would permit to Palestinian
enterprises to export.
An educational revolution will be necessary to
turn to produce technologically advanced products.
Table A. Division of main commodity group of
imports from Israel to the West Bank and export from the West Bank
to Israel 1986
Table B. Division of main commodity group of
imports from Israel to the Gaza Area and export from the Gaza Area
to Israel 1986
Table 1. Import, Export Foreign Trade Balance
of the West Bank and Gaza 1970-1987
Table 2. West Bank and Gaza imports from Israel
as percentage of their total imports (selected years)
Table 3. West Bank and Gaza Exports to Israel,
Jordan and Others as percentage of their total exports
Table 4. Exports of the West Bank and Gaza as
percentage of imports in trade with Israel and Jordan and the Balance
Table 5. Composition of the West Bank and Gaza
Imports: Agricultural and Industrial Products (percentages)
Table 6. Composition of the West Bank and Gaza
Exports: Agricultural and Industrial Products (percentages)
Table 7. Imports through Sea and Airports and
by Kind of Imports
Table 9. Distribution of Merchandise Trade
Table 10. Imports to the West Bank from Israel
and Exports of the West Bank to Israel. 1986 Major Commodity Groups
Table 11. Imports to Gaza from Israel, and Exports
from Gaza to Israel. 1986. Major Commodity Groups
Arnon, A. and Weinblatt, S. (1994) "Trade
Potantial Between Israel, the Palestinians, and Jordan",
Discussion Paper 10.94 Bank of Israel, July 1994
Awartani, H. and Kleiman, E. (1995) "Economic
Interactions Among the Participants in the Middle East Process,"
International Economic Association, 11th World Congress,
Tunis 18-22 December 1995.
Back to Back: The Palestinian Trade
Realities at Crossing Points, Palestinian National Authority,
Dahiet Al-Barid - January 1997
This document focuses on the Israeli impediments
( such as closures, travel and work permits, restriction on investors,
military orders...) to economic and commercial activity in Palestine
which have caused damages to the Palestinian economy.
This study specifically deals with the issue
of border crossing and trade impediments.
It makes some recommendations to improve the
situation such as facilitate transportation between Israel and the
OT, opening of the Israeli market and an improvement of the Palestinian
Table 1. List of the total commodities entering
to the PA areas through the Rafah passage during May 1995 until November
Table 2. Value table of customs indexes and the
total incoming fees collected at the Rafah passage during the period
of May 1995-November 1995
Regional Economic Cooperation via
A supportive Business Environment, Prepared and published
within the projects for Israeli-Palestinian-Jordanian Financial and
Industrial Cooperation and sponsored by The Friedrich Naumann Foundation,
This project tries to identify the economic and
day-to-day issues, which confront small and medium size business activity
in the region, and presents policy guidelines to relevant decision
makers and economic players in the Triad. It focuses on nine topics
that are monetary cooperation, banking cooperation, capital markets,
capital risk fund, marketing industrial goods, technology transfer,
insurance, cumulation of origin and impediments.
The project has generated a spectrum of ideas
for the enhancement of economic cooperation in the region.
Ben Chaim, M. (1993) Trade Potential
Between Israel and the Arab Countries, The Armand
Hammer Fund for Economic Cooperation in the Middle East, Tel Aviv
The present study sets out to gauge the Israel-Arab
trade potential under the assumption of no political intervention.
The study considers as one unit five Arab countries (Syria, Jordan,
Egypt, Saudi Arabia, and the United Arab Emirates) for which data
were available, but disregards the trade between them. An index for
potential trade was constructed which allows the identification of
the specific industries in each country with the highest trade diversion
potential with another country. Industries were classified by sensitivity
to cross-border trade before the index was applied. The conclusions
are that the potential export diversion from Israel to the five countries
is estimated at $2.2 billion, or 23% of total exports, while the trade
diversion potential from the Arab countries to Israel, including
Diwan, Ishac, Walton, Michael, The
Economy of the West Bank and Gaza: from Development to Economic Growth.
Finance and Development. September 1994.
This article outline the economic issues and
choices facing the new Palestinian Authority. As outside sources of
employment (in Israel and the Gulf) are disappearing, they let the
Palestinians in an economically insecure state. Future income growth
have to depend on an expansion of domestic production.
Peace can open opportunities. The PA should maximize
trade linkage providing the environment for private investment. It
would be a mistake to disengage from Israel. Building institutions
(from the health ministry to a private banking system) will be necessary
to support a reorientation in favor of greater independence. Providing
a safety net, especially via temporary public financed employment
will be necessary. Managing aid such as it will be a complement and
not a substitute for the domestic tax effort.
Some of these policies will require a deeper
involvement in negotiations with Israel and Jordan.
Fishelson, Gideon, The Peace Dividend:
Regional Trade and Cooperation. Palestine-Israel Journal,
No.1, Winter 94, pp. 89-95.
This article outline the role of the private
sector concerning regional cooperation. Trade among the ME countries
should be increased by the introduction of private elements, driven
by profit, and lead to more efficient systems and more regional cooperation.
A part of the ME exports to the industrial countries could be partially
substitute by Israeli imports. Joint-venture and tourism would be
an other step to cooperation.
Gains from cooperation are in the ME relevant
to the public sector which carry out the tasks that private sector
performs elsewhere. One of the role of the public sector in regional
cooperation is its participation in regional projects.
Economic cooperation in the ME is expected to
strengthen the foundation of peace and help to attain sustainable
Table 1. Imports/ Exports of the West Bank and
Gaza (million U.S.$)
Table . Basic Demographic and Economic Data,
Middle Eastern Countries
Table 3. Some Economic Indicators that Point
Towards Benefits from Cooperation, 1990
GATT Secretariat (1995) "Trade Policy
Review Mechanism-Israel," World Trade and Arbitration
Materials, vol. 7. No.1, January
Halbach, A.J., et al (1995) "New Potential
for Cooperation and Trade in the Middle East,"
Ifo Research Reports, Department for Development and Transformation
Studies No. 85 (Muchen, Weltforumm Verlag).
Halevi, N. "Economic Implications of
Peace: The Israeli Perspective," in Fischer, S., Rodrik,
D., and Tuma, E. eds. The Economics of Peace in the Middle East
Cambridge, MA.: MIT Press, 1993, pp.87-116.
Halevi, N. (1994) Trade Relations
Between Israel and Jordan: Considerations and Prospects,
The Pinchas Sapir Center for Development and the Armand Hammer Fund
for Economic Cooperation in the Middle East, Tel Aviv University,
Halevi, Nadav, Kleiman, Ephraim, Structure
of Trade Relations Between Israel and Jordan: Alternatives and Recommendations.
In Halevi, Nadav Trade Relations Between Israel and Jordan,
Tel Aviv: The Pinchas Sapir Center for Development and the Armand
Hammer Fund for Economic Cooperation in the Middle East, Tel-Aviv
University, 1994, pp.1-7.
From the existing trade pattern with other countries,
this article analyze the trade potential that exist between Israel
and Jordan. The competition of Israeli products by Jordanian ones
because of geographic proximity should be balanced by the development
of a new line of exports suited for the development needs of the Jordanian
The authors analyze a wide range of possible
trade arrangements, from normal trade relation to custom union or
even a common market. They conclude that any trade arrangement will
be more significant for Jordan than for Israel. They recommend for
the immediate future a mutual removal of the restriction on trade
mixed with an agreement on granting preferential terms to trade in
certain goods, which would allow their importation at customs rates
lower than those on goods from third party countries.
Preferences to Jordanian exports to the Territories
that might 'overflow' in part the Israeli market should be demanded
in return for direct exports of limited quantities of selected Israeli
goods to Jordan, in the spirit of a bi-lateral trade agreement. Finally,
the authors suggest to Israel and Jordan to pass an agreement for
Israeli and Jordan products that compete in international markets
(i.e.: Phosphates, potassium and their derivatives, which constitute
almost half of the Jordanian merchandise export).
Halevi, Nadav and Kleiman, Ephraim, Regional
Versus Non- Regional Integration: The Case of the Middle East.
The Hebrew University of Jerusalem, 1996
This paper deals with the issue to know if with
geographic and cultural proximity, the Middle East constitute a natural
Concerning Middle East trade patterns, the area
has got a low intra-regional trade, even without the Israeli partner.
This outcome may be caused by trade policies, even if it does not
constitute a barrier, since there are others economic reasons which
are present to encourage trade.
The ME countries do not constitute a natural
trading bloc. A solution would be to include Israel (which is a complementary
economy) in a FTA. This is the most far-reaching preferential agreement
that can be envisaged and it permits to each country to maintain its
own external policy.
Table 1. Customs Union Effects
Table 2. Relative Import Intensities, 1994.
Hirsch, S., Ayal, I., Hashai, N., Khesin,
R., Arab-Israeli Potential Trade: The Role of Input Sharing,
The Armand Hammer Fund for Economic Cooperation in the Middle East,
This paper is aimed to develop a methodology
for estimating the level and composition of potential trade, based
on input sharing, between Israel and its Arab neighbors. It tries
to identify industries, especially export industries, in Arab countries
and in Israel which can base their further development on inputs imported
from each other.
To identify the export potential, the authors
calculated the RCA (i.e.: world market share of the branch, normalized
by the county's overall market share) of different economic branches.
The results indicate that there is a basis for this new type of trade
, especially between Israel and Jordan and to a lesser extent between
Israel, Egypt and Syria. The branches which can base their development
on such imported inputs are mainly food industries, textiles and clothing,
construction industry, ceramics etc.
Table 1- RCA indices of Economic Branches in
Egypt and Israel
Table 2- Imports by Israel of Inputs with High
Egyptian RCA Indices
Table 3- Domestic Purchases by Israel of Inputs
with High Egyptian RCA Indices
Table 4- Purchases by Israel of Imported and
Domestic Inputs with High Egyptian RCA Indices
Table 5- Purchases by Israel of Imported and
Domestic Inputs with High Jordanian RCA Indices
Table 6- Purchases by Israel of Imported and
Domestic Inputs with High Syrian RCA Indices
Table 7- RCA Indices of Economic Branches in
Israel, Jordan, Syria and Egypt
Table 8- Purchases of Domestic Inputs with High
Israeli RCA Indices- 1988
Appendix Table 1- RCA Indices of Economic Branches
in Jordan and Israel
Appendix Table 2- RCA Indices of Economic Branches
in Syria and Israel
Appendix Table 3- Imports by Israel of Inputs
with High Jordanian RCA Indices
Appendix Table 4- Imports by Israel of Inputs
with High Syrian RCA Indices
Appendix Table 5- Domestic Purchases by Israel
of Inputs with High Jordanian RCA Indices
Appendix Table 6- Domestic Purchases by Israel
of Inputs with High Syrian RCA Indices
Hirsch, Seev, Ayal, Igal and Fishelson,
Gideon, The Arab-Israeli Trade Potential: Methodological Considerations
and Examples. The Israel Institute of Business
Research, working paper no 7/95, March 1995.
This study forecasts trade potential between
the Arab countries' and Israel. First of all, we can expect "Export
Creation" by the elimination of discrimination between foreign suppliers
on a non-discriminatory basis. Moreover, in a region where there is
no trade we can consider 3 categories of new trade.
Distance sensitive trade assume that proximity
may be an important determinant of tradability. The authors suggest
to use a gravity model and do the analogy with Austria's external
trade pattern after the dissolution of COMECON.
Scale Sensitive Trade should be overcome by a
big enough Arab-Israeli market determined by the traditional comparative
advantage consideration and no more by the phenomenon of economies
New Sources of Input may make possible for firms
to become internationally competitive. Using Egyptian indices of revealed
comparative advantage and Israel's Input-Output statistics, permits
to outline what the potential sources of Egyptian manufactured inputs
that can be used by Israeli industrial customers are.
However, the realization of such a trade depends
on investment which needs a long term commitment.
Table 1 Potential "Export Creation" Between Israel
and Jordan in thousands of US $
Table 2 Distance Sensitive Trade - Austria's
International Trade (1989)
Table 3 Economies if Scale (1992)
Table 4 Locally purchased complementary inputs
Table 5 Imported complementary inputs
Impediments Economic Activity,
Prepared and published within the project for on Israeli-Palestinian-Jordanian
Financial Cooperation and sponsored by The Friedrich Naumann Foundation,
This paper presents guidelines for a trilateral
plan that will foster free flow across regional border. Its goal is
to present to decision-makers an inclusive policy outline which addresses
both security needs and relevant consideration.
Although there is a vision of free flow in the
Triad, free movement is severely restricted due to security concerns
and bureaucratic and psychological impediments.
The plan examine the issue of free flow encompassing
all existing crossing points in the region and their practical aspects,
all economic needs of the entities, present and foreseen security
concerns, and all other relevaconsiderations.
It is necessary to create a regional economic
system that not only addresses security aspects, but also the psychological
and bureaucratic aspects, with a special focus on the Palestinian
Jawhary, M., The Palestinian-Israeli
Trade Arrangements: Searching for Fair Revenue-Sharing,
Jerusalem: Palestinian Economic Policy Research Institute (MAS), December
This report addresses the issue of Palestinian-Israeli
customs union and investigate what is a fair revenue-sharing formula
between the two parties. Effectively, most of Palestinian imports
are purchased indirectly from Israeli traders, and as a consequence,
the PA doesn't receive import taxes. The report estimates that this
leakage is likely to exceed the combined aid of the USA and the EU.
This leakage is the result of a lack of strict
rules of origin, the method of calculation of the revenue clearance
with Israel for imports, and the fact that there is no compensation
for the price-raising effect of the Israeli trade regime on Palestinian
The report recommends compensation for the Palestinians
by Israel, for the price raising effect, application of strict rules
of origin, negotiation of a revenue-sharing formula based on total
import flows and changes in the unified invoice system about a proper
coding of goods flowing between Israel and the WGB, and redesigning
of it in order to provide information on the origin of goods sold
by Israel to the WGB.
Table 1. Estimate of PNA's Foregone Revenue on
Palestinian Indirect Imports, 1992 (based in comparison with Israeli
Table 2. Estimate of PNA's Foregone Revenue on
Palestinian Indirect Imports, 1992 (based in comparison with Israeli
Table 3. Estimate of PNA's Foregone Revenue on
Palestinian Indirect Imports, 1992 (based on guess-estimate of Ministry
of Planning statisticians)
Table 4. Estimate of Palestinian Indirect Imports
from Israel, at Different Assumption of GDP Growth, 1994-96
Table 5. Estimate of Foregone Customs Revenue
on Palestinian Indirect Imports, 1993-96
Table 6. Estimate of WBG Revenues, 1993
Table 7. WBG and Jericho Area Estimated Budget,
Table 8. WBG and Jericho Area Estimated Budget,
1993 and 1995
Table 9 WBG Budgetary Revenue, May 1994 to March
Table 10. Revenue Comparisons: WBG, Egypt, Israel,
Jordan and Developing Countries
Journal of Palestine Studies,
(Documents and Source Material) "Jordanian-Palestine Trade Agreement,
" Spring 1995. "Developing the Palestinian Economy: an Interview with
George T. Abed," Summer 1994.
Kanovsky, E. (1995) "Middle East Economies
and Arab-Israeli Peace Agreements," Israel Affairs, Summer
Kleiman, E. (1995) "The Economic Provisions
of the Agreement Between Israel and the P.L.O.," The Hebrew
University of Jerusalem, Department of Economics, Working Paper, no.
Kleiman, E. Some Basic Problems of
the Economic Relationships Between Israel and the West Bank and Gaza,
Working Paper 261. Jerusalem: Department of Economics, Hebrew University
of Jerusalem, 1992. 31 pp.
This paper identifies the mains problems of the
economic relationship between WBG and Israel and outline some possible
solutions. Though an Israeli point of view, it focuses on developments
in the territories.
Problems related in this paper are those concerning
the flow of goods and factors of production. Remaining problems are
allocation of national property rights, exploitation of potential
externalities in the provision of some services and a lot of technical
The author concludes that small economic units
have to pay a high price for a given measure of autarky. Moreover,
closer economic relationship with the outside world entails some abdication
of economic sovereignty.
Table 1. Growth of per capita product, 1969-1986
(percent per annum)
Table 2. Main Economic Flows between the West
Bank and Gaza, and Israel, 1986
Table 3. The industry structure of employment
in Israel and share in total employment, by industry- Workers from
the West Bank and Gaza, 1987 (percent)
Table 4. Distribution of trade in merchandise
Table 5. Ratio of merchandise trade to income
Murphy, Emma .C., The Arab-Israeli
Peace Process: Responding to the Economics of Globalization,
Critique, Fall 1996.
This article is picturing the risk for the Arab
States to tend to take a regional approach and become part of fragmented
and marginalized economic region, while Israel have taken a global
approach and move onto a fast-track of developed nation status.
Relation between Arab States and Israel will
depend upon this degree of openness. Partnerships through intermediary
organization like the EU will soften the impact of initial direct
relation and by seeing Israel as a conduit for international capital
will make disappear the fears of an Israeli economic domination.
Most Arab States have already realized that they
cannot invest in their own region alone, however they do need to consolidate
their own positions between themselves before opening up to Israel.
A supportive regional environment, mixed with
realistic economic policies, would benefit both Israeli and Arab economies
and permit the Arab world to face the challenge of regional development.
Table 1. Scientists and technicians per 10 000
Table 2. Civilian R&D expenditure as percent
Table 3. Principal imports to Israel 1994
Table 4. Per Capita GDP Comparison, 1994
Table 5. Value of manufactured exports, 1993
Lawrence, R. Z. et al., "Towards Free
Trade in the Middle East: The Trial and Beyond," Institute
for Social and Economic Policy in the Middle East, Kennedy School
of Government, Harvard University, Cambridge, MA, 1995.
Murphy, E. C. "Israel and the Palestinians:
The Economic Rewards of Peace?" Centre for Middle Eastern
and Islamic Studies, University of Durham, 1995.
Nashashibi, Karim and Kanaan, Oussama,
Which Trade Arrangements for the West Bank and Gaza?
Finance & Development, September, 1994, pp.10-13.
WBG are now facing critical strategic choices
concerning the nature of economic links to the rest of the world particularly
neighboring countries. The first steps toward Palestinian autonomy
is to diversify trade patterns and relations, reorient the production
base and reduce the dependency of the Palestinian population on employment
in Israel. Turning inward would be very costly for a small economy
such as the WBG.
The trade strategy will have to be an outward-oriented,
export promotion strategy, and have to create a trade environment
that will stimulate exports and promote efficient import substitution.
A position between retaining a custom union with Israel and establish
a FTA has been achieved by the Protocol on Economic Relation (signed
on April 19, 1994 between Israel and WGB) which took into account
Palestinian development. This Protocol should permit to achieve further
trade liberalization and diversification that would help foster greater
economic integration if additional measures (i.e.: removing some non
tariff barriers, establishing equitable access to water, and devising
a system for fair property settlements) are taken.
Norton, E. (1996) "The Jordan Imperative,"
The New Republic, 18 March 1996.
Panagria, Arvind and Diwan, Ishac,
Trade Policy Option for the West Bank and Gaza Strip.
Palestine Economic Policy Research Institute (MAS). January 1997.
This article analyze from an economic point of
view what are the advantages of a custom union compared to non-discriminatory
tariffs or FTA
The authors base their analysis on custom unions.
Free access to a high protected Israeli agricultural market would
be lucrative for WBG as well as for industrial products such as wearing
apparel and footwear. The presence of FTAs with the EU and USA would
be benefit for WBG. WGB could outweigh losses from their trade deficit
with Israel by "exporting" labor to Israel. Due to the strong commitment
to trade liberalization, under a custom union the CET will remain
A well-functioning custom union is to the advantage
of WBG compared with either a non-discriminatory tariff or FTA. It
would give a secure accto the Israeli market and let them explore
their comparative advantages. It would also fallow the trend of the
value added Israeli industries and the two economies would become
better integrated into the world economy.
Table 1- Gains from trade under Alternative Trade
Table 2- Tariff Rates in (ISIC-3 digit), 1993
Table 3- Total imports from and exports to WBG
Table 4- Indirect Taxes on Domestic Production
And Imports in Israel
Peres, S., with Arye Naor The New
Middle East New York: Henry Holt and Co., 1993.
Protocol On Economic Relations Between
the Government of the State of Israel and The PLO Representing the
Palestinian People. Paris, April 29, 1994.
Sadan, E., "The Best Way for Both Sides,"
Palestine-Israel Journal, Winter 1994.
This article presents some of the microeconomic
aspects of FT. Even if there is one conservative aspect of the cooperation
that is based on cheap Palestinian labor, it exists nowadays a progressive
pattern of cooperation based on technology (i.e.: horticulture). This
last cooperation let opportunity for microeconomic symmetry even though
the macroeconomic situation is asymmetrical. And, in a market economy,
microeconomic symmetry can guarantee the Palestinian terms of trade.
Therefore, a FT framework is the condition to Palestinian forecoming
Table 1. Palestinian GNP Components, 1968-1990,
US $ per Capita per Year
Table 2. Exports of Goods, $/Capita Palestinian
& Mid East, 1986
Table 3. Capital Investment & Number of Employees/
facility, established & new horticulture enterprises, Gaza Region,
Shaban, R., "Toward a Vision of Palestinian
Economic Development," Palestine Economic Policy Research
Institute (MAS), September 1996.
This study focuses on two outlooks, the long
term economic performance and the private sector's role in the development
of Palestine. It attempts to identify measures to rise the standard
of living for the Palestinian population. It relates the current economic
situation and the role of private sector.
This study looks into the realistic potential
for growth with the help of growth scenarios which show that WBG won't
turn immediately into developed country even if a high rate of economic
growth is achieved.
The report makes some recommendation as a development
of a clear administration that should let the private sector to develop
by itself and rely on a free market, the creation of an environment
to drawn in private investment and services for export purposes, and
finally the construction of a port in Gaza with dynamic FT zone.
Table 1. Basic Indicators of the Palestinian
Table 2. Alternative scenarios of Palestinian
Growth Potential, 1993-2000-2010
Table 3. Required Investment According to Growth
Scenarios (As a percent of GNP)
Figure 1. Number of establishments in the WBG
by year of registration: 1980-1995
Figure 2. Number of Banks in the WBG
Figure 3. Number of Bank Branches in the WBG
Figure 4. Customer deposits and bank loans in
the WBG: December 1994-September 1995
Securing Peace in the Middle-East:
Project on Economic Transition. The Institute for Social
and Economic Policy in the Middle East. John F. Kennedy School of
Government. Harvard University. June 1993.
This report deals with two sets of issues: First,
future economic relations among Israel, Jordan and Palestine; And
second, the structure of the Palestinian economy.
It makes recommendations on several points such
as regional trade in agriculture, industry and services in order to
develop regional projects and set up a new regional bank ( The Middle
Eastern Bank for Cooperation and Development).
Even if the differences between the three economies
are striking, the report advises the creation of a FTA in goods, services,
capital and technology.
Concerning labor policy, it recommend to promote
job creation and social insurance in the OT. However, it is against
a rapid opening of the Jordanian labor market to the Palestinians
which would decrease wages and increase tension in Jordan.
Interim self governing authority in the OT should
lead to effective legislative power regarding domestic economic matters.
FT involve constraints on tax and tariff policies.
As a result, tax coordination and revenue recovery should be considered
in the arrangement and would create a revenue for the Palestinian
The role of foreign aid will be large and diversified,
especially during the first years of transition, where the public
sector structure will be created and the private sector revitalized.
Table 1. Selected Economic Characteristics of
Israel, Jordan and the West Bank and Gaza.
Tovias, Alfred, Future trade arrangements
between Israel and its Arab Neighbors: Available options.
The Armand Hammer Fund for Economic Cooperation in the Middle
East. Tel- Aviv University. 1996
This article is a review of the possible scenarios
for economic cooperation in the light of the new Middle East reality.
This is done by studying the economic and political reality in the
Middle East and checking it against theoretical models developed for
regional economic arrangements.
Economic cooperation in the Middle East was at
the beginning a measure adopted for fostering peace. Success of the
strategy will depend on the ability to convince the key players which
are private and public sector firms, that functional integration is
not a zero-sum game (if one side wins, the other doesn't necessary
lose. An other requirement is to ensure that gains from cooperation
would be equally distributed between former enemy countries.
Eight options for regional economic cooperation
in the Middle East are described and analyzed in this article, from
maintain normal trade relations among the parties to conclude industrial
and agricultural FTA agreements.
The author regards preferential arrangements
for specific sectors as the most viable option at present. The author
explain that industrial and industrial and agricultural FTA agreements
are possible further steps towards cooperation but higher forms of
economic integration are not viable.
Finally, the author suggest the use of European
economic integration models as a source of inspiration for the Middle
Table 1. Basic Economic Indicators in the Region,
Table 2. Principal Preferential Agreements between
Regional and Extra Regional Countries in the Middle East
Towards Free Trade in the Middle
East: The Triad and Beyond
This paper is a proposal to remove all trade
barriers between the WBG and Jordan and to Jordanian products entering
in Israel over a five year period. By 2010 all barriers to Israeli
products to Jordan should be eliminated and Jordan's external tariffs
harmonized with those of Israel and the WBG.
Complementary economies and proximity are the
factors which lead us to expect prosperity for trade in the ME.
Other experiences (the European Union, Mercosur,
NAFTA.) have taught us that a non-discriminatory FTA seems to be the
most desirable agreement, however it must be associated with political
reforms in order that it doesn't lose what has been earned by a lower
The agreement can start by a FTA but should be
extended to services, capital mobility and possibility for other countries
The FT should not be a problem for WBG which
already has been exposed to Israeli competition, or for Israel where
the neighborhood markets are too small to have a considerable impact.
However it will represent a real change for Jordan which will have
to change towards a market economy.
The economic framework has already been taking
shape through the signing of a list of interim measures.
Vandewalle Dirk, The Middle East
Peace Process and Regional Economic Integration,
Survival, Vol. 36, No.4, Winter 1994, pp.21-34.
Although closer integration between the Israeli,
Palestinian and Jordanian economies is now all but inevitable, a number
of powerful obstacles make region-wide economic integration unlikely.
Most important among these obstacles are impediments within local
Arab economies that make a transition towards more market-oriented
strategies problematic and the fact that economic development in Arab
couhas often been held hostage by local governments to larger and
more immediate political and security concerns. The end of the Cold
War is likely to exacerbate problems of legitimacy for regional regimes.
As a result, and despite the alleged resurgence of civil society within
Arab countries, meaningful political change will also be held in abeyance
for some time. Even if a comprehensive peace agreement is concluded,
it will not necessarily lead to regional economic cooperation.
Volcker, Paul, Trade Arrangements
in the Middle East & North Africa. Paper presented
at a conference "Report of the Middle East Economic Strategy Group,"
The aim of this group is to give recommendations
with respect to trade arrangements in the ME. They emphasize the essential
role of a more open system and solid foundation of financial stability
to carry the economic development. Even if a FT agreement is not practicable
for foreseeable future, they recognized that they are strong and valid
reasons for proceeding with more limited liberalization among neighboring
countries and with the rest of the world. Agreements need political
will and technical assistance to translate these concepts into reality.
Trade arrangements with third countries can fostering trade and development
for the region whereas sectoral agreements is to emphasize the indissoluble
links between politics and economics. Trade agreements should benefit
from the example of earlier agreements between strong and weak in
providing asymmetric concessions.
Finally, the group gives some recommendation
concerning the Palestinian economy such as to reduce the dependence
on Israel, to facilitate trade relations and movements of people within
the territories, to define a legal framework governing land and develop
an international free trade zone in Gaza.
Wilson, R. "The Palestinian Economy and
International Trade," Centre for Middle Eastern and Islamic
Studies, University of Durham, 1994
Kanaan, O. and Nashashibi, K. (1994)
"Which Trade Arrangements for the West Bank and Gaza," Finance
& Development September 1994 (Hebrew)
Sadan, E. "Free Trade Between Israel
and Palestinian Export Industries" Riv'on Lekalkala, April
1994. Pp.5-14. (Hebrew)