The Wye River Memorandum:
Making Economic Prosperity
for Palestinians a Reality
Jane Glezin
Washington College of Law
American University
Washington D.C.
Copyright © 2000 by Jane Glezin
Cite as 1 ALSB INT'L BUS. L.J. 24
Introduction
| Part I: Post-Oslo Effects on Palestinian
Economy | Part II: The Wye River Memorandum
| Part III: Will Palestinians Achieve Economic
Prosperity Under Wye? | Conclusion
On October 29th, 1998, the State of Israel and the Palestine Liberation Organization
("PLO"),1 with the help of the
good offices of the United States, signed the Wye River Memorandum (the "Wye
Memorandum" or the "Agreement").2
The Agreement’s purpose is to facilitate implementation of the previously signed
agreements between Israel and the PLO.3
The Wye Memorandum intends to monumentalize both sides’ commitment to peace
through confidence building measures and a parallel and reciprocal phase approach to
implementing the agreed provisions. The Agreement contains a strict time table and allows
the Central Intelligence Agency (the "CIA") to be directly involved in carrying
out security provisions.4 The Wye Memorandum
recognizes that both sides have responsibilities, including those related to Israeli
security and Israeli redeployments from the West Bank and Gaza Strip.5 Furthermore, the Wye Memorandum acknowledges the
importance of the Interim Committees6 on
economic issues to promote economic cooperation between Israel and the Territories in
general, and the growth of Palestinian economy in particular. What remains, however, is a
paradox: without peace there will be no economic development in the Territories, but
without economic growth Palestinians will not view peace with Israel to be in their best
interest, and will continue to threaten Israel’s security, thus decreasing potential
for peace.7
This Comment argues that with the implementation of the Wye Memorandum the Territories
will enjoy economic prosperity. To facilitate growth of the Palestinian economy the
Palestinians must assure Israel’s security by complying with the already agreed
security provisions of Oslo and Wye, create adequate administrative and legal
infrastructures, and rid their government of corruption. Should the PLO fulfill their
obligations, private investment to promote agricultural trade will increase,
American-Arab-Israeli joint ventures will be realized, and free trade between Israel and
the Territories will be actualized.
Part I of this paper will discuss the interdependence of economics and the political
climate of the Territories with Israel after Oslo. Part II, Section A will discuss the
text of the Wye Memorandum. Section B will introduce and discuss the innovative provisions
of the Agreement, which are the unrealistic time table and the intrusive CIA’s
involvement. Finally, Part III will propose that the implementation of the Wye agreement
depends on the Palestinians actively complying with the agreed provision of the agreements
and improving their internal conditions.
When Yitzhak Rabin8 and Yasser Arafat9 signed the Oslo Accords,10 they understood that "Palestinians who see no
improvement in their standard of living or find no economic opportunities as a result of
the peace process will question the wisdom of making deals with Israel and perhaps support
forces that oppose the peace process."11
Shimon Peres12 stated on numerous
occasions that "a dollar invested in the West Bank or Gaza is two dollars invested in
Israeli security."13
There is evidence of significant growth potential in the Territories14 but Israeli security policies of closures,15 Palestinian economic dependency on Israel,16 and Islamic fundamentalism reflect
investors’ and potential trade partners’ reluctance to invest in the Palestinian
people.17 The Oslo Accords assumed
confidence of both sides in their leaders and their people, while in reality, mutual
mistrust and noncompliance with the agreed provisions contributed to the Palestinian
economic stagnation and political instability in the region.
First, as a result of numerous attacks18
on Israelis carried out by militant Palestinian terrorist groups in 1993, closures of
Israeli borders to Palestinians became a common Israeli policy.19 Throughout the years, Palestinians became dependent
on Israel for employment,20 but during
closures many were unable to enter Israel.21
Consequently, Israel recognized that substituting Palestinian labor with foreign or
mechanized one would decrease the potential for future acts of violence by Palestinians.22
Second, Palestinian trade has been dependent on Israel23
since the Six Day War24 and finally, the
Economic Protocol of 199425 outlined their
trade practices.26 The Economic Protocol,
while perpetuating Palestinian dependence on Israel, provided independence that
Palestinians previously did not enjoy. The Protocol has three major features: (1) the
freedom of movement of goods27 between
Israel and the Territories28; (2) the
modified customs union between Israel and the Territories29;
and (3) the ability of the Palestinian Authority (the "PA")30 to open export markets for Palestinian goods.31
Under the Economic Protocol, Palestinian industrial and agricultural goods have
unrestricted access to the Israeli market.32
This freedom of movement intended to eliminate the discrimination that Palestinian goods
had suffered since the Six Day War of 1967,33
and promote popular Palestinian support for close economic relations with Israel.>34 Furthermore, through the US-Israel
Free Trade Agreement Palestinian goods have access to the U.S. market, thus enabling the
Palestinians to press for increased economic aid and political support from the United
States.35 Security-motivated border
closures, however,36 have continued to
severely disrupt Palestinian access, not only to the Israeli market, but consequently, to
foreign markets.37
Another feature of the Economic Protocol is the establishment of the customs union38 between Israel and the Palestinians. Under
the customs union, Palestinian import taxes must be the same or higher than Israeli import
taxes on equivalent goods.39 The Economic
Protocol, however, affords Palestinians some independence in setting tariffs: (1)
Palestinians may set their own tariff rates in accordance with "Palestinian market
needs" when importing specified goods from Jordan, Egypt, and other (primarily Arab
or Islamic) countries,40 should these
imports exceed the agreed amounts, however, they become subject to prevailing Israeli
tariff rates,41 and (2) Palestinians may
set the tariff rates to specified goods described as "basic food items and other
goods for the Palestinian economic development program," without quantitative
restrictions.42
Even though the customs union offers benefits to the Palestinians, there are negative
effects that the Territories endure. First, Palestinian consumers pay more for imports
while lacking economic benefits to compensate for the high prices.43 Second, because of the constraints of the customs
union, the Palestinians are unable to promote their exports to foreign markets.44 Third, revenue received from tariffs
accrues to the Israeli government and not to the PA.45
Fourth, the loss of "tens of millions dollars of revenues" also makes the PA
more dependent on foreign aid and philanthropic contributions as the means of funding.
Fifth, the PA’s dependence on Israel creates a "trade-diversion," where the
Palestinian goods are channeled to the Israeli producers who enjoy these products
duty-free (in accordance with Economic Protocol), instead of to potentially more efficient
customers.46 Finally, the customs union
created an inefficient and complex set of rules for anyone who wants to pursue business
with the Territories.47
The Economic Protocol also grants the Palestinian Authority the power to negotiate
agreements with states and international organizations to expand market access for
Palestinian exports.48 This feature allows
Palestinians more independence and the opportunity to expand their market for further
development and growth. It also provides them an opportunity for greater access to
regional and global markets, and can help attract potential investors who are interested
in utilizing the Territories as an export platform.49
Even though the Economic Protocol and Israeli law govern the Palestinian economy,
sustaining the constraints of the customs union and security closures, Palestinian
dependency on Israel promotes their trade with other countries.50 Moreover, the Euro-Mediterranean Agreement may lead
to an increase in exports between the Palestinian Territories and Middle East and North
Africa region (the "MENA" region).51
If PA becomes a member of the MENA region and party to the Euro-Mediterranean Agreement,
they will enjoy the same benefits as other members. In addition, should the MENA countries
reduce the tariff rates, the Palestinians will benefit from such economic liberalization
by their goods reaching MENA markets via the European Union.52 Another advantage for the Palestinians as members of
the MENA region is the liberal rules of origin that apply to products from MENA members.53 Also, Palestinians might increase exports
to MENA countries, party to the Euro-Mediterranean Agreement, if those goods could be
exported to the European Union along with the already existing ones, and if they do not
jeopardize the products’ preferential tariff treatment.54
A. Text
The Wye Memorandum and the Oslo Accords alike tie Palestinian economic prosperity and
Israeli redeployment from the Territories to Israeli security. In fact, the
Agreement’s primary focus is bilateral and trilateral (with the United States)
cooperation to facilitate Israeli security.55
Similar to previous agreements, the Wye Memorandum demonstrates that both sides understand
the importance of promoting economic development in the Territories,56 but Israeli security still takes precedent over
Palestinian economic concerns.57
Furthermore, the Agreement recognizes the pressing need to resume permanent status
negotiations.58 In addition, both sides
agreed that negotiations must be held in a "positive environment," thus
unilateral actions by either party are prohibited by the Memorandum.59 Finally, the Memorandum has a Time Line, allowing
the unrealistic 12 weeks for its implementation.60
As both sides comply with security provisions, Palestinians will get more land61 under their complete control, greater
access to water resources,62 and the
benefits of further economic development. Part III63
of the Wye Memorandum maintains economic committees established by the Interim Agreement,64 provides for the timely opening of the
Gaza Industrial Estate65 and the Gaza
Airport,66 and encourages immediate
negotiations on safe passage routes for Palestinians to travel safely within their
territory and between the West Bank and Gaza.67
This freedom of movement will promote internal Palestinian trade, cooperation, and overall
economic growth.68 Furthermore, the Wye
Memorandum allows for the establishment of the Gaza Port,69
promotes cooperation of both sides to resolve unsettled legal issues70 and to improve their economic relationship.71 Finally, both sides agree that foreign aid
is crucial for successful implementation of the agreements, as well as for Palestinian
economic development.72
B. New Provisions
The letter and the spirit of the Wye Memorandum, and of the Oslo Accords, is centered on
mutual trust and cooperation, where both sides gain much from its implementation. While
Oslo emphasized "land for peace" principles, where land was exchanged for
promises, Wye focuses on the Palestinians actually "earning" their independence.
In short, Palestinians gain land and desperately needed economic development, only when
Israel gains security and is assured of Palestinians’ desire of peaceful coexistence.
Moreover, the U.S. is an active participant in the implementation of the Memorandum.
Historically, the United States has been Israel’s closest friend, partner, and ally
and has supported the peace process from the start acting as a mediator.73 Regrettably, the Memorandum undermines the
U.S.-Israel relations, infringing on Israel’s sovereignty through the operative
involvement of the U.S. government.74 The
Memorandum itself does not introduce any new provisions regarding either Israeli security
or Palestinian economic development, and in fact it does not supersede any of the
previously agreed ones.75 However, what
has been added to the Memorandum that previous agreements did not contain are the
following: (1) the time table, and (2) the active involvement of the CIA.
1. The Time Table
It was unrealistic to include such a speedy time table for the implementation of the
Memorandum given the consistent Palestinian non-compliance with the previous agreements.
Israel signed the Wye Memorandum, as well as the previous agreements with the PLO, with
the assumption that both sides will comply with the agreed provisions. Since 1993 the
Israelis provided new "encouragements" for the Palestinians to keep their
original promises made at Oslo and other multiple agreements,76 but the PLO again has failed to meet its
obligations. As a result, the implementation of the Memorandum was suspended in December
1998,77 after riots in the Territories.78
2. The CIA’s
Active Involvement
With the passage of the Memorandum, the United States has become an active participant in
the peace process.79 The CIA has been
assigned the intrusive role of a "security adjudicator,"80 to oversee Israeli and Palestinian compliance of
with the security provisions and actions against terrorism outlined in Wye. The CIA’s
becoming a "third partner" in the peace process creates at least three problems:
(1) the "limited" CIA involvement is limited only on its face; (2) the CIA
undertakes responsibilities that only a Sovereign has; and (3) the CIA’s active
participation will take away from the parties’ responsibility to agree to peace on
terms acceptable to both parties.
On its face, the role of the CIA seems to be limited. All the Agency has to do is to
collect and assess intelligence information and pass it to the President, the Department
of Defense, and Congress.81 The first
underlying assumption here is that the CIA is capable of collecting and assessing
intelligence information. This begs the question of whether today’s CIA be trusted to
do a competent job. Looking at various events in 1998, the answer is likely to be no. In
May, the CIA was surprised by India’s nuclear tests. Another surprise for the CIA
came in August, when the North Koreans completed the third stage of their three-stage
ballistic missile shot and launched a missile over Japan.82
The second underlying assumption regarding this trilateral arrangement is that the U.S.
political apparatus will use the information provided by the CIA to make unbiased
decisions. There is ample evidence that proves otherwise. For example, During the UNSCOM
controversy, the Clinton Administration sacrificed findings of Saddam Hussein’s
violations presented by UNSCOM inspector Scott Ritter, for evasion of confrontation and
for putting a political spin on the program’s success.83 Arguably, the Memorandum makes the U.S. a partner in
the peace process, inevitably subjecting it to the complexities of the process itself and
to the politics of the parties, therefore increasing the possibility of damaging relations
trilaterally.84 Therefore, following this
Administration’s record, it is likely to instruct the CIA to go along with the
PLO’s violations and treat Arafat the same as it did Hussein, i.e. reject confronting
the violator and create the illusion of victory.85
Moreover, the Clinton Administration continuously rewards Palestinians as they
repeatedly break their promises made in Oslo. The First Lady’s statements86 and Secretary Albright’s ultimatums exemplify
this trend.87 Furthermore, President
Clinton’s visits to Gaza even though supported by the American people, proved to be
fruitless. The President should have demanded the PLO leadership to take a harsher stand
against terrorism, halt incitement of violence, and rid its media of anti-Semitic
propaganda.88 Instead, the President
promised them more aid. In hopes of building a legacy for the President, the
"process" of peace instead of the terms of peace itself consume this
Administration. In doing so, the Administration will take credit for a short-term
affectation of peace on terms not fully acceptable to Israel. Unfortunately, this
Administration is treating the PLO, a terrorist organization with sporadic support for the
United States at best, on equal footing with Israel, America’s loyal ally.89
Second, the United States’ participation in the peace process as a third party
takes away from Israel’s sovereign responsibilities. The CIA’s particular duties
are to make sure that Palestinians assure Israel her security, while assurance of security
has been strictly the responsibility of a sovereign.90
Only the Israeli government knows when Israel is secure. Most importantly, the CIA
inexorably will resort to picking sides when Israel and the PLO disagree whether either
side has been complying with the agreed provisions.91
In such a situation, only Israel’s voice must count since it is her security that is
at stake.92 Moreover, when the
Administration disagrees with Israel on compliance, such disagreement will seriously
damage the special relationship that Israel has developed with the United States through
the years.93
Third, when Israel and the PLO rely on the CIA for peace keeping, they will decline to
assume the responsibility to maintain peace themselves.94
The Wye Memorandum allows the CIA to make determinations of whether Palestinian compliance
is satisfactory, and does not require the CIA sharing that information with Israel. For
example, the Agreement states that the Palestinians must submit the plan of ridding the
Territories of terrorist groups to the U.S. for evaluation. After the U.S. deems the plan
to be satisfactory, it is to be implemented immediately.95
The Agreement explicitly does not allot Israel the authority to evaluate such Palestinian
plan that would have direct consequences to Israeli security. Furthermore, the CIA’s
involvement eliminates the need for the two sides to cooperate with one another directly,
when it is in their short- and long-term interests to do so. Prime Minister Netanyahu
admitted that allotting this much responsibility to the CIA was an American initiative; it
is thus reasonable to suspect that the Prime Minister accepted this proposal, adverse to
Israel’s interests, under pressure from American officials.96
A. Barriers to Palestinian Economic Development
Should Israel and the PLO implement the Memorandum, there will be economic growth in the
Territories. However, as Arafat signed the Oslo Accords and the Memorandum, he had to
understand that economic improvements of the Territories could not exist in a vacuum.
Israeli officials repeatedly stated that unless Arafat assures Israeli security, there
could not be an independent Palestinian State.97
Arafat, at least in theory, should want to do everything possible to provide that security
in order to gain Israel’s trust, stability in the region, and the desperately needed
economic growth for his people. Yet the reality has repeatedly proven to be otherwise.
There are two barriers that the PLO must overcome in order to achieve economic growth in
the Territories: (1) comply with promises made at Oslo and Wye, and (2) address internal
problems.
1. Palestinian
Non-compliance with Oslo and Wye
Israel has signed peace agreements with the PLO expecting changed Palestinian behavior,
but if Palestinians fail to comply, Oslo provides for Israel’s suspension of her
commitments.98 Oslo Accords have not been
a good deal for Israel: Israel exchanged land for empty promises of the Palestinians.99 As provided in the Memorandum, Israel
agreed to give up more land while the Palestinians promised again to keep their original
concessions.100 So far, their compliance
has been minimal.101 For example, after
Wye, Palestinian and Israeli police conduct joint patrols on daily basis.102 Arafat also pledged to amend the clauses of the
PLO Charter that call for Israel’s destruction in 1993 at Oslo,103 yet still has not done so. The Palestinian Charter
explicitly states that it can be amended only "[by]a majority of two-thirds of the
total membership of the National Congress of the Palestine Liberation Organization at a
special session convened for that purpose."104
The "symbolic" show that leaders of the PLO have put on before President Clinton
on December 14 1998, hardly qualifies.105
Moreover, the Palestinians have failed to comply with other previously agreed
provisions. First, incitement of violence, explicitly prohibited in the Memorandum, has
continued.106 On December 1, 1998 Abu
Alaa, the speaker of the PA Parliament, promised that the liberation fight will continue,107 after Israeli President Weizman had
repeatedly asked Arafat to denounce the "armed struggle" in Arabic.108 Contrary to Weizman’s requests, however,
Arafat stated in Arabic that in addition to the armed struggle against Israel, the signing
of the peace agreements signifies a part of the PLO’s 1974 Plan of Stages, designed
to destroy Israel by "lulling and weakening" her politically.109 Furthermore, during the Gulf War in 1991,110 the Palestinians openly supported Iraq,
as they did in 1998,111 and burned U.S.
and Israeli flags in protest of the U.S. attacks.
Second, On December 9, 1998 Arafat made statements promising to unilaterally declare an
independent Palestinian State,112 which
is expressly prohibited by the Memorandum.113
Arafat did not follow through with his promise, but such action shows the PLO’s gross
disregard for Israel and the peace agreements. Third, while the Memorandum requires the
Palestinian Authority to take measures to outlaw and eliminate terrorists and their
infrastructure, so far the PA has been conducting reactive operations focusing on isolated
targets.114 Fourth, the PA has not been
making a serious effort to collect illegal weapons as required by the Memorandum.115 Fifth, Palestinian leaders
"fabricated a crisis" out of the issue of prisoner release, resulting in
anti-Israeli violence in December 1998.116
Israel has already released 250 prisoners, in accordance with the Memorandum,117 but declined to release those involved in murders
of Israelis.118 Finally, the PLO must
abolish its "revolving-door" policy toward terrorists held in its custody and
stop accepting terrorists into the Palestinian police forces.119
2. Internal Problems
The Palestinians’ consistent refusal to acknowledge the right for the Jewish State to
exist has significantly contributed to their poor economic conditions since 1993. While
Israel’s policies in the Territories from 1967 contributed to Palestinian economic
stagnation, Palestinians must share responsibility for their internal inadequacies.120 The Palestinian Authority has to apply
the following compelling means with which to facilitate economic growth in the Territories
(the list is not exhaustive): (1) create legal and administrative infrastructures; (2)
stop creating trade monopolies; and (3) rid itself of corruption.
First, the PA must create adequate legal and administrative infrastructures to promote
investment and trade. For example, Gaza and the West Bank have different legal systems,121 and their commercial law is confusing,
complex and intimidating to foreign investors.122
In 1993 the World Bank published a report stating that the peace process will enable the
Palestinians to legislate laws to involve the private sector in commerce in general, thus
use it to start off economic development and growth in particular.123 The Palestinians, however, have failed to provide
their citizens and foreign investors with commercial and investment laws that could be
utilized efficiently and effectively.124
In response, foreign investors and businesses interested in dealing with the Middle East
prefer to invest in the stable, prosperous, and West-friendly economies of Israel and
Jordan.125
Furthermore, the PLO relies heavily on international donors for facilitating economic
sustainable development in the Territories, yet it failed to efficiently provide a forum
for aid delivery. For example, the PLO took six months to staff and organize the Palestine
Economic Council for Development and Reconstruction.126
The U.S. and the European Union could not provide Palestinians with the needed aid,
because there was no one on the receiving end.127
As a result of political violence and lack of adequate legal and administrative
infrastructures in the territories, the international donor community is cautious to
supply Palestinians with the large amounts of aid.
Second, the Palestinian Authority must eliminate nepotistic trade monopolies that it
has created for itself.128 A primary
example is the Palestine Development and Investment Company ("PADICO"), headed
by the Al-Masri family, that owns 49% of the shares of its subsidiaries.129 This casts a doubt as to whether Arafat is
committed to a free market economy130
and whether Palestinians will comply with Oslo and Wye and build a democracy or perpetuate
the status quo under a dictatorship.131
Israeli officials fear adverse effects of the monopolies to include poverty promulgation
in the Territories resulting from disengagement of their private sector from economic
development, and contribution to further underdevelopment of their economy and terrorism.132
Third, the Palestinian Authority must rid itself of corruption133 and reestablish the trust of its own people along
with that of investors, trade partners, and donors. In 1997, the Israeli newspaper
Ha’aretz published a report on secret accounts in Tel Aviv used by Arafat and other
Palestinian officials.134 Later that
year, a British newspaper,135 published
in detail the extent of the PA’s corruption.136
In May 1997, the Palestinian Authority publicly disclosed the losses that accrued due to
its corruption and mismanagement to be approximately $326 million in public funds,
correlating to about 40% of the PA’s annual budget.137
Hoping to calm the public’s discontent, Arafat allowed the Palestinian
Authority’s Public Monitoring and Audit Department to investigate corruption in
ministries and branches of his government.138
Despite the fact that the international community and many Members of the Palestinian
Legislative Council have condemned the corrupt practices of the Palestinian Authority and
called for changes, not much has been done.139
As a result of the current situation within the Palestinian government, foreign investors,
trade partners, and donors are unwilling to put more money into the Palestinian economy.140 Another consequence of PA’s
corruption is that as Arafat loses popularity, the militant group Hamas gains it, which
has direct effects on Israel’s security and the security of the world at large.141
B. If Wye is Implemented
If and when Israel and the PLO resolve the fundamental dichotomy between Israeli
security and Palestinian independence, political stability in the Middle East will be
sustained through economic means. Palestinians, after establishing legal and
administrative infrastructures, will break the "cycle of mistrust, violence, and
instability"142 when they accept
Israel’s right to exist and begin to normalize relations with Israel through economic
interdependence. In addition to the economic benefits outlined in the Memorandum,
Palestinians will be able to take advantage of additional ones, including, but not limited
to: (1) private investment to promote agricultural trade to the Territories; (2)
American-Arab-Israeli joint ventures; and (3) a free-trade agreement between Israel and
the PA.
1. Private
Investment to Promote Agricultural Trade
With the growth of unemployment and the explosion of population growth, the Middle East in
general and the Palestinian Territories in particular are facing food shortages and lack
of employment opportunities.143
Moreover, the Palestinian export market is facing competition from the vibrant Israeli and
Jordanian economies.144 Historically,
Palestinians have exported agricultural goods while importing manufactured products. In
light of increased risks of food and water shortages, however, they will have to
reconsider their export practices.145
The establishment of the Gaza Industrial Estate was a step to selective industry
development, aimed at specializing in "new lines of industrial endeavors for the
local and export markets."146
Increasingly, the Territories will become dependent on their exports of food.147
To solve the emerging internal and external problems, the private sector, not the
government, must be responsible for providing the resources for "job creation,
industrial expansion, and export promotion."148
While the PA was concentrating on establishing various ministries149 in hopes of revitalizing their economy, what the
PA should have done was promote involvement of the private sector in the economy.
Moreover, the engagement of new producers will minimize the risk of monopolistic abuse.150 The PA nevertheless has a
responsibility to channel public policies to create public policies that assure food
consumption above an accepted level,151
and to support the private sector by encouraging savings and investment at high rates.152
2.
American-Arab-Israeli Joint Ventures
Another benefit that Palestinians may enjoy as "equal partners" with Israel
after implementing the Memorandum is an option to partake in joint ventures with Israel
and possibly the United States. A joint venture system will also facilitate development
and sustainment of export-led growth of the Palestinian economy based on private
investment.153 The joint venture program
has political as well as economic benefits. Politically, it will promote integration,
embedded in trust and cooperation for all parties, which will decrease antagonism between
Jews and Arabs.154 Economically, joint
ventures effectively reduce risks, as "[a] joint venture allows the undertaking of
speculative endeavors without exposing assets to unlimited liability."155 Furthermore, Israel is an attractive partner for
joint venture schemes because of its highly educated and skilled labor force, and its
sophisticated legal and administrative infrastructures with incentives to promote foreign
direct investment.156 Palestinians, on
the other hand, can offer cheap labor force.
U.S. companies will benefit both parties and will gain benefits themselves from
participating in Palestinian-Israeli joint ventures. First, the United States will
maintain good relations with Israelis and Arabs, and remain a "leader" in the
Middle East.157 Second, because Israel
has enjoyed a free trade agreement with the Europeans, the U.S. companies will be able to
penetrate the European market via Israel on competitive terms.158 Finally, the United States can use those companies
as a "tool" to promote its own economic and strategic goals in the Middle East
and Europe.159
3. Free Trade
Agreement between Israel and the PA
As Israel gains trust in the Palestinians, and both sides agree on where borders
separating them are, it will be beneficial for both sides (but especially for the
Palestinians) to substitute the customs union with a free trade agreement.160 FTA will help Palestinians implement export-led
economic policies, facilitating economic development, while decreasing security risks for
Israel. The FTA provides for economic growth without the expense of political dependence,
which is exactly what the Palestinians have been trying to achieve.161 Moreover, the Palestinians will be able to
diversify their export and import outlets by penetrating European, American, and Canadian
markets via Israel,162 thus decreasing
their dependence on Israel. Palestinians will also be able to trade with other Arab
markets, which they could not do previously because of the Arab embargo against Israel.163
Undoubtedly, there are economic benefits insured for the Palestinians if they renounce
violence and combat terrorism as outlined in Oslo and Wye. Keeping in mind that Wye did
not bind Arafat with any new responsibilities, it stands to reason that if he complied
with what he had originally agreed to at Oslo, Palestinians would have experienced
economic growth starting in 1993. Furthermore, if the Palestinians and other Arab
states had recognized the right of the Jewish State to exist in 1948, they could have had
economic prosperity staring 50 years ago. |
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