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International intergovernmental organizations granted observer status to WTO

bodies، http://www.wto.org/english/thewto_e/igo_obs_e.htm

ACCESSION TO THE WTO, WTO.

Fiftieth Anniversary of the Multilateral ،trade system، WTO.

http://www.aljazeera.net/news/ebusiness/2011/4/16

http://www.almustaqbal.com/v4/Article.aspx?Type=np&Articleid=540160(

Accession of the Hashemite Kingdom of Jordan، 1999، WTO

Accession of the Kingdom of Saudi Arabia, Decision of 11 November 2005,

WTO.

Lebanon –Observe ، application for WTO،2007.

Memorandum of Foreign Trade Regime - Lebanon , WTO

http://www.mit.gov.jo/Default.aspx?tabid=607

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1

CONFIDENTIAL DRAFT

STATEMENT TO THE GENERAL COUNCIL OF THE WORLD TRADE

ORGANISATION ON BEHALF OF ARAB STATES MEMBERS AND OBSERVERS

Geneva, 7 May 2001 ANNEX 1: Arab Emergency Summit Conference, Cairo, 21-22 October 2000, Resolution on

support of the Palestinian economy ANNEX 2: Israeli Measures Affecting Palestinian Trade and Economic Impact, October 2000 -

March 2001

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2

Distinguished delegates

It is my honour to deliver this statement on behalf of the Arab Member States of the

World Trade Organisation: Bahrain, Djibouti, Egypt, Jordan, Kuwait, Mauritania,

Morocco, Oman, Qatar, Tunisia and the United Arab Emirates; as well as Arab observer

States acceding to WTO: Algeria, Lebanon, Sudan and Yemen.

On this occasion, we refer to the decision in support of the Palestinian economy

(annexed to this statement) of the Emergency Summit Conference of Arab Heads of

State, held from 21 to 22 October 2000 in Cairo. Accordingly, we are instructed to alert

the General Council to the grave developments affecting normal trade and economic

relations with Palestine, and the systematic campaign by a WTO Member, Israel, aimed

at destroying the very fabric of the Palestinian economy. These actions have had

serious ramifications for the living conditions of hundreds of thousands of Palestinians

and have crippled trade flows between the occupied Palestinian territory and our

markets, as well as with the rest of the world.

As we have witnessed vividly since October 2000, the occupied territory has been the

scene of violent repression by Israel of the Palestinian people, who continue to seek

their legitimate national rights, in accordance with the relevant resolutions of the United

Nations. This has entailed a series of adverse trade-related measures taken by the

occupying power within the context of a broader policy of collective punishment and

strangulation of the Palestinian national economy. These practises have been

condemned in resolutions by the Arab Summit, by the Summit of the Islamic

Organisation Conference, held in Doha in November 2000, and by Special Sessions of

the United Nations General Assembly of the Commission on Human Rights, convened

in October 2000.

Distinguished delegates

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3

These measures are in flagrant violation of the very goals for which our Organization

was founded, and which Israel, as a Member, is bound to observe. Indeed, such

conduct only serves to undermine adherence to the principles of a fair, open, rules-

based multilateral trading system that we are all obliged, as Members of WTO, to

uphold. While WTO rules are applied de-facto to Palestine, by virtue of its economic

agreements with Israel since 1994, the weak Palestinian economy faces the

paradoxical situation of no recourse to those rules to resist the detrimental impact of

Israeli occupation. This de-facto control obliges Israel to abide by WTO rules regarding

trade of other Members with Palestine, and not to jeopardise their rights as derived from

the different WTO Agreements. After decades of occupation, Palestine remains hostage

to the whims and unfair trade practises of the occupying power, despite the tentative

gains achieved by the peace process since 1993.

Even though Palestine is not yet a Member of our organisation, we attach the greatest

importance to this issue. This situation is not only of concern to Arab Members of WTO,

some of whom have signed preferential trade accords with Palestine. Palestinian trade

flows have also been adversely affected with the rest of the international community,

including with a number of other Members of WTO, such as Canada, the European

Union and the United States of America, which in recent years have established

preferential trade arrangements with the Palestinian Authority. Israeli measures have

furthermore jeopardised the smooth operation of the international assistance

programme in favour of the Palestinian people, led by the donor community, the

multilateral financial and development institutions and United Nations agencies.

Numerous vital development projects have been halted indefinitely.

Allow me to summarise briefly the main features of this systematic Israeli programme of

economic blockade and sanctions since October 2000. A separate annex to this

statement provides more detailed facts and figures:

Closure of international crossings of Al-Karameh with Jordan and Rafah with

Egypt for days or weeks on end;

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4

Arbitrary closure of Gaza International airport or limiting of its permitted operating

hours, constraining its use for passenger and commercial traffic;

Delays and cumbersome procedures affecting passage of commercial through

the crossing points, holding up or altogether spoiling Palestinian exports and

delaying or refusing imports from Arab states, including emergency food supplies

and medical aid;

Internal closure of Palestinian cities and villages, using road blocks, trenches

and barriers which prevent the movement of people and goods, including external

trade;

Interminable delays and obstacles to the smooth transit through Israeli ports of

Palestinian trade with markets in Europe, Asia and North America.

Closure of Palestinian borders with Israel, preventing entry of over 100,000

workers and aggravating unemployment to levels equivalent to almost half of the

Palestinian labour force;

Rapid spread of poverty, to encompass over one million Palestinians;

Losses to the Palestinian national economy and infrastructure of at least $1.8

billion in only six months, equivalent to a third of Palestinian gross national income;

A precipitous decline in Palestinian merchandise trade flows of up to 50% during

the past six months, while Palestinian trade with Arab markets has reached record

lows.

Distinguished delegates,

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5

As these points demonstrate, Israel’s actions are a clear violation of its commitment to

the spirit and the letter of the basic objectives of the multilateral trading system, as

embodied in the first paragraphs of the Preamble to the WTO Agreement, as follows:

First: Israeli measures against the Palestinian economy and trade have not been

“conducted with a view to raising standards of living, ensuring full employment and a

large and steadily growing volume of real income and expanding the production of

and trade in goods and services” (Preamble, paragraph 1). As we have shown, they

have been completely the contrary.

Second: Nor has Israel’s conduct towards the small, weak and marginalised

Palestinian economy exhibited any respect for the “need for positive efforts

designed to ensure that developing countries, and especially the least developed

among them, secure a share in the growth in international trade commensurate with

the needs of their economic development” (Preamble, paragraph 2). Complete

disrespect by Israel would be the more appropriate term.

Third, Israel has repeatedly violated its commitment, as embodied in the

objectives of the WTO as well as in the terms of the 1994 Protocol on Economic

Relations Between Israel and Palestine, to “reciprocal and mutually advantageous

arrangements directed to the substantial reduction of tariffs and other barriers to

trade and to the elimination of discriminatory treatment in international trade

relations” (Preamble, paragraph 3). Indeed, Israeli measures have given a new

meaning to the term “barriers to trade” and "discriminatory treatment".

Furthermore, as confirmed by the reports of impartial observers, including the

human rights inquiry commission establish by the United Nations Commission on

Human Rights, Israeli measures of collective punishment, destruction of property,

and closures and curfews violate its responsibilities as an occupying power,

especially Articles 23, 33, 55 and 56 of the Fourth Geneva Convention and Articles

6 and 11 of the International Covenant on Economic, Social and Cultural Rights.

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6

Distinguished delegates

Under no imaginable pretext, be it political, security or other, nor under any rule

sanctioned by the Organisation, can Israel justify in this or any other forum the illegal

measures of collective economic punishment that it has practiced against a hostage

nation and economy. Whatever twisted rationale Israel may advance to attempt to

defend these measures, they are unacceptable under the principles of humanitarian

law, and indeed the norms and disciplines of international trade relations. These

measures furthermore constitute a flagrant interference by a WTO Member in our

countries’ sovereign right to conduct normal trade relations with Palestine, in line with

trade accords between Israel and Palestine, as well as between Arab states and

Palestine.

Therefore, we affirm to fellow Members of WTO the following:

We strongly protest this conduct by Israel and we call upon other concerned

Members of WTO to register unequivocally, their serious concern at this course

upon which Israel has embarked. Israel must realise that trade-related measures

which result in closing markets or reducing market access for Palestine, and which

discourage growth, employment and stability, run in direct opposition to the

underlying premises of this Organisation.

Our countries have begun to implement the Arab Summit decision to provide

Palestinian exports access to our markets free of all and any quantitative and

qualitative restrictions. We insist that Israel should honor its commitments to

maintaining the free flow of trade between our markets and Palestine, and we call

upon other Members of WTO to follow suit and take effective measures to ensure

that Palestinian trade with them is restored unhindered by Israeli obstacles.

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On this occasion, we wish to reaffirm our desire to seeing a peaceful and

negotiated exit from the current political impasse. However, this in no way

diminishes Israel’s immediate responsibility to comply with international law and

desist in its measures of economic sanctions and collective punishment of the

Palestinian people.

If Israel pursues its current destructive policy, it is incumbent upon Palestine's

trade partners, in the region and beyond, to adopt without further delay reciprocal

measures, of equal significance and impact, to protect and support the beleaguered

Palestinian economy. Israel’s persistence along this avenue has grave economic

ramifications and casts serious doubts on its good credentials within the multilateral

trading system.

We furthermore request that the Director General initiate a technical assistance

programme by WTO secretariat, in cooperation with the competent United Nations

and international organisations, to help Palestine develop a WTO-compatible foreign

trade regime and prepare for its closer integration into the regional and global

economies.

Distinguished delegates

It is unfortunate that Palestine cannot yet benefit from the application of WTO rules

dedicated to open, fair and undistorted trade. Nor has the moment arrived when

Palestine can resort to the legal protection and dispute settlement mechanisms that

membership in the WTO can provide to all Members, especially the least developed

and marginalised small economies. However, we look forward to the day that all

Members join us in welcoming Palestine to this General Council, in line with its intention

to attain observer status in WTO at the appropriate time, and without placing

unacceptable political obstacles or conditionality along this path.

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We firmly believe that recent events have highlighted the importance of further

strengthening of the multilateral trading system, in its regional and global

manifestations. Through the expeditious and fair accession to WTO of Arab Observers,

joined soon by Palestine, WTO can fulfil its role in developing trade relations in the

region on equitable bases. It can furthermore make its own contribution to building

peace, prosperity and development for all peoples and States in our region.

In this context, it is appropriate to recall to fellow Members of WTO, that the

multilateral trade system is only one component of a global policy framework for

peace, at least for keeping the peace. Using trade policies such as economic

blockades and harassment in order to weaken, if not suffocate, the protagonist and to

influence the outcome of political or military conflicts is an irreversible political error.

The consequences of such actions are incalculable, both for their perpetrator as well

as for the community of nations. Losing sight of this supreme peace mission entrusted

to the multilateral trade system can only undermine its foundations and place in doubt

its future.

In closing, we request that the Director General circulate this statement and its annexes

as an official document of the General Council and to make it widely available to the

general public through all WTO media outlets.

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ANNEX 1

(Unofficial translation)

Arab Emergency Summit Conference Cairo-Arab Republic of Egypt

21-22 October 2000

Resolution

SUPPORT OF THE PALESTINIAN ECONOMY The Arab Summit Conference, held in Cairo during the period 21-22 October 2000: Emphasizing its support for the Palestinian people’s steadfastness as well as the

enhancement of their economic capacities in confronting the Israeli policy of siege and isolation;

Stressing the need to ensure political and economic support for the Palestinian people and their National Authority, including releasing them from subordination to the Israeli economy;

Condemning Israeli measures obscuring the flow of Palestinian goods and produce in violation of the rules of the World Trade Organization.

Decides

To request Governments to take the necessary procedures to ensure the following: 1- Allowing the import of Palestinian goods and products without any quantitative or

qualitative restrictions. 2- Palestinian goods and products shall be exempted from custom duties and levies.

Palestinian certificates of origin, issued by chambers of commerce and industry and certified by the Palestinian Ministry of Economy and Trade, shall be acknowledged.

3- The relevant Arab Ministries shall address a complaint to the World Trade Organization and the concerned international institutions to cancel Israeli measures obstructing the free passage of Palestinian goods and products into Arab markets.

4- Arab Ministers of Finance are to hold a meeting in the League of Arab States, within a period not exceeding one month from of the present date, in order to agree on the following:

a- Participation in the two funds. b- The use of the funds’ resources. c- The management of the funds and the supervision mechanism that would ensure their

efficiency and sustainability. d- Benefit from the technical expertise of Arab Funds and the Islamic Development Bank in

operating the two funds.

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Annex 2

Israeli Measures Affecting Palestinian Trade and Economic Impact October 2000 - March 2001

1. Economic Blockade UNSCO noted that during the period 1 October 2000 - 31 January 2001, there were 93 days

of border closures (76% of the time) during which the commercial crossings at Rafah and Allenby/ Karameh bridge were closed for about 61% and 37% of the days, respectively. The passenger crossings at the two borders were closed for 38% and 21% of the days, respectively. Gaza International Airport was closed for around 52% of the days.1

The Israeli authorities tighten security measures at commercial crossings after periods of

closure, limiting the working hours and aggregate truckloads allowed to cross the borders. In addition to increasing the waiting time at the borders, these measures inflate transport costs accrued by traders.2

Closures of Border Crossings since 29 September, 2000 Crossing Closure Partial Re-opening Al-Mentar (With Israel)

Closed on September 29,2000 Re-closed on October 8,2000 Re-closed on November 14,2000 Re-closed: on January1,2001 Re-closed in the morning of January 14, 2001 Re-closed on January 15, 2001

October 2,2000 October 10, 2000 November 19,2000 January 7, 2001 Evening of January 14, 2001 January 17, 2001.

Sofa (with Israel) Closed on October 8,2000. Re-closed on January 18, 2001 Re-closed on February 15, 2001

January 17, 2001 For laborers only on February 12, 2001 March 16, 2001

Eretz ( with Israel) Closed on October 8,2000 Re-closed on January 1,2001 Re-closed on February 4, 2001 Re-closed on February 15, 2001

For laborers on December 14, 2000 For laborers on January 22, 2001 For laborers on February 7, 2001

Rafah (with Egypt) Closed on October 8,2000 Re-closed on October 12,2000 Re-closed on October 16,2000 Re-closed on November 8,2000 Re-closed on December 11,200 from 10:00 to 12:00 Re-closed on December 18,2000

October 10, 2000 with reduced staff October 15,2000 October 19,2000 November 20,2000; re-closed on the same day November 28,2000 for one day. December 19,2000

1

UNSCO, “ The Impact on the Palestinian Economy of Confrontations, Mobility Restrictions and Border Closure, 1 October- 31 January 2001”, Gaza. 2 For example, the re-opening of Sofia crossing, on March 16, was accompanied by a new set of restrictive measures limiting the working hours between 7:00 am to 12:30 p.m., the area designated for gathering truckloads was reduced from 80 dunums to 20 dunums, and preventing Palestinian trucks from entering the green line area to load goods. In the case of Al-Muntar crossing, stringent measures included manual security checking in addition to preventing the passage of Palestinian trucks to the green line area. This resulted in increasing transport costs from about $375 to around $875 per truck. Moreover, fees paid at the outlet increased from $62.5 to around $ 67.5 for a truck and from $87,5 to $100 per lorry. See “Closure Update” No. 30 and No. 34, a report by the Palestinian Center for Human Rights on the Closure Imposed by Israel on the Gaza Strip, Gaza.

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Re-closed on December 30,2000 Re-closed on January 14, 2001 Re-closed on January 24, 2001 Re-closed on January 31, 2001 Re-closed on February 5, 2001 Re-closed on March 18, 2001

January 11, 2001 January 17, 2001 January 25, 2001 February 1, 2001 For pilgrims only on February 13, 2001 For pilgrims on February 20, 2001

Allenby-Karamah (with Jordan)

Closed on January 1,2001 January 11, 2001

Gaza International Airport

Closed on October 8,2000 Re-closed on October 29,2000 Re-closed on November 8, 2000 Re-closed on January 1,2001 Re-closed on January 15, 2001 Re-closed on January 31, 2001 Re-closed on February 5, 2001 Re-closed on February 14, 2001

October 15,2000 November 6,2000 December 1,2000 January 18,2001 February 1, 2001 For pilgrims on February 13, 2001.

Source: Palestinian Center for Human Rights, “Closure Update No. 34”, 22 March 2001 and Al-Quds daily newspaper, January 11, 2001 Internal closure on Palestinian cities and villages, preventing the free flow of trade Since 12 October 2000: Israeli forces imposed an internal closure between Palestinian

populated centers in Zone A in the West Bank, and on villages located in Zones B and C, where the Israel has control over security.3

Internal closure measures are most stringent during severe closures entailing the

prohibition on the use of main roads and secondary roads between Palestinian towns and villages. In the case of partial closures, Palestinians are allowed to use only some main roads and most of the secondary roads. According to UNSCO, internal closure - severe and partial - have been imposed on the West Bank and Gaza Strip for 100% and 89%, respectively, of the period between 1 October 200 – 31 January 2001. In Gaza, internal closure measures entail limiting the number of hours during which main roads could be used by Palestinian vehicles.4

The safe passage, connecting the Gaza Strip and the West Bank, has been closed since 8 October 2000.5

The main road linking the northern and central West Bank has been partially accessible for

most of the period. This resulted in increasing transport costs accrued by Palestinian traders since travel between these areas is possible only via a circuitous route through the Jordan Valley.6

3 B’Tselem (January 2001), “Civilians Under siege: Restrictions on Freedom of Movement as Collective Punishment” 4 UNSCO, “ The Impact on the Palestinian Economy of Confrontations, Mobility Restrictions and Border Closure, 1 October- 31 January 2001”, Gaza. 5

Ibid. 6 For example, average travel time between Nablus and Ramallah increased an estimated 113 per cent from 45 minutes to 96 minutes. Reliable figures on transport costs accrued by traders are not available, however the sharp increases in taxi fees can be considered as an indication. These rose 108 per cent from NIS 9 to NIS 18,75 for traveling between Nablus and Ramallah and 41 per cent from NIS 15 to NIS 21 for traveling between Hebron and Ramallah (a less frequent travel route). Ibid.

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20 November 2000: Israeli forces closed the major road connecting the northern and southern parts of Gaza, thus dividing the strip into two parts. Since November 23, Israel began to open the eastern road twice a day, from 10.00 a.m. to 12.00 p.m., and from 4.00 p.m. to 6.00 p.m. However, the movement of goods and people remains limited.7

On 2 January 2001, Israeli authorities closed internal roads leading to the south of Gaza, as

well as another western road, thus dividing Gaza into three isolated parts.8 Additional concrete roadblocks were built during the first half of the month along the main roads to close the entrances to Gaza, thereby dividing the area into four parts.9

During the month of December 2000 Israeli forces imposed a strict siege on Al-Mawasi

(agricultural) area, in Rafah and Khan Yunis through closing Al-Tuffah roadblock, thus separating the people of the city and refugee camp of Khan Yunis from the area and cement blocks. As a result, Palestinian farmers were not able to reach their farms and lands or market their produce.10

During the month of March 2001, the Israeli forces built a heavy iron gate in the northern

part of Jenin to prevent vehicles and pedestrians from entering the city.11 The new Israeli government has recently adopted a new plan according to which the West

Bank areas will be divided into 60 isolated parts.12 Humanitarian Aid Denied Access into PA During the month of January, the Israeli authorities rejected a consignment from Iraq

consisting of more than 7000 tons of food supplies. An additional 200 tons of aid contributed by popular committees from Iran, Qatar and Saudi Arabia were also lying idle in various storage units in Amman/Jordan after being denied entry by Israel.13

On 21 March 2001, Israel prohibited a Belgian airplane, carrying ambulances and medical

equipment from landing in Gaza International Airport.14 42 trucks loaded with food stuffs and medical supplies sent by Saudi Arabia have been

held at Rafah crossing for over a month since February 2001.15

7 Palestine Center

8Al-Mezan Center for Human Rights.

9Ha’aretz daily newspaper, 15 January 2001.

10 Palestinian Center for Human Rights (PCHR), “Closure update No.29”,16 December 2000 11 Palestine News Agency “WAFA”, 11 March 2001. 12 Yediot Ahranot daily newspaper, 12 March, 2001. 13 Jordan Times, 10 January 2001. 14 WAFA, 21 March 2001. 15Al-Quds daily newspaper , 2 April 2001.

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2. Economic Sanctions The Israeli army decided “to intensify economic sanctions against the Palestinian

Authority” in November 2000. Israeli forces “ordered that no goods may enter the territories controlled by the Palestinian Authority, aside from humanitarian aid products”, and “that the amount of gasoline transferred to the Palestinian Authority would be minimal”. Moreover, it reaffirmed an earlier decision to prevent the transfer of raw material which could be used by the Palestinian Authority for various projects”.16 These sanctions have been maintained or reinstated for different periods since.

In November 2000, the previous Israeli Prime Minister confirmed that Israel was

“withholding millions of dollars in tax revenues owed to he PA”.17 The newly elected Prime Minister has made it clear, on several occasions since February 2001, that the government does not intend to transfer these revenues to the PA, which are estimated to amount to over $100 million.18

On 19 November 2000, Israel cut Jordanian cement shipments to PA. Israeli authorities

allowed a limited entry of cement to PA on November 28: only 650-700 tons per day amounting to 19,500-21,000 ton per month compared to 75,000 tons of cement per month allowed into the PA before the siege.19

In October-November 2000, more than 900 trucks loaded with goods and produce were

held up at the Israeli ports of Haifa and Ashdod along with 1000 new and used cars.20 The backlog has since only been partially reduced.

For a week in February 2001, Israel cut all fuel supplies to the PA.21 Economic Separation Israel is planning to establish an “effective economic border” through which goods would

be authorized to pass only at certain border checkpoints “Building a border fence will take a long time, the effective economic border will be here sooner than we imagined”, explains the Israeli Director-General of Customs. 22

Israeli authorities are in the process of setting up five checkpoints to control the flow of

goods between the West Bank and Israel. The crossing points are to be set up in five

16 Ha’aretz daily newspaper , 7 November 2000. 17

Ha’aretz daily newspaper, 17 November 2000. 18 Ha’aretz daily newspaper, 14 March 2001. 19 Ha’aretz daily newspaper, 19 November 2000 and (PCHR ) “Closure update No. 29”, 16 December 2000

20 The Independent, 7 November 2000

21 Al-Quds daily newspaper, 19 February 2001.

22 Ha’aretz, 22 October 2000.

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different regions in the West Bank and construction work was scheduled for completion by the end of January.23

3. Economic Impact of Israeli Blockade and Sanctions Aggregate impact Based on Palestinian Central Bureau of Statistics (PCBS) estimates, total economic losses

for the months of October-November 2000, were $862 million. Of these, $420 million was accounted for by deteriorating domestic economic activities, including trade; $169 million was due to loss of employment in Israel; and $272 million was damaged infrastructure.24 As pointed out by UNSCO, GDP in those months was less by 50% than projected GDP for the reported period (assuming no border closure).25

Based on these PCBS estimates UNSCO has calculated aggregate losses during the period

1 October 2000 - 31 January 2001 at $1,150 million. This includes losses accrued from the decline in GDP ($907 million) and labor income from Israel ($243 million).26 Per capita gross national income (GNI) is estimated to have declined by at least 16% from a projected $2000 for the year 2000 to an estimated $1,680.27

Extrapolating these figures forward for the months of February and March implies an

aggregate loss of Palestinian national income of around $1.8 billion for the six-month period October 2000 - March 2001.

Sectoral impact UNSCO notes that manufacturing and construction activities incurred the highest losses

during the period October-November 2000, together accounting for about 40% of the decline in GDP during the period. Internal and external trade activities (wholesale and retail trade, customs duties and net VAT on imports) accounted for nearly 30% of the loss. Agriculture accounted for another 10%. Public administration and publicly owned enterprises combined accounted for about 10% of the decline while the other services, both public and private, contributed about 10% of the loss in GDP.

23

The plan refers to locations in areas north of Jenin, west of Tul Karm, southwest Ramallah, and the south entrance to Jerusalem, northeast of Bethlehem, and Tarkumia, west of Hebron. (Ha’aretz, 10 January 2001). 24 PCBS, “Direct Losses accrued induced on the Palestinian Economy by the Israeli Siege”, December 2000. 25

UNSCO, “ The Impact on the Palestinian Economy of Confrontations, Mobility Restrictions and Border Closure, 1 October- 31 January 2001”, Gaza. 26

UNSCO, “ The Impact on the Palestinian Economy of Confrontations, Mobility Restrictions and Border Closure, 1 October- 31 January 2001”, Gaza. According to the Palestinian Ministry of Labor, there was about 120,000 Palestinian worker in Israel on the eve of the crisis, earning a daily wage of $27.50 per person. See PCHR, “Closure Update No.31”, 8 January 2001. 27

UNSCO, “ The Impact on the Palestinian Economy of Confrontations, Mobility Restrictions and Border Closure, 1 October- 31 January 2001”, Gaza.

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Breakdown of total loss in GDP by activity for October-November 2000

Estimated Contribution to GDP%

Estimated Proportional Losses by Activity %

Estimated Impact on Total GDP by Activity %

Economic Activities Agriculture and Fishing 6.86 -73.84 -5.07 Mining, Manufacturing, Electricity and Water

18.51 -53.64 -9.93

Mining and quarrying 0.62 -58.54 -0.36 Manufacturing 16.77 -54.08 -9.07 Electricity and water supply 1.12 -48.98 -0.55

Construction 12.22 -78.66 -9.61 Wholesale and Retail Trade 10.27 -58.98 -6.06 Transport 3.49 -34.58 -1.21 Financial Intermediation 3.23 -24.62 -0.79 Other Services 18.47 -26.02 -4.81 Real estate and business services 9.24 -9.78 -0.90 Community, social and personal services

0.49 -68.33 -0.33

Hotels and restaurants 1.36 -87.92 -1.20 Education 4.72 -29.48 -1.39 Health and social work 2.67 -49.01 -1.31 Public Administration and Defense 9.75 -29.51 -2.88 Households with Employed Persons 0.16 -50 -0.08 Public Owned Enterprises 3.54 -60 -2.12 Plus: Customs Duties 7.80 -60 -4.68 Plus: VAT on Imports, net 8.21 -50 -4.11 Gross Domestic Product 100 --- -50.72

Source: UNSCO, “ The Impact on the Palestinian Economy of Confrontations, Mobility Restrictions and Border Closure, 1 October- 31 January 2001”, Gaza. The tourism sector’s total losses exceeded $200 million by the end of March 2001 as

pointed out by the Palestinian Ministry of Tourism.28 Palestinian hotels witnessed a 76% drop in occupancy rates during the fourth quarter of 2000, according to the PCBS.29

The agricultural sector accrued over $180 million in total losses (direct and indirect)

during the period 1 October 2000 -31 December 20001, according to the Palestinian Ministry of Agriculture.30 Total revenues generated from the export of flowers registered a decline of 50% during the first quarter of this year compared to the same period last year as a result of Israeli restrictive measures.31

28 Al-Hayat-al-Jadidah daily newspaper, 23 March 2001. 29 Al-Ayyam daily newspaper, 1 April 2001. 30 Al-Hayat-al-Jadidah daily newspaper, 15 January 2001. 31 Traders are forced to export flowers through Al-Mentar crossing following Israel’s decision to close the commercial passage at Eretz crossing on January 1, 2000. This inflated transaction costs for traders and the damaging of 25 per cent of the consignments designated for export. Al-Hayat-al-Jadidah daily newspaper, 27 March 2001.

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The industrial sector’s losses stood at $800 million by the beginning of February 2001, according to the Palestinian Ministry of Industry.32

The construction sector’s total losses stood at $100 million by the end of February 2001,

according to the Palestinian Contractors Union.33 Other losses The Palestinian Energy Authority reported that the sector’s total losses stood at $22.5

million by the end of February 2001 as a result of the Israeli destruction of basic electricity infrastructure.34

Gaza International Airport: According to the Palestinian Airlines and Civil Aviation

Administration, the airport has accrued $4 million in direct losses since the onset of the crisis, as airline companies halted their flights to the airports being unable to commit to their schedules.35

Gaza seaport: Construction works for establishing a deep-water seaport in Gaza were

suspended in October 2000. The port, to be located 5 kilometers away from the southern border of Gaza, is supposed to provide Palestinian traders access to international markets, thereby reducing their heavy dependence on Israeli transport facilities,36 utilized for transporting around 90% of Palestinian merchandise.

Infrastructure: PECDAR estimated losses incurred until January 2001 as a result of the

Israeli destruction of basic infrastructure to stand at $200 million.37 Fiscal deficit: The proposed PA budget for the year 2001 puts the fiscal deficit at $524

million.38 The 2001 deficit is estimated to be at least four times the level anticipated at the onset of the crisis.39

Unemployment: According to PECDAR, the rate of unemployment had grown to 47% by

early 2001, with more than 260,000 unemployed compared to 11% unemployment rate during the first nine months of 2000.40

32 Al-Ayyam daily newspaper, 9 February 2001. 33 Al-Ayyam daily newspaper, 12 March 2001. 34 Al-Ayyam daily newspaper, 26 February 2001. 35 WAFA, 18 March 2001. 36 90 per cent of Palestinian merchandise trade flows through Israeli transport facilities. See Ashoka Mody (1997), Infrastructure in the West bank and Gaza Strip: Institutions and Growth, Ramallah: Palestine Economic Policy Research Institute (MAS)

37 Al-Quds Al Arabi daily newspaper, 8 January, 2001 38 Al-Hayat-al-Jadidah daily newspaper, 30 March, 2001. 39 “Crisis in Faith”, Second Submission of the Palestinian Liberation Organization to the Sharm El-Sheikh Fact- Finding Committee, 30 December 2000. 40 Al-Quds Al-Arabi daily newspaper , 8 January 2001.

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Poverty: Poverty rate registered over 50% increase during the period 1 October 2000 –31

January 2001 to stand at 32% compared to 21% in September 2000.41 At present, more than 1 million people, one third of the population, are living below the poverty line of $2.10 per day according to the World Bank, while PECDAR estimates the percentage of people living under poverty line at 45%.42 This leaves more than 41% of the families without any source of income, as reported by the Palestinian Labor Union.43 So acute is the impact of closure that even with a partial relaxation in the Israeli restrictive measures, poverty rate is expected to reach 44% by the end of 2001. 44

4. Impact of Israeli Blockade and Sanctions on Palestinian Trade Palestinian exports to Israel registered a decline of 22% during October and November

2000 on a monthly average basis compared to October–November 1999 from $45 million to $35 million. Non-agricultural imports from Israel declined from $147 million to $100 million on a monthly average basis, a drop of 32% compared to the same period in 1999.45

According to the Palestinian Ministry of Agriculture, agricultural exports during

September-December 2000 registered a 43% decline compared to the same period in 1999. Amounts in Tons

Product Sep-Dec. 1999 Sep.- Dec. 2000 Tomatoes 15079 8906 Cucumbers 10289 5644 Peppers 330 401 Eggplants 345 222 Zucchinis 402 247 Potatoes 1102 819 Cherries 18 6 Guavas 2383 701 Dates 388 66 Other 1338 765 Total 31674 17757

Source: Palestinian Ministry of Agriculture The amounts of citrus, fruits, vegetables and strawberries exported from Gaza during the

period September 28-December 15, 2000, declined to half as much as compared to the same period in 1999.

41 See UNSCO, “ The Impact on the Palestinian Economy of Confrontations, Mobility Restrictions and Border Closure, 1 October- 31 January 2001”, Gaza and the World Bank Group, “The Impact of Prolonged Closure on Palestinian Poverty”, Gaza 1 November 2000. 42 “Poverty in the West Bank and Gaza Strip”, a press release issued by the World Bank, 5 February 2001 and Al-Quds Al-Arabi daily newspaper 8 January 2001. 43 WAFA, 14 March 2001.

44 See UNSCO, “ The Impact on the Palestinian Economy of Confrontations, Mobility Restrictions and Border Closure, 1 October- 31 January 2001”, Gaza and the World Bank Group, “The Impact of Prolonged Closure on Palestinian Poverty”, Gaza 1 November 2000. 45 UNSCO, “ The Impact on the Palestinian Economy of Confrontations, Mobility Restrictions and Border Closure, 1 October- 31 January 2001”, Gaza

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Year Fruits Citrus Vegetables Strawberries Fruits (in numbers)

1999 1535 1931 17012 407 6 million 2000 19 105 9766 200 3 million

Source: PCHR, “Closure Update No.30”, 25 December 2000

Palestinian strawberry farmers decided to leave the season's strawberries on the plants in order to avoid accruing additional costs having little hope that Israel will lift the border closure imposed on Gaza before the end of the harvesting season. Farmers have not been able to export more than 850 tons out of 2000 tons planted for exports.46

At the height of the export season, 500 tons of tomatoes designated for export from Gaza

were spoilt after being held up by Israeli authorities at Al-Mentar crossing.47 Palestine's Main Trade Partners (1998) According to the latest available official statistics (for 1998), Israel remains Palestine’s

main trade partner accounting for about 80% of the value of total trade transactions. However, an examination of the regional structure of Palestinian external trade reveals a shift towards growing imports from the rest of the world. The following tables show that the years 1997 and 1998 witnessed growing imports from the rest of the world from 12.3% in 1996 to 14 % in 1997 before doubling to 29% in 1998. Henceforth, reducing Israel’s share of the total value of Palestinian imports from 86.4% in 1996 to 69% in 1998.

Total Value of Palestinian Trade Transactions with selected markets, 1998

Value in $ thousands Country Total Value of Trade

Transactions Share of total Trade Transactions

Israel 2,214,638 79.98% Jordan 66,124 2.39% Italy 57,812 2.09% Turkey 48,399 1.75% Spain 36,422 1.32% Germany 34,126 1.23% China 33,789 1.22% United States 33,430 1.21% Egypt 27,728 1.00% United Kingdom 25,357 0.92% Main Partners’ Trade

2,577,825 93.10%

Total Trade 2,768,948 100% Source: PCBS, “Foreign Trade Statistics, 1998: Main Results,

Regional Structure of Palestinian External Trade

Subject 1994 1995 1996 1997 1998 Imports $million

1075 1690 2017 2164 2375

46 Palestine Report, a weekly report by Jerusalem Media and Communication Center (JMCC), 24 January 2001; and PCHR, Closure Update No.33, 22 February 2001. 47 Al-Quds daily newspaper, 9 January 2001.

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Israel (%)

85.6 90.0 86.4 83.3 69

Jordan (%)

0.6 0.5 0.4 1.4 1.4

Egypt (%)

0.1 0.3 0.9 1.2 0.9

ROW (%)

13.7 9.2 12.3 14.1 28.7

Exports $million

243 326 340 381 395

Israel (%)

84.3 93.3 93.8 93.9 94.8

Jordan (%)

12.8 4.5 5.3 4.9 4.9

Egypt (%)

- 0.2 0.3 - -

ROW (%)

2.9 1.4 0.6 1.2 0.3

Sources: For 1992-1995, UNCTAD estimates (see UNCTAD/GDS/SEU/2); for 1996-1998, PCBS-foreign trade statistics.

Trade with Jordan, Egypt and other Arab Countries Trade with Jordan registered a significant increase during 1998 compared to 1997, despite

the cumbersome customs and overland procedures at the crossing borders.48 However, trade with Egypt in 1998 did not exceed $ 27.8 million down from $30.6 million in 1997, as security measures became more stringent at Rafah crossing. If anything, the recent crisis reversed the positive trend towards trade diversification that has been achieved during the years 1997 and 1998.

Volume in $ thousands

Arab Countries Jordan Egypt 1997 1998 1997 1998 1997 1998 Exports 19559 11498 17695 9120 15 30 Imports 56145 85339 25038 57004 30583 27698 Total Volume of Trade 75704 96837 42233 66124 30598 27728 Net balance -36586 -73841 -7843 -47884 -30568 -27668

Source: PCBS, “Foreign Trade Statistics, 1998: Main Results

48 These procedures result in inflating transport costs for Palestinian traders, long delays and the border crossings, and the damage of consignments designated for export. See UNCTAD, “Cooperation Between the Palestinian Authority, Egypt and Jordan on Trade-Related Services” UNCTAD/GDS/SEU/3

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EPP

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EXTRACT:

Economic Policy Programme

Legal and Technical Support to the Ministry of National Economy

The Economic Policy Programme

The Economic Policy Programme (EPP) is an initiative launched in 1996 as part of the European

Community’s progamme of assistance is to the Palestinian Population of the West Bank and

Gaza Strip. The objective is to provide the Authority with policy support that assists in clarifying

and shaping trade policy option and thereby strengthens its capacity to negotiate with current and

future trading partners on economic policy issues.

The first two phases of the programme, which is coordinated by the Palestinian Ministry of

National Economy (MNE) in collaboration with the London School of Economics, were funded

by the European Commission and the UK’s Department for International Development (DFID),

during 1996-1998 and 1999-2001 respectively. During this period, the Ministry, in addition to its

other activities, focused on the development of trade relations with Israel, technical preparation

for the conclusion of trade agreements with third parties and for Palestinian application for WTO

observership.

EPPIII continues from where Phases II left in 2001, building on and developing earlier work in

support of Ministry activities in relation to forging an independent trade regime – providing

options, elaborating domestic laws, advancing progress on WTO issues, and consolidating the

building blocks for future trade relation with Israel and third parties.

Selected list of studies and report

Reports

The Israel-Palestine Protocol on Economic Relation and the law of the World trade

Organization, Professor Thomas Cottier, Feb 1997. EPP1

The Possibility of Participation by Means of Observer Status for the Palestinian National

Authority in the World Trade Organization, Professor Thomas Cottier and Remo

Arpagaus, Feb 1997.

EPP1

Palestine seeks Observer Status in the World Trade Organization, Lobby Paper,

Professor Thomas Cottier and Remo Arpagaus, Feb 1997. EPP1

Condition and requirements to Qualify as a Separate Customs Territory under WTO

rules, Professor Thomas Cottier and Krista Nadakavukaren, Feb 1998. EPP1

Customs Union and Free Trade Agreement: A General Perspective, Hanspete Taschaeni,

Background brief 2, March 1997. EPP1

Principle of Palestinian Trade Policy: Options, Professor Thomas Cottier, Dec 1999. EPP2

Options paper: the twenty points framework, trade and economic relation, March, July, EPP2

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Oct 2000.

Options for regulating economic and trade relations with the State of Israel during a

transitional, Professor Thomas Cottier, Thomas Hughman and Valerie York, Sept 2000. EPP2

Shot, Medium and Long term trade policy options, Professor Thomas Cottier, Jan 2001. EPP2

Draft memorandum: Overview of the Palestinian Policy and Foreign Trade Regime,

Serge Pannatier and Professor Thomas Cottier, Jan 2000 EPP2

Options for a future Trade Agreement with Israel, Professor Thomas Cottier, Dec 2003. EPP3

Options for a Non-Discriminatory Trade Policy for Palestinian: Challenges and Risks,

Professor Thomas Cottier, Dec 2003.

EPP3

Foreign Trade Act of Palestinian, Commentary, revised act and conceptual paper,

Professor Thomas Cottier, second revised drafts, amended Aug 2003

EPP3

Data requirement for evaluating Palestine’s Trade Policy Options, Jaime de Melo, Jan

2001

EPP3

Options for a tariff policy for Palestine, Jaime de Melo, Jean Marie Grether, Alan

Winters, Feb 2003

EPP3

World Custom Organization: Requirements and Procedures for Observership, Nov

2003.

EPP3

Roundtable on the Foreign Trade Act of Palestine: conceptual Paper MOETI, Ramallah,

Oct 2002.

EPP3

Roundtable with the World Bank and EPP Strategy Meeting LSE, Nov 2002. EPP3

Roundtable on the Foreign Trade Act of Palestine: Draft Text MOEIT, Ramallah, Feb

2003.

EPP3

MNE workshop on Foreign Trade Act of Palestine, MNE, Ramallah, July 2003 EPP3

Roundtable on options for a Trade Agreement with Israel and EPP Strategy Meeting

LSE, Sept 2003.

EPP3

Roundtable on options for a Tariff Policy: Study MNE, Ramallah, Sept 2003 EPP3

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WORLD TRADE

ORGANIZATION

WT/L/631 21 November 2005

(05-5480)

General Council 1-2 December 2005

Original: English

SIXTH SESSION OF THE MINISTERIAL CONFERENCE

Request for Observer Status by the Palestine Liberation Organization on behalf of the Palestinian Authority

The following communication, dated 30 October 2005, has been received by the Director-General from the Minister of National Economy of the Palestinian authority.

_______________ The Palestine Liberation Organization (Palestine), on behalf of the Palestinian Authority Ministry of National Economy, hereby has the honour to request admission as an observer to the Sixth Meeting of the Ministerial Conference of the World Trade Organization in Hong Kong, China in December 2005. We believe that observer status at the Ministerial Conference at this crucial moment in Palestinian history would provide significant benefits on our difficult way to economic recovery, integration into the multilateral trading system and ultimately membership in the WTO. Participation at this Ministerial Conference as an observer, we believe, will provide us the opportunity to be exposed to the dynamics of the multilateral trading system and trade negotiations. It will also dovetail with, and significantly contribute to, our on-going efforts in formulating a comprehensive trade policy for Palestine. I trust that you would transmit this request for the consideration of the General Council at the earliest convenient date and that this request would be accorded the highest consideration by all WTO Members.

__________

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ORGANIZATION

WT/L/770 6 October 2009

(09-4782)

Original: English

PALESTINE – REQUEST FOR OBSERVER STATUS

Communication from Palestine The following communication, dated 2 October 2009, addressed to the Chairman of the General Council, has been received from the Permanent Observer Mission of Palestine to the United Nations and other International Organizations with the request that it be brought to the attention of the General Council.

_______________

APPLICATION FOR OBSERVERSHIP IN THE GENERAL COUNCIL AND ITS SUBSIDIARY BODIES

On behalf of the Palestine Liberation Organization, acting on behalf of the Palestinian Authority, I have the honour to submit the application of my government for observer status in the General Council of the World Trade Organization (WTO) and its subsidiary bodies.

In this connection, and pursuant to the General Council rules of procedure set out in document WT/L/161, I would like to state that it is the intention of my government to apply for accession to the WTO Agreement in the near future, within a maximum period of five years. Such observer status will enable my government to better acquaint itself with the WTO and its activities, and to prepare and initiate negotiations for accession to the WTO Agreement.

On behalf of H.E. Dr. Bassim Khoury, Minister of National Economy, I should like to request you to place this application and the accompanying overview of the Palestinian economic policy and foreign trade regime before the General Council for decision at its next regular meeting in October 2009.

_______________

OVERVIEW OF THE PALESTINIAN ECONOMIC POLICY AND FOREIGN TRADE REGIME

I. INTRODUCTION

A. TERRITORY AND POPULATION

1. Palestine lies on the western edge of the Asian continent and on the eastern extremity of the Mediterranean Sea. Its territory comprises two parts - the West Bank, a landlocked area bordered by Israel and Jordan, and the Gaza Strip, bordered by Israel, Egypt and the Mediterranean Sea.

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2. The Palestinian population of the West Bank and the Gaza Strip was reckoned at 3.8 million in the 2007 census, with 2.3 million living in the West Bank and 1.4 million in the Gaza Strip. The population has been growing at an annual rate of 3% in recent years. This rapid growth rate reflects both high fertility rates and the influx of Palestinians from abroad. The Palestinian literacy rate of 86.6% ranks amongst the highest in the Arab world. Arabic is the official language and the first language of virtually all Palestinians. English and Hebrew are also spoken.

B. THE ECONOMY

3. Although it has undergone a significant process of modernization over the past decade, the Palestinian economy is still characterized by structural imbalances and high external dependence. Its vulnerability to external factors has meant that the economy’s performance over the past years has fluctuated widely.

Agriculture 4. The agriculture sector employs over 15.6% (2007) of the Palestinian work force. Its contribution to the economy varies from year to year, fluctuating with the two-yearly cycle of olive production, climate and the conditions of access to key neighbouring markets. Its share of GDP reached 6.3% in 2007. The variety of climates allows cultivation of a wide range of crops. Olive cultivation is traditionally the backbone of West Bank agriculture, accounting for half of all cultivated land and generating roughly a quarter of the income in this sector. Agricultural production was worth US$1.11 bn in 2006, of which livestock represented 36.3%; fruits, field crops and vegetables made up the remainder.

Industry 5. The industrial sector (mining and manufacturing) contributes around 10% to GDP. Small, owner-operated enterprises characterize this sector. Only 5% of enterprises employ more than 50 workers while nearly 90% employ less than five. There are approximately 11,500 establishments evenly spread over the various regions of the Palestinian territory.

6. Mining and stone-based industries are primarily concentrated in the southern areas of the West Bank where the quality of stone makes it highly competitive in export markets. The industry accounts for around 5% of GDP. Marble and stone exports to Israel, Jordan, other Arab countries and broader international markets have increased in the past years and now account for around 40% of total industrial exports.

7. Other principal industrial activities include food processing, manufacturing of chemicals and pharmaceuticals, clothing and textile, leather and building materials. Overall manufacturing activity has decreased in recent years.

Services 8. The services sector is the largest contributor to the economy representing 55% of GDP according to 2008 statistics. Wholesale, retail trade, transportation and tourism are major sources of employment, accounting for roughly one third of the jobs in Palestine in 2008. The contribution of services to GDP has been underpinned in recent years by the doubling employment in the public sector since the establishment of the Palestinian Authority in 1994 in part reflecting the expansion in its operations and functions. The establishment of self-rule has stimulated the re-emergence of the banking sector. Whereas at the end of 1993 there were only four banks operating in the West Bank and Gaza, with just 16 branches, there are now 21 banks, with 190 branches. Construction services

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also witnessed a boost since the year 1993 with the peace accord with Israel and the donor assistance that flowed to the Palestinian territory thereafter.

9. Information and Communication Technologies is one of the fastest-growing sectors in the Palestinian Territory, mainly thanks to private telecommunications services and an innovative software industry. The growth rate of this sector has averaged 25–30% annually since 2000. The telecommunication infrastructure witnessed serious improvements over the past years. The Palestine Telecommunications Company (PALTEL) was established in 1995; Pal-Cell (Jawwal) was set up in 1999 to provide mobile phone services. In 2006, the number of telephone lines was approximately 321,999. Meanwhile, Jawwal counted 821,800 subscribers by 2006, compared to a mere 22,500 in 1999. A recent investment by Zain, the Kuwait-based telecommunications company, in PALTEL, which in a share-swap took over 100% of Zain’s mobile operations in Jordan, exemplify the growing dynamics of the Palestinian telecoms market.

10. One sector which has not yet realized its very significant growth potential, given the wealth of religious and archaeological sites, is tourism, despite significant investments in recent years in the hotel, travel agency, tourism-related transport and restaurant sectors.

External Trade 11. Palestine’s external trade is characterized by a significant trade imbalance. In 2007 total exports of USD 513 million were exceeded by imports of USD 3,141.3 million.

12. Israel is by far the largest trading partner. In 2007 about 73.4% of imported goods came from Israel, while 88.7% of Palestinian exports of goods went to Israel. In absolute terms, the bilateral trade deficit reflects the overall trend. Imports from Israel of USD 2,307 million were counterbalanced by exports to Israel of just USD 455 million in 2007. The situation is different with respect to trade in services. Here, Palestinian exports consistently (with one exception in 2004) surpass imports from Israel. In 2007 services exports to Israel (including labour) of USD 121.8 million were met by imports from Israel of USD 104.7 million.

13. Palestine’s other main trading partners are the European Union, Arab countries, European Free Trade Association (EFTA), various Asian countries such as India, China and others, the United States and Canada. Imports of goods from the EU and EFTA amount to approximately 10%, imports from Asia approximately 12%, and imports from Arab countries approximately 3% of total imports. The main Palestinian export products are stone and marble, fruits and vegetables, textiles and clothing, footwear and leather products, pharmaceuticals and chemicals as well as furniture and other wood products.

14. Palestinian exports of services to third countries include in particular telecoms, software development and consulting services. Software development services are traded with Arab countries, European countries and Canada, while consulting services are provided in particular to clients in Arab countries and Israel, as well as to International Development Organizations operating in Palestine.

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Imports and Exports, Main Indicators 2000- 2007 (Value in USD)

Indicators 2000 2001 2002 2003 2004 2005 2006 2007

Total Palestinian Exports 401.0 290.3 240.9 279.7 312.7 335.4 366.7 513.0 Total Palestinian Imports 2,382.0 1,515.6 2,033.6 1,800.3 2,373.2 2,666,8 2,758.7 3,141.3 Palestinian Net Trade Balance 1,981.0 1,743.3 1,274.7 1,520.6 2,060.6 2,331.4 2,392.1 2,628.3 Total National Exports 295.0 217.8 178.0 195.7 216.1 234.6 263.7 347.6 Total Re-Exports From Palestine 106.0 72.6 62.9 84.0 96.6 100.8 103.0 165.3 Total Exports From West Bank 323.0 251.9 208.1 234.4 272.8 294.2 332.8 490.7 Total Exports From Gaza Strip 78.0 38.4 32.7 45.2 35.0 41.2 33.9 22.3 Total Palestinian Imports from Israel

1,739.0 1,352.0 1,117.0 1,309.6 1,747.9 1,872.9 2,002.2 2,307.0

Total Palestinian Exports to Israel

370.0 273.0 216.0 256.0 281.1 290.6 326.6 455.0

Total Exports From West Bank to Israel

311.0 235.5 189.4 217.0 246.1 253.4 292.6 448.0

Total Palestinian Imports by Road

2,129.0 1,811.0 1,283.2 1,521.8 2,102.2 2,410.6 2,336.9 2,631.4

Total Palestinian Imports by Pipes and Nets

253.0 157.4 150.5 278.4 130.4 256.1 421.8 509.9

Total Palestinian Exports by Road

383.0 290.3 240.9 276.9 312.7 335.4 366.7 513.0

Total Palestinian Exports of Services to Israel

129.1 84.8 66.3 73.1 92.6 127.7 131.3 121.8

Total Palestinian Imports of Services from Israel

83.1 66.2 49.0 61.6 94.0 119.1 123.2 104.7

Palestinian Net Balance Trade in Services

46.0 18.5 17.3 11.5 -1.5 8.6 8.1 17.2

International Aid 15. Economic growth since 1993 has been underpinned by substantial inflows of foreign aid, designed to meet immediate challenges and requirements and to lay the foundation for longer-term economic growth. In 1994-98, Palestine received total aid of USD 3.46 billion, of which USD 2.6 billion was in support of the development plan. Inflows of donor funds were equivalent to an annual average of 21% of GDP during this period, and played a significant role in supporting the Palestinian Authority until it could build up its own revenue base.

16. The latest development plan (PRDP) met massive support in the 2007 Paris conference where the international community pledged USD 7.2 billion as budget support.

II. OVERALL DEVELOPMENT STRATEGY

17. Remedying structural imbalances and laying the foundations of sustainable economic development have been the economic policy priorities of the Palestinian Authority since it took over the management of the economy in 1994.

Palestinian Reform and Development Plan 2007 18. The Palestinian Authority’s short-term economic development strategy (2008-2010) is laid out in the - Palestinian Reform and Development Plan (PRDP) of 2007. The PRDP is the most recent version of the Palestinian Development Plan (PDP), a government programme, updated on a rolling (year-by-year) basis, which sets the goals and strategies and establishes the general framework within which PA ministries and institutions allocate resources. The PDP was first introduced in 1997,

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following on from previous programmes, namely: the Emergency Assistance Programme for 1994 which focused on the rehabilitation of infrastructure; the Core Investment Programme for 1996, which identified the most urgent investment and technical assistance needs for physical infrastructure, housing and the social sector, private sector support and institutional development; and the Public Investment Programme for 1997. The latest PDP, now named PRDP, covers the period 2008-2010.

19. The August 2009 program of the current government includes direct and clear recommendations to initiate a sustainable economic recovery and to rebuild the national economy as a pillar of a modern Palestinian state in accordance with international practices. In this context, the Government has defined policy priorities in seven domains.

Creating an enabling investment environment: The Government will promote investment in Palestine through, inter alia, tax incentives to local and foreign investors. The Government will also develop the package of modern investment laws and regulations to promote investment and economic activity.

Promoting the role of private sector in social and economic development: Private

business is an integral part of Palestinian society. The Government will act to enhance the role of the private sector in national development. The Government will also support the development of Palestinian private sector institutions to increase their capacity to represent the interests of their members.

Support Palestinian products and expertise: In all its procurement activities, the

Government will give priority to Palestinian goods and services without prejudice to competition on grounds of cost and quality.

Developing national resources: Palestine is abundant with human resources, but has

limited natural resources. Therefore, the Government will focus on developing human capital through an education system that meets the needs of a labour market in a productive and globally-competitive national economy. On the other hand, the Government will develop techniques to conserve and manage our limited natural resources for the benefit of the Palestinian society and economy.

Developing infrastructure: Insufficient and inadequate infrastructure is a major factor

driving up the cost of production. The Government will develop national infrastructure, including industrial zones, electricity networks, roads, crossing points, and other critical infrastructure to reduce production costs and enable Palestinian products to be more competitive in the domestic, regional and international markets.

Transmit knowledge and support Palestinian innovation: In light of the rapid pace of

globalization, Palestinian businesses need international exposure to benefit from international expertise and promote Palestinian goods and services overseas. The Government will support international knowledge transfer and marketing activities in order to develop and enrich the national economy. In addition, the Government will encourage Palestinian innovation through promoting research and development.

Expand bilateral and multilateral cooperation: The Government will develop and

sign agreements on commercial cooperation with states that grant Palestine preferential treatment, and raise awareness and utilization of existing agreements. The Government will also continue efforts to enrol Palestine as a full member of the World Trade Organization, World Customs Organization and of other international bodies.

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III. ECONOMIC POLICIES

Fiscal Policies 20. Public finances are currently characterized by a significant deficit, financed primarily through foreign aid, most of it in the form of budget support. Government revenue currently accounts for about half of government expenditure. Around one third of government revenue is from internal sources (tax revenue and non-tax revenue); the remaining two thirds derive from customs duties and VAT levied on imports. Under the terms of the bilateral Palestinian-Israeli agreement on economic relations, the Paris Protocol, customs duties and import VAT are usually collected by Israeli authorities at the time of importation and remitted to the Palestinian Authority on a monthly basis.

21. As part of the 2007 PRDP the Palestinian Authority has embarked on an ambitious fiscal reform path with the aim of stabilizing government expenditure and reducing dependency on foreign aid. Progress on this path has been slow, however, and with USD 623 per head (June 2008) the Palestinian population remains among the recipients of the highest amounts of overseas development assistance worldwide. However, a freeze on public sector wages, limits on growth in public-sector employment and the improved collection of utility bills are contributing to a progressive stabilization of expenditure.

Palestine Monetary Authority 22. The Palestine Monetary Authority supervises the banking sector, holds the Palestinian Authority’s foreign currency reserves and regulates foreign-exchange dealers. It is in the process of transforming into a central bank. Discussions to issue a Palestinian currency in the future are ongoing. At present the New Israeli Shekel, the Jordanian Dinar and the United States Dollar are used in the Palestinian Territory.

23. Local lending by Palestinian banks has been traditionally low, with banks preferring to invest deposits abroad. The Palestinian Monetary Authority enacted recently new regulations aimed at encouraging local lending.

Investment Policies 24. While public investment has been rising steadily since 1994, underpinned by donor funding, private investment, other than in housing, has been very slow. The Palestinian Authority introduced a number of measures to stimulate domestic and foreign investment, in particular in productive sectors. These have taken the form of investment incentives, industrial estates and free zones and investment guarantees.

Investment Incentives 25. The 1998 Law for the Encouragement of Investment offers a series of incentives based on the capital invested and the labour force employed. It fully exempts investors from income tax according to the amount and the length of the investment, for a variable number of years, and permits free transfer of foreign currency and repatriation of income generated in the West Bank and Gaza Strip. The law applies uniformly to all investors, irrespective of their nationality.

Industrial estates and free zones 26. The Law on Industrial Estates and Industrial Free Zones, enacted in 1997, established free zones for purposes of export to regional and international markets. The Palestinian Real Estates and Free Zones Authority, provides regulatory oversight and off-site infrastructure. It acts as a one-stop

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shop for all licenses, permits and official registrations needed. The Gaza Industrial Estate was the first to open in 1999; the latest is currently being established in Bethlehem where it is planned to cover over 50 hectares, employ around 500 people directly and generate another 1000 indirect jobs.

Investment Guarantees 27. At the request of the Palestinian Authority the Multilateral Investment Guarantee Agency (MIGA) has set up the West Bank and Gaza Investment Guarantee Fund that provides both foreign and local eligible private investors with investment guarantees against political risks including expropriation, war and civil disturbance for up to USD 5 million per project.

Palestine Investment Fund 28. The Palestine Investment Fund (PIF) was established in 2000 as an independent public Palestinian investment company. PIF invests in viable and strategic projects that promote the development of the national Palestinian economy including in sectors such as telecommunications, electricity, real estate development and tourism.

Agricultural Policies 29. The Ministry of Agriculture is responsible for the formulation and implementation of agricultural policies. These policies centre on the preservation and growth of the agricultural sector and are designed with the primary aims of providing for a minimum level of food security and of encouraging agricultural development as a form of employment generation, in view of its labour intensive structure, and as a social safety net of supplemental family income.

30. A major issue facing agricultural development, and hence facing agricultural policy-making, is the scarcity of water resources. Policy responses aim at diversifying production by focusing on traditional agricultural products such as olives and olive oil while at the same time also encouraging the development of higher value-added cash crops which can be exported.

Industrial Policies 31. Although industry accounts for only around 10% of the GDP in 2008, certain industries have excelled within the Palestinian economy and in export potential such as the stone and marble industry, pharmaceuticals and processed foods. Palestinian industrial policy therefore aims at increasing investment in these sectors, including by providing suitable incentives. Policies also aims at increasing the value added in production, inter alia by increasing linkages between academic institutions and industry in order to foster innovative research and development. The Ministry of National Economy, which spearheads industrial policy-making, is working with the private sector and international partners to increase technology transfer and introduce automation and quality management concepts into this sector. Further work is being done on increasing the competitive capacity of Palestinian industry through sectoral clustering and the creation of export consortia.

IV. FOREIGN TRADE REGIME AND POLICY

32. Apart from risks and limitations resulting from security-related concerns, Palestine has a relatively open trade regime and provides a liberal business environment. There are no restrictions on foreign exchange, repatriation of funds and capital transfers. Apart from preferences accorded under bilateral and regional agreements, discriminatory barriers against foreign imports are limited to local preferences in government procurement.

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33. Palestinian trade policy is formulated and implemented by the Ministry of National Economy. Other Palestinian Authority bodies involved in the regulation of trade include inter alia the Customs Authority (operating under the Ministry of Finance), the Ministry of Health, the Ministry of Agriculture and the Ministry of Planning, as well as ministries and agencies involved in the regulation of services.

Tariffs and Indirect Taxes 34. Under preferential trade agreements concluded with Israel, the Arab States (Arab Free Trade Area), the European Communities, EFTA, Turkey and Canada, most goods originating in these countries enjoy preferential access to the Palestinian market. The same applies, on a reciprocal unilateral basis, to goods from the United States. Under the bilateral agreement on economic relations with Israel (the Paris Protocol), the Palestinian Authority agreed to harmonize most of its import tariff rates with Israeli import rates as a minimum floor. However, import tariff rates into Palestine are “unbound” under the Paris Protocol and the Palestinian Authority remains free to raise import tariffs at will. In practice, however, Palestinian tariffs are usually set at the same level as their Israeli tariffs. The Palestinian Authority may apply tariffs below Israeli tariff rates with respect to goods listed in annexes to the Paris Protocol.

35. Palestinian and Israeli customs authorities, acting in coordination under the Paris Protocol, have continued to implement trade liberalization reforms. The average applied MFN tariff has fallen from 10.8% in 2000 to 8.9% in 2005, with a maximum rate of 560%. Tariffs on agricultural goods average at a rate of 30%. The average MFN tariff on non-agricultural products is 5 %. About 50% of all tariff lines now carry a rate of zero.

36. Other duties and charges are set at zero. Domestic indirect taxes consist of a 14.5% VAT, a purchase tax of 5% to 20% on a number of "luxury goods", and various excise taxes; no distinction is made between foreign and domestic goods.

Customs 37. As agreed in the Paris Protocol, most Palestinian imports from countries other than Israel are at present cleared by Israeli customs on behalf of the Palestinian Customs Authority upon landing at Israeli ports and points of entry. The resulting tariff and VAT collections are transferred to the Palestinian Authority.

38. The Processing of imports is done through the use of a single administrative document, which is produced by ASYCUDA (an automated customs clearance system sponsored by UNCTAD). Customs valuation is performed by the Palestinian Authority in post-audit procedures, ensuring no delay in the clearance of the products.

Import Licensing 39. Import licensing requirements are maintained by the Palestinian Authority for purposes of tariff quota administration, safety and security reasons. The issuance of import licenses in most cases is automatic, with certain exceptions such as automobiles, military products, fissionable and radioactive materials, products which pose a threat to human, animal or plant health or life or to national security. Under the Paris Protocol, Palestinian and Israeli authorities are each responsible for the licensing of their respective importers.

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Export Regime 40. The Palestinian Authority does not currently apply export duties, taxes or other charges on exported goods. A wide range of products is subject to export control and licensing, mainly for sanitary and quality control. Automatic export licensing is the basis for the Palestinian Authority’s export regime, with some exceptions of products which cannot be exported without a license, relevant to security and security related technology.

Technical Regulations, Standards and Sanitary and Phytosanitary Measures 41. The entry of some goods into the Palestinian market is subject to requirements relating to technical regulations, sanitary or phytosanitary measures. The Palestinian Authority applies Palestinian measures to locally produced goods as well as all imports, including those from Israel. For third country imports Israeli requirements are usually enforced in addition at the time of entry, as agreed under the Paris Protocol, to avoid the indirect importation of sub-standard goods. Palestinian TBT and SPS measures are applied post-audit.

42. The Palestine Standards Institute, which was established in 1996 with a mandate to develop Palestinian standards, has already adopted 630 national standards. The Institute is in the process of developing a set of further standards in accordance with European directives. A process of consolidation of all governmental laboratories is under way, with the aim of converting the public health lab of the Ministry of Health into the Palestinian Food and Drug Administration, thereby unifying the address for SPS under one institutional structure, and ensuring efficiency within the process.

Trade in Services 43. The Palestinian Authority further maintains a relatively free trade regime for trade in services into and out of Palestine. The banking, insurance and other financial services sectors are regulated according to international standards and practices and in a non-discriminatory manner. In the telecommunications sector, a competitive market for mobile services is emerging. An independent telecommunications regulator is in the process of being established, which would include both the public and private sectors, and which would work on the regulation of the sector according to international standards and best practices.

44. Tourism, being one of the most important services sectors, is regulated by the Ministry of Tourism and Antiquities. A Public – Private Partnership has just been formed under the title of the “Palestinian Tourism Board” which will be handed over the power of regulating and recommending policies to the Government relevant to tourism. The tourism sector is currently loosely regulated and issues such as entry of foreign tourist guides in permitted with minimal requirements. The same is applicable for tourism transport services and tour operators.

Intellectual Property 45. As part of the 1995 Interim Agreement with Israel it was agreed that the Palestinian Authority would ensure that legislation and enforcement will be consistent with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The prevailing laws in Palestine, however, predate 1954 and need to be updated. The PA is in the process of drawing up legislation to conform to international standards with technical assistance from the World Intellectual Property Rights Organization (WIPO).

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Legal Framework 46. The Palestinian legal framework is a combination of several layers of laws ranging from British Mandate laws, Ottoman laws, Israeli military orders still in effect, Jordanian pre-1967 laws and Palestinian laws issued after 1995. A legal reform process is on the way, with new laws which have been adopted to replace old laws and drafts of new laws which are pending approval by the Legislative Council. Some of the new laws include the following:

Investment Promotion Law Corporate Registration Law Income Tax Law Quality Infrastructure Law Corporate Income Tax Law Capital Markets Authority Law Palestinian Monetary Authority Law Commercial Agencies Law

Draft laws pending approval include the following:

Movable Assets Registry Law Secured Lending and Leasing Commercial Leasing Law Commerce Law Foreign Trade Act Food Safety Law Plant Protection Law Veterinary Services Law Competition Law

Trade Agreements 47. A key trade agreement is the 1994 Paris Protocol, which provides for free trade in originating products between the Israeli and Palestinian markets and for cooperation between Israel and the Palestinian Authority with respect to aspects of the regulation of trade with third parties. Cooperation and harmonization measures aim to reduce risk of trade deflection and circumvention of trade measures.

48. The Palestinian Authority has concluded the following trade-related agreements in addition to the Paris Protocol:

The Technical and Economic Cooperation Accord between the Arab Republic of Egypt and the Palestine Liberation Organization of January 25, 1994, eases border restrictions and provides for the creation of free-transit areas and the use of Egyptian ports, airports and land borders.

The Trade Agreement between the Government of the Hashemite Kingdom of Jordan

and the Palestinian National Authority of January 26, 1995, provides for the duty-free import by the other party of 77 products originating in Jordan and 60 products originating in the West Bank and Gaza.

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The Euro-Mediterranean Interim Association Agreement on Trade and Co-operation between the European Communities and the Palestine Liberation Organization for the Benefit of the Palestinian Authority of the West Bank and Gaza Strip of February 24, 1997, formally brings Palestine into the emerging Euro-Med area and endorses the Palestinian Authority’s status as a full partner in the Barcelona process. It confirms concessions granted by the EU to the Palestinians since 1986 (duty-free access to the EU for Palestinian products subject to some agricultural quotas) and provides for financial and economic co-operation.

The Interim Agreement between the European Free Trade Area states and the Palestine

Liberation Organization for the Benefit of the Palestinian Authority of November 30, 1997, grants duty-free access to the EFTA markets for products from the West Bank and the Gaza Strip.

The Joint Canadian Palestinian Framework for Economic Co-operation and Trade of

February 27, 1999, provides for duty-free access for a number of Palestinian goods and services to the Canadian market.

The Arab Free Trade Area (AFTA), which was initiated in 1997 and to which the PLO is

an original signatory, opens the door for Palestinian exports to a large number of regional markets. In addition, the untapped potential through diagonal cumulation, provided by the Palermo Protocol, with countries in the AFTA who are also members in the Pan-Euro Mediterranean area, opens many prospects for exports to the Pan-Euro Mediterranean area.

49. Reciprocal preferences have been further established with the United States on the basis of unilateral action. The US Presidential Proclamation of November 13, 1996, grants duty-free treatment to products of the West Bank and Gaza entering the US market. The Palestinian Authority reciprocated unilaterally and granted US products duty-free treatment upon entering the West Bank and Gaza.

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WORLD TRADE

ORGANIZATION

WT/L/770/Add.1 23 October 2009

(09-5265)

Original: English

PALESTINE – REQUEST FOR OBSERVER STATUS

Communication from Palestine

Addendum The following additional communication, dated 22 October 2009, addressed to the Chairman of the General Council, has been received from the Permanent Observer Mission of Palestine to the United Nations and other International Organizations with the request that it be brought to the attention of the General Council.

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Palestine’s Request for WTO Observership – Normal Case, Normal Rules A "Separate Customs Territory” on the Way to Statehood

A few days ago Palestine's1 formal request for Observership in the WTO General Council and its subsidiary bodies was circulated to WTO Members (WT/L/770). Numerous discussions have indicated widespread support among Members for the Palestinian quest. During these discussions, some Members expressed an interest in further factual and legal information that would assist them in developing a better understanding of how Palestine fits into the WTO System, in particular in view of certain de facto constraints on the Palestinian government and the economic relationship with Israel under a bilateral agreement, the so-called Paris Protocol. This note aims to respond to that interest in some detail. It explains that Palestine's case for observership (and eventual membership) in the WTO is, in fact, a rather normal one: A "separate customs territory" aiming to make the first of the classical steps towards membership in the organization, as foreseen by the rules. There can be no doubt that Palestine under the Palestinian Authority is such a "separate customs territory". The very fact that Palestine entered into a bilateral trade agreement with partners such as Israel, the EC, EFTA, Canada or Turkey confirms its legal autonomy in trade matters. But even if the agreed cooperation with Israel under the Paris Protocol were taken as defining Palestinian regulatory autonomy (a result no government engaged in bilateral trade agreements would want to accept), the remaining policy space still leaves a Palestinian "separate customs territory" with regulatory authority in all key WTO areas such as tariffs, quantitative restrictions, subsidies, SPS, TBT, Services and IP. The Palestinian Authority through the Ministry of National Economy and Palestine's Mission in Geneva, remains at Members' disposal should additional background information or explanations be required.

1 The term "Palestine", referring to the West Bank and Gaza, is used here for easier readability, without

prejudice to questions of status.

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INTRODUCTION AND OVERVIEW The WTO system is characterized by the aim to foster a world trading system based on non-discrimination, market access, transparency, predictability, reliability and the rule of law. Both the WTO and its predecessor, the GATT, have cultivated a pragmatic approach in their aim to achieve universal coverage of disciplines on the regulation of international trade. Palestine, where trade regulation encompassing all areas covered by WTO law is practiced daily by the Palestinian Authority, can and should be included in this coverage.

Palestine and the WTO

Palestine seeks to proceed on its way towards full integration into the world trading system. Following its participation as an ad hoc observer in the session of the WTO Ministerial Conference in Hong Kong in 2005, Palestine is now seeking to obtain "full" WTO observership status, i.e., observership in the General Council and its subsidiary bodies as an interim step on the way towards WTO Membership. Palestine is on the way to becoming a normal member of the international community. A logical aspect of this normalization is the country’s integration into universal systems, including the international economic systems. Palestine specifically seeks integration as a normal player into the rules-based world trading system under the umbrella of the WTO, with rights and obligations. Palestine is ready to play by the rules, and wishes to rely on the rules, when trading with its partners. Integration into the world trading system also means to establish a firm basis and reference for current and future bilateral and regional trading arrangements. While continued and growing trade with Israel as a neighbour will remain a key element of Palestine’s current and future economic policy, Palestine’s producers, traders, service providers and intellectual property owners are taking a global outlook to gain and retain competitiveness in the future. WTO rules will provide an essential underpinning for their activities by guaranteeing important rights such as market access under agreed terms, non-discrimination and respect for proper administrative procedures. These rights will apply in relationships with all trading partners, except to the extent that bilateral or regional agreements specifically determine otherwise.

Palestine as a "Separate Customs Territory"

Unlike in other contexts where statehood might matter, Palestine’s situation vis-à-vis the WTO is rather simple. WTO observership (and membership) does not presuppose statehood. It is sufficient to be a "separate customs territory" – a criterion Palestine under the Palestinian Authority clearly meets. The very fact that the Palestinians concluded reciprocal trade agreements with Israel, the EC, EFTA, Canada or Turkey leaves no doubt about the required legal authority of the Palestinian side in all trade matters. This authority, incidentally, is also explicitly confirmed in the text of the Paris Protocol itself. The agreement under the Paris Protocol of both the Israeli and the Palestinian side to set standards for, and cooperate on, aspects of the regulation of trade with third parties does not diminish, but rather confirms their autonomy. No government could accept the alternative position – that autonomy as understood by WTO rules for purposes of status and eligibility is relinquished upon the entry into bilateral trade agreements. But even if the Paris Protocol were seen as defining somehow a priori the degree of Palestinian (and Israeli) autonomy in economic and trade policy making (which, as indicated, is obviously not the case), it is important to note that the agreement is in fact rather limited in its scope, as far as the regulation of trade with third parties is concerned. While the agreement establishes administrative cooperation and a certain degree of harmonization, key third-party trade competencies in all areas of WTO coverage, including in core areas such as tariffs, quantitative restrictions,

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subsidies, SPS, TBT, services and intellectual property rights, are left to the parties. Even under the Paris Protocol the Palestinian side thus clearly qualifies as a "separate customs territory." This note explains these two considerations in detail. It further adds reflections on additional aspects, namely the pragmatic tradition of the GATT/WTO in the furtherance of its regulatory goals, and the fact that the separate customs territory of Palestine is, according to the International Roadmap, arguably on the way to statehood. The phased integration of Palestine into the WTO system thus follows both the system’s own logic and, almost by coincidence, the logic of the international community’s plan for a durable peace in the Middle East 1. Palestine as a "Separate Customs Territory"

Palestine currently qualifies as a "separate customs territory" for purposes of observership in the WTO. (a) The Relevant Rules

The Rules of Procedure for Sessions of the Ministerial Conference and Meetings of the General Council (WT/L/161) provide in their respective Rule 10 that "[r]epresentatives of States or separate customs territories may attend the meetings as observers on the invitation of [the Ministerial Conference / the General Council](…)." Paragraph 1 of Annex 2 to the Rules clarifies that requests for observership "shall be examined on a case-by-case basis." The rules do not contain a definition of a "separate customs territory" for purposes of observership. The context, namely the idea that observership would be granted normally to countries that embark on WTO accession, however, appears to suggest that in principle "separate customs territories" should be read in light of Article XII of the Marrakesh Agreement, which talks of "any State or separate customs territory possessing full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement and the Multilateral Trade Agreements." The interpretation of what defines a worthy candidate for observership may further benefit from a careful contextual reading of Article XXIV:2 of GATT 1994, which defines a customs territory as "any territory with respect to which separate tariffs and other regulations of commerce are maintained for a substantial part of the trade of such territory with other territories." However, given that WTO coverage has moved well beyond the scope of the GATT 1947, in the context of which this provision and the concept of a "separate customs territory" was originally conceived, a careful interpretation is required. It is further important to note that the concept of "separate customs territory" is an autonomous GATT/WTO concept. It stands against a particular historical background and must be interpreted in light of its object and purpose. There are two broad functions that stand out. First, the concept serves to allow for, and ensure, coverage of the world trading system not only in states but also in all those territories outside of states where international trade, autonomous trade policy making and trade regulation occurs. It reflects both the aspiration of universal coverage of the multilateral trading system and the GATT’s traditional pragmatism underlying its focus on actual trade and trade regulation, avoiding "sticky" issues of status under international law. We explore this aspect further below. Second, the concept serves to ensure that every Member (and Observer) government is in a position to meaningfully negotiate, assume and implement obligations, and pursue rights, under the WTO agreements, including tariff concessions, specific commitments in services and the numerous disciplines under the Uruguay Round Agreements. The key question is, negatively put: Is the government subject to another government’s legal authority with respect to relevant areas of WTO

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coverage so that a meaningful application of commitments and participation in the WTO system cannot be assured. The Palestinian territory rather clearly qualifies as a "separate customs territory" under the said provisions. The key considerations in this respect can be summarized as follows. (b) The Existence of the Paris Protocol and other Trade Agreements Confirms the Status of a

Palestinian "Separate Customs Territory"

Palestinian economic relations with Israel are based on a treaty. The Paris Protocol concluded between the Palestine Liberation Organization and Israel in 1994, later included as the "Protocol on Economic Relations" in Annex V of the Interim Agreement of 1995. The Paris Protocol is an agreement under international law. Like other trade agreements it contains rules agreed between the two parties on various aspects of their bilateral economic relations and in addition addresses aspects of trade between them individually and third parties. It establishes essentially a weak form of customs union, in view of the far-reaching autonomy retained by both parties (for details see section C below). Customs unions are, of course, not unusual in the WTO. Several WTO Members have entered into customs unions or close free trade agreements with other countries, such as the Member States of the European Union, the South African Customs Union (SACU) or CARICOM, to name just a few. These and other WTO Members would hardly accept that anyone doubted their retention of "full autonomy in the conduct of their external commercial relations" as this is meant in the context of the WTO Agreement. Like other international trade agreements, the Paris Protocol is simply a reciprocal agreement on trade liberalization between the two parties, covering in addition certain aspects of their respective external (third-party) trade relations. The very fact that the Israeli and the Palestinian sides possessed the legal capacity to enter into this agreement demonstrates their autonomy to regulate trade. While this conclusion speaks for itself, it is interesting to note that the Paris Protocol itself confirms this autonomy explicitly in its preamble and throughout its provisions, consistently underlining the reciprocal nature of the specific obligations undertaken by both parties. The preamble, for example, establishes as the explicit premise of the agreement "mutual respect of each other's economic interests, reciprocity, equity and fairness". It goes on to speak of the Palestinian side's "right of economic decision-making in accordance with its own development plan and priorities," and recognizes the different ties the Israeli and Palestinian economies have with third parties. Given this explicit recognition of Palestine’s "right of economic decision-making", the text itself leaves little doubt as to the Palestinian autonomy in the sphere of trade regulation. Article I of the Paris Protocol further speaks of the "contractual agreement" established by the Protocol between the two sides. Numerous specific provisions further underline the reciprocal nature of the agreement. Article III:1, for instance, provides that "[t]he import and customs policies of both sides will be according to the principles and arrangements detailed in this Article." Either party would not want to see this interpreted as limiting its "autonomy in the conduct of its external commercial relations" – in fact, it of course confirms that autonomy. The very existence of the agreement thus demonstrates that the Palestinian side has autonomy in the conduct of its foreign trade relations, which it has exercised inter alia by entering into and operating in accordance with the agreement. The same applies with regard to Palestine’s other reciprocal preferential trade agreements with other parties, including the EC, EFTA, Turkey and Canada. All of these, of course, equally presuppose and hence confirm Palestine’s autonomy in external commercial relations.

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(c) Even under the Paris Protocol "Full Autonomy" Continues to Apply

Even if, arguendo, the Paris Protocol were seen as defining somehow a priori the degree of the parties` autonomy in economic and trade policy making (which, as indicated, is not the case), it is important to note that the agreement is in fact rather limited in its scope, as far as the regulation of external (third-party) trade is concerned. As a result, the agreement, primarily concerned with bilateral trade and economic cooperation, leaves enough room to both sides that both would qualify as "separate customs territories" even if the agreed cooperation under the Paris Protocol were understood to be "superimposed" (as opposed to agreed, as is the case). This becomes clear when the external trade disciplines contained in the Paris Protocol (the "PP") are compared to the coverage of WTO agreements. To name just a few:

Tariffs (GATT Article II): In the area of tariffs, both sides, like other members of customs unions, have agreed to largely align their policies. The construction, however, is unusual. It was agreed that the Palestinian side would apply the Israeli applied tariffs as its own minimum tariffs, except for goods contained in three lists annexed to the Protocol, where it retained the possibility to apply lower tariffs without further agreement. The result of this unusual construction is Palestinian "full autonomy" (for purposes of the WTO Agreement) even in the area of tariffs.

Symptomatic is that the Parties, logically, maintain separate tariff books. As the Parties

agreed in PP Article III para. 5.a that Israeli (applied) tariffs shall serve as the minimum basis for most Palestinian tariffs, the PA retains full autonomy in its ability to raise tariffs. GATT Article II, one of the WTO's key market access rules for goods, however, foresees that tariffs of WTO Members will be bound, in the form of upper limits (the "bound rates"), through each Members individual schedule of concessions. The PP thus regulates an aspect that is of little interest to WTO law, namely a minimum level of external tariffs, and leaves full Palestinian autonomy with respect to what WTO law aims to discipline, namely the raising of tariffs.

This, of course, includes the possibility to set tariffs above the Israeli WTO bound tariff levels

– another rather clear indication that the Palestinian customs territory is separate from the Israeli customs territory. It also demonstrates that Palestine is not legally covered by Israeli WTO commitments. Note that the agreement that the PA would not lower its tariffs below Israeli applied tariffs is simply a measure to stem the risk of trade deflection, arising because of (at the time) open borders between the parties.

Of course, as part of the future accession negotiations WTO Members may, on certain

products, seek to negotiate with the PA bound tariffs that are below the Israeli applied tariffs. In that case, the Palestinian side – like any other country engaged in a bilateral trade agreement which addresses the harmonization of third party trade – would have to either decline the request or seek renegotiation with Israel. The PP, incidentally, explicitly provides for the possibility of amending the annexed lists of goods, which would facilitate the process if need be.

Both would be rather normal negotiating situations in a WTO context. In any case, Palestine

retains "full autonomy" to either maintain current tariffs as agreed under the PP, to raise tariffs, as it is completely free to do under the PP, or to renegotiate the PP or its Annexes in order to reduce tariffs.

SPS Agreement: PP Article VIII addresses, beyond free bilateral trade in agricultural

products, the imposition of SPS measures. The provision, however, only aims to ensure that

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high standards are applied by both sides' veterinary and plant protection authorities, and that both sides cooperate effectively "based on mutuality" (para. 3) – another reconfirmation of the reciprocal nature of the agreement. With regard to imports from and exports to third countries, which is what WTO law would be concerned about, paragraph 2 of Article VIII states that the veterinary and plant protection services of each side will be responsible for importation and exportation. Para. 6 further clarifies that "the official veterinary services of each side have the authority to issue veterinary import permits." While the parties agree to apply "the professional veterinary conditions for Israel", the context makes it clear that this means (as for tariffs) minimum conditions -the agreement simply aims to ensure that no substandard products get transshipped through the Palestinian territory to Israel. Again, importantly, the Palestinian side retains full autonomy to set higher standards at will (which in practice it occasionally does, including vis-à-vis Israeli products) – something the SPS Agreement aims to discipline when it comes to imports from WTO Members. For the importation of plants and plant products from third parties the situation is similar. Para. 9 provides that the permits issued "will be based on the prevailing standards and requirements." Clearly, thus, the setting of standards (no upper limits) and the administration of SPS measures is left to both parties; Article VIII mainly addresses the mutually agreed need for good cooperation between the SPS authorities concerned. As a result, the Palestinian SPS administration is, as far as the trade focus of the SPS Agreement is concerned, almost entirely undisciplined by the PP.

TBT Agreement: Similar to its treatment of SPS measures, the PP in

Article III para. 10 foresees that for third country imports Israeli "standards" (obviously not referring to standards but rather to technical regulations in the diction of the TBT Agreement) apply as minimum standards for purposes of third party imports, to avoid deflection of sub-standard imports to the Israeli market -a normal measure in view of the then open trade borders between the two parties. This understanding of the provision results from a contextual reading and has never been in doubt in Palestinian-Israeli practice. Palestinian regulatory authorities have always retained and used the right to apply additional or higher standards, exemplified for instance by strictly enforced labelling requirements including, incidentally, on Israeli goods. In the area of standards proper (in the TBT diction), it is worth noting that the Palestinian Standards Institute has meanwhile issued over 600 national standards something the TBT Agreement would certainly aim to discipline under its Article 4 and the annexed "Code of Good Practice." Again, "full autonomy" when read in the specific WTO legal context is well beyond doubt.

GATT Article X (Customs Administration): Article III para. 14.a of the PP expressly states

that Palestinian customs is responsible for the implementation of the agreed-upon customs and importation policy at the entry points of the Jordan River and the Gaza Strip – the borders of the Palestinian Territory with parties other than Israel. As part of the agreed cooperation, Israeli customs officials are to be "present" and receive copies of relevant papers from the Palestinian customs officials. GATT Article X deals in particular with the administration of customs -here the PA is clearly autonomous, and hence, from the vantage point of WTO law, susceptible to disciplining under Article X. Again, the relevant "full autonomy" can hardly be in doubt. This legal result is, importantly, not affected by the at times limited adherence to the letter of the provision in practice in the past years. As the example of Georgia has shown, which acceded to the WTO with two regions which were not under its government’s effective jurisdiction,2such de facto limitations do not affect the legal character of the customs territory and the applicability of WTO principles.

2 See working Party Report on the Accession of Georgia, WT/ACC/GEO/31, para. 39.

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GATT Article XI: Quantitative Restrictions: The PP contains no limitations on the PA applying import bans or quotas on third-party imports or exports.

Import Licensing Agreement (AILP): PP Article III para. 9 provides that each side will

issue import licenses to its respective importers. The act of licensing (the actual procedure) by the respective authorities is thus not subject to PP disciplines at all. Those procedures, however, are the major concern of the AILP. Seen from the disciplines of a key WTO agreement, the Palestinian Authority and Israel remain entirely unconstrained by the PP. Note that the reference in para. 10 to "policies of import licensing," which are agreed to be aligned on the basis of Israeli practice, refers to the requirement of licensing as such. Apart from the fact that this is only partly regulated by WTO law, a contextual reading (and the corresponding Palestinian-Israeli practice) clarify that Israeli licensing requirements act as minimum requirements, and the Palestinian side remains free to add to them for goods destined for its territory. The very matter WTO aims to discipline, the potentially excessive use of licensing requirements, thus, remains unchecked by the PP.

Agreement on Agriculture – Subsidies Disciplines: The PP contains no disciplines on

agricultural subsidies. Both sides thus retain full autonomy in a key area of WTO concern.

SCM Agreement: PP Article IX expressly allows for the use of direct subsidies and tax breaks by the PA, with no limitations. The subsidization of products that may be exported to, or replace imports from, WTO Members is thus not disciplined at all. Again, a key area of WTO disciplines is not covered by the PP.

Trade Remedies under ADA, SCM and SGA: The PP contains no disciplines on the use of

trade remedies in third party trade. Palestine remains thus free to use them at will.

GATT Article XVII (State Trading Enterprises): The PP contains no disciplines on the operation of Palestinian or Israeli State Trading Enterprises in third-party trade. The issues addressed by GATT Article XVII thus remain unaddressed.

GATS: The PP contains no regulation of third-party trade in services by either party, except

for a mutual agreement on aspects of tourism management. This leaves almost the entire second pillar of WTO law -the GATS -untouched. The PA is thus entirely free to regulate trade in services as it pleases -obviously in "full autonomy." This applies also in bilateral services trade with Israel, with a few scattered exceptions (e.g. car insurance).

TRIPS: The PP does not cover intellectual property rights. Elsewhere in the Washington

Agreement ("Oslo II"), however (Annex III Protocol Concerning Civil Affairs, Article 24 of the Appendix), both parties agreed that

"Each side shall use its best efforts to adopt in its legislation standards of protection

of intellectual property compatible with those in the GATT Agreement on Trade Related Aspects of Intellectual Property (hereinafter "GATT-TRIPS").

Each side will strive to establish an adequate system for the examination of

applications for registration of intellectual property rights compatible with those in GATT-TRIPS."

Apart from the weak "best endeavour" nature of the obligation, this provision simply refers to

the TRIPS Agreement, a part of the single undertaking and as such non-negotiable for

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acceding countries. It is thus obviously a confirmation of, not a limitation on, the "full autonomy" referred to in the WTO rules on observership and membership.

Government Procurement Agreement: The PP contains no disciplines on government

procurement. The Parties remain entirely free in their policies.

This small "tour de force" (many details could be added) shows that the Paris Protocol, primarily concerned with bilateral trade, contains virtually no limitations on Palestinian third-party trade policy and regulation that have an appreciable effect on any of the key areas addressed by WTO agreements. Importantly, wherever the parties agreed to jointly apply minimum levels (as which, for practical purposes, they took Israeli measures), the Palestinian Authority retained (and exercises) unlimited authority to raise levels of tariff and non-tariff barriers on third country trade. It is thus obvious that even under the Paris Protocol the Palestinian Authority retains "full autonomy in the conduct of its external commercial relations in matters covered by [the WTO Agreements]." 2. Interpreting the Rules in Light of the WTO’s Traditionally Pragmatic Approach

Quite apart from these technical legal considerations, which speak for themselves, it is helpful to confirm the finding of "full autonomy" by looking at the function and history of the concept under consideration. The concept of a "separate customs territory," as indicated, is an autonomous GATT/WTO concept. It stands against a particular historical background and must be interpreted in light of its object and purpose. WTO rules both for membership and observership, unlike those of most other international organizations, are characterized by pragmatism rather than principle. The WTO system aims to work towards universal coverage of world trade, creating fair rules of competition, non-discrimination, predictability, reliability and the rule of law in international trade in goods, trade in services and trade-related intellectual property rights. With this aim in mind, and following the example of the GATT 1947, the WTO therefore treats access to the organization (membership or observership) in a highly pragmatic manner, aiming for maximum coverage of trade and trade regulation where meaningfully possible while avoiding to the extent possible political questions that are not related to the operation of the trading system. A number of cases both of original membership and accessions confirm this approach. Examples in point are the current full membership of the European Communities and their Member States, despite the fact that neither has exclusive jurisdiction in all matters covered by the WTO system (the EC, for example, only "shares" authority over GATS and TRIPS matters with its Member States). Other examples are the accessions and memberships of Chinese Taipei, Hong Kong and Macao, as well as the original GATT membership of the then not yet independent countries Rhodesia (now Zimbabwe), Burma (Myanmar) and, in particular, Ceylon (now Sri Lanka). The latter provides an interesting example inter alia because its de facto treaty making power, even in the absence of de jure treaty making power, was seen as sufficient to qualify. Illustrative is also the accession of the Principality of Liechtenstein, a state, which forms a close customs (and monetary) union with Switzerland. Originally (as expressly agreed in the Swiss accession protocol), Liechtenstein was deemed to be covered by the GATT through the Swiss participation. In 1994, however, without any change in the customs union agreement, Liechtenstein acceded as a separate contracting party to the GATT. At the time, both parties confirmed that Liechtenstein had the "full autonomy" required for a meaningful GATT participation. Instructive is the formulation used by Switzerland: "The Principality of Liechtenstein is not bound by any undertaking that might compromise its autonomy in the conduct of its external economic relations and in other matters covered by the General Agreement." This corresponds to the negative test suggested

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above: Is the government seeking observership or accession subject to (constitutive) legal constraints that would stand in the way of a meaningful application of WTO obligations and rights? The observership and later accession of Iraq, initiated only months after the fall of the previous regime, demonstrates that less than full control by a local authority over security aspects and internal order need not be an impediment for moving ahead on the trade front. All these examples confirm the said trade-oriented pragmatism as a key feature of the WTO system. In addition to, and apart from, the considerations reflected in Section 1 above, it is obvious that it would be rather strikingly inconsistent with the WTO’s aim (universal coverage of relevant trade regulation by entities exercising relevant regulatory powers) if the Palestinian territory, where separate and autonomous economic policy making and regulation affecting virtually all areas covered by WTO law occurs, were not considered eligible for observership. This should further inform and confirm the interpretation of the applicable rules in view of the object of purpose of the organization as such as well as the status of observership and the conditions for achieving it. 3. Palestine as a "State in the Making"

Irrespective of its current status, however, it is useful to note that Palestine – different from several other customs territories that have acceded to the GATT/WTO – is on its way to full statehood. The International Roadmap for Peace, sponsored by the "Quartet" (UN, US, EU & Russia), supported by the international community at large and accepted by both the Palestinian and the Israeli sides, envisages a "democratic, independent and viable Palestinian state." Palestinian WTO observership should be seen in light of this unambiguous direction, which despite many difficulties is reflected in developments on the ground. The Roadmap process, notwithstanding recognized difficulties, makes it likely that Palestine may start its observership as a separate customs territory but complete its accession as a state. This prospect provides important additional context for the decision on observership. Palestine is not only a "separate customs territory" now but further, supported by an international plan, aims to evolve into a state, at which stage all considerations as to its "full autonomy" will no longer matter. In this sense, the rules’ reference to "states and separate customs territories", read in their context (preparation for WTO accession) and their object and purpose (to identify those territories that exercise trade regulation that the WTO system aims to cover), should, arguably, be understood to cover Palestine not only as a separate customs territory but also, in addition, as a "state in the making." There is, as indicated, no need for Members to express a view on this matter at this stage or later. Because Palestine qualifies as a "separate customs territory," the prospect of future statehood only provides context to, but is not material for, any decision on observership or accession. 4. WTO Observership as a Reflection of Economic Reality and a Contribution to Peace

and Prosperity

With the increasing importance of principles and disciplines of World Trade Law in the region, Palestine’s trade policies should be based upon these rules with a view to foster its trade in the region and worldwide. As a first step Palestine therefore seeks to achieve observer status in the WTO in order to become fully acquainted with the multilateral trading system and with the view to de facto application of WTO rules. As indicated, it is the Palestinian government’s stated aim that the initiative shall eventually result in full WTO membership.

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In addition to the technical aspects discussed above, the following broader considerations further underline the logic of Palestinian observership:

Palestine’s trade policy is increasingly regulated by international agreements such as the Euro Mediterranean Interim Association Agreement between the EU and the PLO/PA and the Trade Agreement between the Government of the Hashemite Kingdom of Jordan and the Palestinian National Authority or unilateral acts under international law extending benefits to Palestine, such as the United States’ decision covering imports from Palestine. It appears logical in this context to anchor Palestinian trade policy in the global trading system.

It should be recalled further that Israel was a Contracting Party to the GATT since 1962 and is

a founding Member of the World Trade Organization. Imports and exports from other WTO members not only to Israel, but also to the Palestinian Territory are thus – de facto – often conducted in line with WTO rules and disciplines. Moreover, existing agreements binding to Palestine on more than one occasion implicitly or explicitly refer to WTO rules and thereby affect the framework of Palestinian trade policy. It appears therefore logical both for Palestine and its trading partners that Palestine moves towards formal participation in the WTO system.

Palestine’s future trade talks with its neighbours should be based on and led in the spirit of the

WTO system of principles and rules. Palestine is committed to open markets and to the removal of trade barriers which are still paramount in the region and which impair the development of Palestine’s economy.

Palestine is convinced that the principles and disciplines of the WTO will assist the peace

process to which Palestine is committed. They also provide a useful basis, and essential building blocks, for the processes of creating open regional trading systems.

Observer status, as envisaged by the rules, will bring about full information on the activities

in WTO. It will assist Palestine in building capacities and know-how in the field of trade regulation. It will facilitate the process towards further de facto, and later de jure, application of WTO law in Palestine. In the same vein, observer status in the WTO will also support Palestine in seeking trade agreements with its neighbouring states in compliance with WTO law.

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WORLD TRADE

ORGANIZATION

WT/L/792 13 April 2010

(10-1898)

Original: English

PALESTINE – REQUEST FOR OBSERVER STATUS

Communication from Palestine

The following communication, dated 12 April 2010, has been received from the Permanent Observer Mission of Palestine to the United Nations and other International Organizations.

_______________

APPLICATION FOR OBSERVERSHIP IN THE GENERAL COUNCIL AND ITS SUBSIDIARY BODIES

The Permanent Mission of Palestine to the United Nations and other International Organizations, has the honour to submit herewith its application for observer status in the General Council of the World Trade Organization (WTO) and its subsidiary bodies. In this connection, and pursuant to the General Council rules of procedure, it is the intention of Palestine to apply for the Membership of the WTO and accede to the multilateral trading system and its Agreements in the near future, within a maximum period of five years. This observer status within the WTO, will enable Palestine to better acquaint herself with the WTO and its activities, and to prepare and initiate negotiations for accession to the WTO Agreement, thereby furthering the potential to integrate in the multilateral trading system, as well as improving the livelihood and competitiveness of the Palestinian economy. This observership comes within the comprehensive plan and vision of state building set forth by Palestinian National Authority. Observership in the WTO is an important requisite to help build the necessary infrastructure of state institutions, provide the premise to review and establish a new comprehensive trade regime in line with rules governing multilateral trade as prescribed by the WTO Agreement, with the aim of encouraging sustainable development throughout Palestine, all of which are key objectives in creating an independent viable state. The Permanent Mission of Palestine would like to emphasize that this is a technical application, not a political action. This observership will be a cornerstone of constructive state building as a future Palestinian state will benefit from the technical assistance provided by the WTO. The Permanent Mission of Palestine would like to request that this application and the accompanying overview of the Palestinian economic policy and foreign trade regime are placed before the General Council for decision at General Council meeting in May 2010. Mission of Palestine would be grateful, Director General Mr. Lamy, if you would take all necessary steps invite WTO members to consider grant Palestine observership in General Council of May 2010.

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OVERVIEW OF THE PALESTINIAN ECONOMIC POLICY AND FOREIGN TRADE REGIME

I. INTRODUCTION

A. TERRITORY AND POPULATION

1. Palestine lies on the western edge of the Asian continent and on the eastern extremity of the Mediterranean Sea. Its territory comprises two parts - the West Bank, a landlocked area bordered by Israel and Jordan, and the Gaza Strip, bordered by Israel, Egypt and the Mediterranean Sea.

2. The Palestinian population of the West Bank and the Gaza Strip was reckoned at 3.8 million in the 2007 census, with 2.3 million living in the West Bank and 1.4 million in the Gaza Strip. The population has been growing at an annual rate of 3% in recent years. This rapid growth rate reflects both high fertility rates and the influx of Palestinians from abroad. The Palestinian literacy rate of 86.6% ranks amongst the highest in the Arab world. Arabic is the official language and the first language of virtually all Palestinians. English and Hebrew are also spoken. B. THE ECONOMY

3. Although it has undergone a significant process of modernization over the past decade, the Palestinian economy is still characterized by structural imbalances and high external dependence. Its vulnerability to external factors has meant that the economy’s performance over the past years has fluctuated widely.

Agriculture 4. The agriculture sector employs over 15.6% (2007) of the Palestinian work force. Its contribution to the economy varies from year to year, fluctuating with the two-yearly cycle of olive production, climate and the conditions of access to key neighbouring markets. Its share of GDP reached 6.3% in 2007. The variety of climates allows cultivation of a wide range of crops. Olive cultivation is traditionally the backbone of West Bank agriculture, accounting for half of all cultivated land and generating roughly a quarter of the income in this sector. Agricultural production was worth US$1.11 bn in 2006, of which livestock represented 36.3%; fruits, field crops and vegetables made up the remainder.

Industry 5. The industrial sector (mining and manufacturing) contributes around 10% to GDP. Small, owner-operated enterprises characterize this sector. Only 5% of enterprises employ more than 50 workers while nearly 90% employ less than five. There are approximately 11,500 establishments evenly spread over the various regions of the Palestinian territory.

6. Mining and stone-based industries are primarily concentrated in the southern areas of the West Bank where the quality of stone makes it highly competitive in export markets. The industry accounts for around 5% of GDP. Marble and stone exports to Israel, Jordan, other Arab countries and broader international markets have increased in the past years and now account for around 40% of total industrial exports.

7. Other principal industrial activities include food processing, manufacturing of chemicals and pharmaceuticals, clothing and textile, leather and building materials. Overall manufacturing activity has decreased in recent years.

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Services 8. The services sector is the largest contributor to the economy representing 55% of GDP according to 2008 statistics. Wholesale, retail trade, transportation and tourism are major sources of employment, accounting for roughly one third of the jobs in Palestine in 2008. The contribution of services to GDP has been underpinned in recent years by the doubling employment in the public sector since the establishment of the Palestinian Authority in 1994 in part reflecting the expansion in its operations and functions. The establishment of self-rule has stimulated the re-emergence of the banking sector. Whereas at the end of 1993 there were only four banks operating in the West Bank and Gaza, with just 16 branches, there are now 21 banks, with 190 branches. Construction services also witnessed a boost since the year 1993 with the peace accord with Israel and the donor assistance that flowed to the Palestinian territory thereafter.

9. Information and Communication Technologies is one of the fastest-growing sectors in the Palestinian Territory, mainly thanks to private telecommunications services and an innovative software industry. The growth rate of this sector has averaged 25–30% annually since 2000. The telecommunication infrastructure witnessed serious improvements over the past years. The Palestine Telecommunications Company (PALTEL) was established in 1995; Pal-Cell (Jawwal) was set up in 1999 to provide mobile phone services. In 2006, the number of telephone lines was approximately 321,999. Meanwhile, Jawwal counted 821,800 subscribers by 2006, compared to a mere 22,500 in 1999. A recent investment by Zain, the Kuwait-based telecommunications company, in PALTEL, which in a share-swap took over 100% of Zain’s mobile operations in Jordan, exemplify the growing dynamics of the Palestinian telecoms market.

10. One sector which has not yet realized its very significant growth potential, given the wealth of religious and archaeological sites, is tourism, despite significant investments in recent years in the hotel, travel agency, tourism-related transport and restaurant sectors.

External Trade 11. Palestine’s external trade is characterized by a significant trade imbalance. In 2007 total exports of USD 513 million were exceeded by imports of USD 3,141.3 million.

12. Israel is by far the largest trading partner. In 2007 about 73.4% of imported goods came from Israel, while 88.7% of Palestinian exports of goods went to Israel. In absolute terms, the bilateral trade deficit reflects the overall trend. Imports from Israel of USD 2,307 million were counterbalanced by exports to Israel of just USD 455 million in 2007. The situation is different with respect to trade in services. Here, Palestinian exports consistently (with one exception in 2004) surpass imports from Israel. In 2007 services exports to Israel (including labour) of USD 121.8 million were met by imports from Israel of USD 104.7 million.

13. Palestine’s other main trading partners are the European Union, Arab countries, European Free Trade Association (EFTA), various Asian countries such as India, China and others, the United States and Canada. Imports of goods from the EU and EFTA amount to approximately 10%, imports from Asia approximately 12%, and imports from Arab countries approximately 3% of total imports. The main Palestinian export products are stone and marble, fruits and vegetables, textiles and clothing, footwear and leather products, pharmaceuticals and chemicals as well as furniture and other wood products.

14. Palestinian exports of services to third countries include in particular telecoms, software development and consulting services. Software development services are traded with Arab countries, European countries and Canada, while consulting services are provided in particular to clients in Arab countries and Israel, as well as to International Development Organizations operating in Palestine.

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Services 8. The services sector is the largest contributor to the economy representing 55% of GDP according to 2008 statistics. Wholesale, retail trade, transportation and tourism are major sources of employment, accounting for roughly one third of the jobs in Palestine in 2008. The contribution of services to GDP has been underpinned in recent years by the doubling employment in the public sector since the establishment of the Palestinian Authority in 1994 in part reflecting the expansion in its operations and functions. The establishment of self-rule has stimulated the re-emergence of the banking sector. Whereas at the end of 1993 there were only four banks operating in the West Bank and Gaza, with just 16 branches, there are now 21 banks, with 190 branches. Construction services also witnessed a boost since the year 1993 with the peace accord with Israel and the donor assistance that flowed to the Palestinian territory thereafter.

9. Information and Communication Technologies is one of the fastest-growing sectors in the Palestinian Territory, mainly thanks to private telecommunications services and an innovative software industry. The growth rate of this sector has averaged 25–30% annually since 2000. The telecommunication infrastructure witnessed serious improvements over the past years. The Palestine Telecommunications Company (PALTEL) was established in 1995; Pal-Cell (Jawwal) was set up in 1999 to provide mobile phone services. In 2006, the number of telephone lines was approximately 321,999. Meanwhile, Jawwal counted 821,800 subscribers by 2006, compared to a mere 22,500 in 1999. A recent investment by Zain, the Kuwait-based telecommunications company, in PALTEL, which in a share-swap took over 100% of Zain’s mobile operations in Jordan, exemplify the growing dynamics of the Palestinian telecoms market.

10. One sector which has not yet realized its very significant growth potential, given the wealth of religious and archaeological sites, is tourism, despite significant investments in recent years in the hotel, travel agency, tourism-related transport and restaurant sectors.

External Trade 11. Palestine’s external trade is characterized by a significant trade imbalance. In 2007 total exports of USD 513 million were exceeded by imports of USD 3,141.3 million.

12. Israel is by far the largest trading partner. In 2007 about 73.4% of imported goods came from Israel, while 88.7% of Palestinian exports of goods went to Israel. In absolute terms, the bilateral trade deficit reflects the overall trend. Imports from Israel of USD 2,307 million were counterbalanced by exports to Israel of just USD 455 million in 2007. The situation is different with respect to trade in services. Here, Palestinian exports consistently (with one exception in 2004) surpass imports from Israel. In 2007 services exports to Israel (including labour) of USD 121.8 million were met by imports from Israel of USD 104.7 million.

13. Palestine’s other main trading partners are the European Union, Arab countries, European Free Trade Association (EFTA), various Asian countries such as India, China and others, the United States and Canada. Imports of goods from the EU and EFTA amount to approximately 10%, imports from Asia approximately 12%, and imports from Arab countries approximately 3% of total imports. The main Palestinian export products are stone and marble, fruits and vegetables, textiles and clothing, footwear and leather products, pharmaceuticals and chemicals as well as furniture and other wood products.

14. Palestinian exports of services to third countries include in particular telecoms, software development and consulting services. Software development services are traded with Arab countries, European countries and Canada, while consulting services are provided in particular to clients in Arab countries and Israel, as well as to International Development Organizations operating in Palestine.

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Imports and Exports, Main Indicators 2000- 2007 (Value in Million USD)

Indicators 2000 2001 2002 2003 2004 2005 2006 2007

Total Palestinian Exports 401.0 290.3 240.9 279.7 312.7 335.4 366.7 513.0 Total Palestinian Imports 2,382.0 1,515.6 2,033.6 1,800.3 2,373.2 2,666,8 2,758.7 3,141.3 Palestinian Net Trade Balance 1,981.0 1,743.3 1,274.7 1,520.6 2,060.6 2,331.4 2,392.1 2,628.3 Total National Exports 295.0 217.8 178.0 195.7 216.1 234.6 263.7 347.6 Total Re-Exports From Palestine 106.0 72.6 62.9 84.0 96.6 100.8 103.0 165.3 Total Exports From West Bank 323.0 251.9 208.1 234.4 272.8 294.2 332.8 490.7 Total Exports From Gaza Strip 78.0 38.4 32.7 45.2 35.0 41.2 33.9 22.3 Total Palestinian Imports from Israel

1,739.0 1,352.0 1,117.0 1,309.6 1,747.9 1,872.9 2,002.2 2,307.0

Total Palestinian Exports to Israel

370.0 273.0 216.0 256.0 281.1 290.6 326.6 455.0

Total Exports From West Bank to Israel

311.0 235.5 189.4 217.0 246.1 253.4 292.6 448.0

Total Palestinian Imports by Road

2,129.0 1,811.0 1,283.2 1,521.8 2,102.2 2,410.6 2,336.9 2,631.4

Total Palestinian Imports by Pipes and Nets

253.0 157.4 150.5 278.4 130.4 256.1 421.8 509.9

Total Palestinian Exports by Road

383.0 290.3 240.9 276.9 312.7 335.4 366.7 513.0

Total Palestinian Exports of Services to Israel

129.1 84.8 66.3 73.1 92.6 127.7 131.3 121.8

Total Palestinian Imports of Services from Israel

83.1 66.2 49.0 61.6 94.0 119.1 123.2 104.7

Palestinian Net Balance Trade in Services

46.0 18.5 17.3 11.5 -1.5 8.6 8.1 17.2

International Aid 15. Economic growth since 1993 has been underpinned by substantial inflows of foreign aid, designed to meet immediate challenges and requirements and to lay the foundation for longer-term economic growth. In 1994-98, Palestine received total aid of USD 3.46 billion, of which USD 2.6 billion was in support of the development plan. Inflows of donor funds were equivalent to an annual average of 21% of GDP during this period, and played a significant role in supporting the Palestinian Authority until it could build up its own revenue base. 16. The latest development plan (PRDP) met massive support in the 2007 Paris conference where the international community pledged USD 7.2 billion as budget support. II. OVERALL DEVELOPMENT STRATEGY

17. Remedying structural imbalances and laying the foundations of sustainable economic development have been the economic policy priorities of the Palestinian Authority since it took over the management of the economy in 1994.

Palestinian Reform and Development Plan 2007 18. The Palestinian Authority’s short-term economic development strategy (2008-2010) is laid out in the - Palestinian Reform and Development Plan (PRDP) of 2007. The PRDP is the most recent version of the Palestinian Development Plan (PDP), a government programme, updated on a rolling (year-by-year) basis, which sets the goals and strategies and establishes the general framework within which PA ministries and institutions allocate resources. The PDP was first introduced in 1997,

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following on from previous programmes, namely: the Emergency Assistance Programme for 1994 which focused on the rehabilitation of infrastructure; the Core Investment Programme for 1996, which identified the most urgent investment and technical assistance needs for physical infrastructure, housing and the social sector, private sector support and institutional development; and the Public Investment Programme for 1997. The latest PDP, now named PRDP, covers the period 2008-2010. 19. The August 2009 program of the current government includes direct and clear recommendations to initiate a sustainable economic recovery and to rebuild the national economy as a pillar of a modern Palestinian state in accordance with international practices. In this context, the Government has defined policy priorities in seven domains.

Creating an enabling investment environment: The Government will promote investment in Palestine through, inter alia, tax incentives to local and foreign investors. The Government will also develop the package of modern investment laws and regulations to promote investment and economic activity.

Promoting the role of private sector in social and economic development: Private business is an integral part of Palestinian society. The Government will act to enhance the role of the private sector in national development. The Government will also support the development of Palestinian private sector institutions to increase their capacity to represent the interests of their members.

Support Palestinian products and expertise: In all its procurement activities, the Government will give priority to Palestinian goods and services without prejudice to competition on grounds of cost and quality.

Developing national resources: Palestine is abundant with human resources, but has limited natural resources. Therefore, the Government will focus on developing human capital through an education system that meets the needs of a labour market in a productive and globally-competitive national economy. On the other hand, the Government will develop techniques to conserve and manage our limited natural resources for the benefit of the Palestinian society and economy.

Developing infrastructure: Insufficient and inadequate infrastructure is a major factor driving up the cost of production. The Government will develop national infrastructure, including industrial zones, electricity networks, roads, crossing points, and other critical infrastructure to reduce production costs and enable Palestinian products to be more competitive in the domestic, regional and international markets.

Transmit knowledge and support Palestinian innovation: In light of the rapid pace of globalization, Palestinian businesses need international exposure to benefit from international expertise and promote Palestinian goods and services overseas. The Government will support international knowledge transfer and marketing activities in order to develop and enrich the national economy. In addition, the Government will encourage Palestinian innovation through promoting research and development.

Expand bilateral and multilateral cooperation: The Government will develop and sign agreements on commercial cooperation with states that grant Palestine preferential treatment, and raise awareness and utilization of existing agreements. The Government will also continue efforts to enrol Palestine as a full member of the World Trade Organization, World Customs Organization and of other international bodies.

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III. ECONOMIC POLICIES

20. Palestine is applying with the full intention of reforming its economic policies and trade law in accordance with the rules and regulations of the WTO.

Fiscal Policies 21. Public finances are currently characterized by a significant deficit, financed primarily through foreign aid, most of it in the form of budget support. Government revenue currently accounts for about half of government expenditure. Around one third of government revenue is from internal sources (tax revenue and non-tax revenue); the remaining two thirds derive from customs duties and VAT levied on imports. Under the terms of the bilateral Palestinian-Israeli agreement on economic relations, the Paris Protocol, customs duties and import VAT are usually collected by Israeli authorities at the time of importation and remitted to the Palestinian Authority on a monthly basis. 22. As part of the 2007 PRDP the Palestinian Authority has embarked on an ambitious fiscal reform path with the aim of stabilizing government expenditure and reducing dependency on foreign aid. Progress on this path has been slow, however, and with USD 623 per head (June 2008) the Palestinian population remains among the recipients of the highest amounts of overseas development assistance worldwide. However, a freeze on public sector wages, limits on growth in public-sector employment and the improved collection of utility bills are contributing to a progressive stabilization of expenditure. Palestine Monetary Authority 23. The Palestine Monetary Authority supervises the banking sector, holds the Palestinian Authority’s foreign currency reserves and regulates foreign-exchange dealers. It is in the process of transforming into a central bank. Discussions to issue a Palestinian currency in the future are ongoing. At present the New Israeli Shekel, the Jordanian Dinar and the United States Dollar are used in the Palestinian Territory. 24. Local lending by Palestinian banks has been traditionally low, with banks preferring to invest deposits abroad. The Palestinian Monetary Authority enacted recently new regulations aimed at encouraging local lending. Investment Policies 25. While public investment has been rising steadily since 1994, underpinned by donor funding, private investment, other than in housing, has been very slow. The Palestinian Authority introduced a number of measures to stimulate domestic and foreign investment, in particular in productive sectors. These have taken the form of investment incentives, industrial estates and free zones and investment guarantees.

Investment Incentives 26. The 1998 Law for the Encouragement of Investment offers a series of incentives based on the capital invested and the labour force employed. It fully exempts investors from income tax according to the amount and the length of the investment, for a variable number of years, and permits free transfer of foreign currency and repatriation of income generated in the West Bank and Gaza Strip. The law applies uniformly to all investors, irrespective of their nationality.

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Industrial estates and free zones 27. The Law on Industrial Estates and Industrial Free Zones, enacted in 1997, established free zones for purposes of export to regional and international markets. The Palestinian Real Estates and Free Zones Authority, provides regulatory oversight and off-site infrastructure. It acts as a one-stop shop for all licenses, permits and official registrations needed. The Gaza Industrial Estate was the first to open in 1999; the latest is currently being established in Bethlehem where it is planned to cover over 50 hectares, employ around 500 people directly and generate another 1000 indirect jobs. Investment Guarantees 28. At the request of the Palestinian Authority the Multilateral Investment Guarantee Agency (MIGA) has set up the West Bank and Gaza Investment Guarantee Fund that provides both foreign and local eligible private investors with investment guarantees against political risks including expropriation, war and civil disturbance for up to USD 5 million per project.

Palestine Investment Fund 29. The Palestine Investment Fund (PIF) was established in 2000 as an independent public Palestinian investment company. PIF invests in viable and strategic projects that promote the development of the national Palestinian economy including in sectors such as telecommunications, electricity, real estate development and tourism.

Agricultural Policies 30. The Ministry of Agriculture is responsible for the formulation and implementation of agricultural policies. These policies centre on the preservation and growth of the agricultural sector and are designed with the primary aims of providing for a minimum level of food security and of encouraging agricultural development as a form of employment generation, in view of its labour intensive structure, and as a social safety net of supplemental family income. 31. A major issue facing agricultural development, and hence facing agricultural policy-making, is the scarcity of water resources. Policy responses aim at diversifying production by focusing on traditional agricultural products such as olives and olive oil while at the same time also encouraging the development of higher value-added cash crops which can be exported. Industrial Policies 32. Although industry accounts for only around 10% of the GDP in 2008, certain industries have excelled within the Palestinian economy and in export potential such as the stone and marble industry, pharmaceuticals and processed foods. Palestinian industrial policy therefore aims at increasing investment in these sectors, including by providing suitable incentives. Policies also aims at increasing the value added in production, inter alia by increasing linkages between academic institutions and industry in order to foster innovative research and development. The Ministry of National Economy, which spearheads industrial policy-making, is working with the private sector and international partners to increase technology transfer and introduce automation and quality management concepts into this sector. Further work is being done on increasing the competitive capacity of Palestinian industry through sectoral clustering and the creation of export consortia. IV. FOREIGN TRADE REGIME AND POLICY

33. Apart from risks and limitations resulting from security-related concerns, Palestine has a relatively open trade regime and provides a liberal business environment. There are no restrictions on

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Industrial estates and free zones 27. The Law on Industrial Estates and Industrial Free Zones, enacted in 1997, established free zones for purposes of export to regional and international markets. The Palestinian Real Estates and Free Zones Authority, provides regulatory oversight and off-site infrastructure. It acts as a one-stop shop for all licenses, permits and official registrations needed. The Gaza Industrial Estate was the first to open in 1999; the latest is currently being established in Bethlehem where it is planned to cover over 50 hectares, employ around 500 people directly and generate another 1000 indirect jobs. Investment Guarantees 28. At the request of the Palestinian Authority the Multilateral Investment Guarantee Agency (MIGA) has set up the West Bank and Gaza Investment Guarantee Fund that provides both foreign and local eligible private investors with investment guarantees against political risks including expropriation, war and civil disturbance for up to USD 5 million per project.

Palestine Investment Fund 29. The Palestine Investment Fund (PIF) was established in 2000 as an independent public Palestinian investment company. PIF invests in viable and strategic projects that promote the development of the national Palestinian economy including in sectors such as telecommunications, electricity, real estate development and tourism.

Agricultural Policies 30. The Ministry of Agriculture is responsible for the formulation and implementation of agricultural policies. These policies centre on the preservation and growth of the agricultural sector and are designed with the primary aims of providing for a minimum level of food security and of encouraging agricultural development as a form of employment generation, in view of its labour intensive structure, and as a social safety net of supplemental family income. 31. A major issue facing agricultural development, and hence facing agricultural policy-making, is the scarcity of water resources. Policy responses aim at diversifying production by focusing on traditional agricultural products such as olives and olive oil while at the same time also encouraging the development of higher value-added cash crops which can be exported. Industrial Policies 32. Although industry accounts for only around 10% of the GDP in 2008, certain industries have excelled within the Palestinian economy and in export potential such as the stone and marble industry, pharmaceuticals and processed foods. Palestinian industrial policy therefore aims at increasing investment in these sectors, including by providing suitable incentives. Policies also aims at increasing the value added in production, inter alia by increasing linkages between academic institutions and industry in order to foster innovative research and development. The Ministry of National Economy, which spearheads industrial policy-making, is working with the private sector and international partners to increase technology transfer and introduce automation and quality management concepts into this sector. Further work is being done on increasing the competitive capacity of Palestinian industry through sectoral clustering and the creation of export consortia. IV. FOREIGN TRADE REGIME AND POLICY

33. Apart from risks and limitations resulting from security-related concerns, Palestine has a relatively open trade regime and provides a liberal business environment. There are no restrictions on

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foreign exchange, repatriation of funds and capital transfers. Apart from preferences accorded under bilateral and regional agreements, discriminatory barriers against foreign imports are limited to local preferences in government procurement. 34. Palestinian trade policy is formulated and implemented by the Ministry of National Economy. Other Palestinian Authority bodies involved in the regulation of trade include inter alia the Customs Authority (operating under the Ministry of Finance), the Ministry of Health, the Ministry of Agriculture and the Ministry of Planning, as well as ministries and agencies involved in the regulation of services. Tariffs and Indirect Taxes 35. Under preferential trade agreements concluded with Israel, the Arab States (Arab Free Trade Area), the European Communities, EFTA, Turkey and Canada, most goods originating in these countries enjoy preferential access to the Palestinian market. The same applies, on a reciprocal unilateral basis, to goods from the United States. Under the bilateral agreement on economic relations with Israel (the Paris Protocol), the Palestinian Authority agreed to harmonize most of its import tariff rates with Israeli import rates as a minimum floor. However, import tariff rates into Palestine are “unbound” under the Paris Protocol and the Palestinian Authority remains free to raise import tariffs at will. In practice, however, Palestinian tariffs are usually set at the same level as their Israeli tariffs. The Palestinian Authority may apply tariffs below Israeli tariff rates with respect to goods listed in annexes to the Paris Protocol. 36. Palestinian and Israeli customs authorities, acting in coordination under the Paris Protocol, have continued to implement trade liberalization reforms. The average applied MFN tariff has fallen from 10.8% in 2000 to 8.9% in 2005, with a maximum rate of 560%. Tariffs on agricultural goods average at a rate of 30%. The average MFN tariff on non-agricultural products is 5 %. About 50% of all tariff lines now carry a rate of zero. 37. Other duties and charges are set at zero. Domestic indirect taxes consist of a 14.5% VAT, a purchase tax of 5% to 20% on a number of "luxury goods", and various excise taxes; no distinction is made between foreign and domestic goods. Customs 38. As agreed in the Paris Protocol, most Palestinian imports from countries other than Israel are at present cleared by Israeli customs on behalf of the Palestinian Customs Authority upon landing at Israeli ports and points of entry. The resulting tariff and VAT collections are transferred to the Palestinian Authority. 39. The Processing of imports is done through the use of a single administrative document, which is produced by ASYCUDA (an automated customs clearance system sponsored by UNCTAD). Customs valuation is performed by the Palestinian Authority in post-audit procedures, ensuring no delay in the clearance of the products. Import Licensing 40. Import licensing requirements are maintained by the Palestinian Authority for purposes of tariff quota administration, safety and security reasons. The issuance of import licenses in most cases is automatic, with certain exceptions such as automobiles, military products, fissionable and radioactive materials, products which pose a threat to human, animal or plant health or life or to national security. Under the Paris Protocol, Palestinian and Israeli authorities are each responsible for the licensing of their respective importers.

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Export Regime 41. The Palestinian Authority does not currently apply export duties, taxes or other charges on exported goods. A wide range of products is subject to export control and licensing, mainly for sanitary and quality control. Automatic export licensing is the basis for the Palestinian Authority’s export regime, with some exceptions of products which cannot be exported without a license, relevant to security and security related technology.

Technical Regulations, Standards and Sanitary and Phytosanitary Measures 42. The entry of some goods into the Palestinian market is subject to requirements relating to technical regulations, sanitary or phytosanitary measures. The Palestinian Authority applies Palestinian measures to locally produced goods as well as all imports, including those from Israel. For third country imports Israeli requirements are usually enforced in addition at the time of entry, as agreed under the Paris Protocol, to avoid the indirect importation of sub-standard goods. Palestinian TBT and SPS measures are applied post-audit. 43. The Palestine Standards Institute, which was established in 1996 with a mandate to develop Palestinian standards, has already adopted 630 national standards. The Institute is in the process of developing a set of further standards in accordance with European directives. A process of consolidation of all governmental laboratories is under way, with the aim of converting the public health lab of the Ministry of Health into the Palestinian Food and Drug Administration, thereby unifying the address for SPS under one institutional structure, and ensuring efficiency within the process. Trade in Services 44. The Palestinian Authority further maintains a relatively free trade regime for trade in services into and out of Palestine. The banking, insurance and other financial services sectors are regulated according to international standards and practices and in a non-discriminatory manner. In the telecommunications sector, a competitive market for mobile services is emerging. An independent telecommunications regulator is in the process of being established, which would include both the public and private sectors, and which would work on the regulation of the sector according to international standards and best practices. 45. Tourism, being one of the most important services sectors, is regulated by the Ministry of Tourism and Antiquities. A Public – Private Partnership has just been formed under the title of the “Palestinian Tourism Board” which will be handed over the power of regulating and recommending policies to the Government relevant to tourism. The tourism sector is currently loosely regulated and issues such as entry of foreign tourist guides in permitted with minimal requirements. The same is applicable for tourism transport services and tour operators. Intellectual Property 46. As part of the 1995 Interim Agreement with Israel it was agreed that the Palestinian Authority would ensure that legislation and enforcement will be consistent with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The prevailing laws in Palestine, however, predate 1954 and need to be updated. The PA is in the process of drawing up legislation to conform to international standards with technical assistance from the World Intellectual Property Rights Organization (WIPO).

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Legal Framework 47. The Palestinian legal framework is a combination of several layers of laws ranging from British Mandate laws, Ottoman laws, Israeli military orders still in effect, Jordanian pre-1967 laws and Palestinian laws issued after 1995. A legal reform process is on the way, with new laws which have been adopted to replace old laws and drafts of new laws which are pending approval by the Legislative Council. Some of the new laws include the following:

Investment Promotion Law Corporate Registration Law Income Tax Law Quality Infrastructure Law Corporate Income Tax Law Capital Markets Authority Law Palestinian Monetary Authority Law Commercial Agencies Law

Draft laws pending approval include the following:

Movable Assets Registry Law Secured Lending and Leasing Commercial Leasing Law Commerce Law Foreign Trade Act Food Safety Law Plant Protection Law Veterinary Services Law Competition Law

Trade Agreements 48. A key trade agreement is the 1994 Paris Protocol, which provides for free trade in originating products between the Israeli and Palestinian markets and for cooperation between Israel and the Palestinian Authority with respect to aspects of the regulation of trade with third parties. Cooperation and harmonization measures aim to reduce risk of trade deflection and circumvention of trade measures. 49. The Palestinian Authority has concluded the following trade-related agreements in addition to the Paris Protocol:

The Technical and Economic Cooperation Accord between the Arab Republic of Egypt and the Palestine Liberation Organization of January 25, 1994, eases border restrictions and provides for the creation of free-transit areas and the use of Egyptian ports, airports and land borders.

The Trade Agreement between the Government of the Hashemite Kingdom of Jordan

and the Palestinian National Authority of January 26, 1995, provides for the duty-free import by the other party of 77 products originating in Jordan and 60 products originating in the West Bank and Gaza.

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The Euro-Mediterranean Interim Association Agreement on Trade and Co-operation between the European Communities and the Palestine Liberation Organization for the Benefit of the Palestinian Authority of the West Bank and Gaza Strip of February 24, 1997, formally brings Palestine into the emerging Euro-Med area and endorses the Palestinian Authority’s status as a full partner in the Barcelona process. It confirms concessions granted by the EU to the Palestinians since 1986 (duty-free access to the EU for Palestinian products subject to some agricultural quotas) and provides for financial and economic co-operation.

The Interim Agreement between the European Free Trade Area states and the Palestine Liberation Organization for the Benefit of the Palestinian Authority of November 30, 1997, grants duty-free access to the EFTA markets for products from the West Bank and the Gaza Strip.

The Joint Canadian Palestinian Framework for Economic Co-operation and Trade of February 27, 1999, provides for duty-free access for a number of Palestinian goods and services to the Canadian market.

The Arab Free Trade Area (AFTA), which was initiated in 1997 and to which the PLO is

an original signatory, opens the door for Palestinian exports to a large number of regional markets. In addition, the untapped potential through diagonal cumulation, provided by the Palermo Protocol, with countries in the AFTA who are also members in the Pan-Euro Mediterranean area, opens many prospects for exports to the Pan-Euro Mediterranean area.

50. Reciprocal preferences have been further established with the United States on the basis of unilateral action. The US Presidential Proclamation of November 13, 1996, grants duty-free treatment to products of the West Bank and Gaza entering the US market. The Palestinian Authority reciprocated unilaterally and granted US products duty-free treatment upon entering the West Bank and Gaza.

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1

November 3, 2009

Legal Note on the Palestinian Authority‟s Request for WTO Observer Status

Introduction

1. The Palestine Liberation Organization (PLO) acting on behalf of the

Palestinian Authority has submitted an application to the WTO for observer

status in the General Council of the organization and its subsidiary bodies

(WT/L/770 dated October 6, 2009).

2. The request for observer status contains an overview of the economic policy

and foreign trade regime of the Palestinian Authority. The request is based on

the premise that the Palestinian Authority will be applying for accession "in

the near future, within a maximum period of five years". The request claims

that observer status will enable the Palestinian Authority to better understand

the WTO system and “to prepare and initiate negotiations for accession.”

3. Israel is of the view that the Palestinian Authority‟s request is inconsistent

with WTO rules and must be rejected on that basis. Granting the request

would create a problematic precedent under which governments that are not

states or separate customs territories with full autonomy will seek to become

WTO observers.

Accession and Observer Status Under WTO Law

1. The text of the Marrakesh Agreement Establishing the World Trade

Organization (WTO Agreement) does not explicitly address observer status

in the organization. (Article V concerns WTO relations with other

intergovernmental and non-governmental organizations and will not be

discussed here since the provision is not implicated by the Palestinian

proposal).

2. However, Article XII (1) of the WTO Agreement provides that the entities

eligible to accede to the organization are limited, namely: "any State or

separate customs territory possessing full autonomy in the conduct of its

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external commercial relations and of the other matters provided for in this

Agreement and the Multilateral Trade Agreements may accede to this

Agreement, on terms to be agreed between it and the WTO. Such accession

shall apply to this Agreement and the Multilateral Trade Agreements annexed

there to."

"Article XXIV (2) of GATT 1947 defines a "customs territory" as "any

territory with respect to which separate tariffs or other regulations of

commerce are maintained for a substantial part of the trade of such territory

with other territories."

3. The WTO Rules of Procedure for Sessions of the Ministerial Conference

and Meeting of the General Council (WT/L/161) explicitly link accession

and observer status. Rule10 of the General Council rules of procedure states:

"Representatives of States or separate customs territories may attend the

meetings as observers on the invitation of the General Council in accordance

with the paragraphs 9 to 11 of the guidelines in Annex 2 to these Rules."

Annex 2 sets forth Guidelines for Observer Status for Governments in the

WTO (while Annex 3 covers observer status for international organizations in

the WTO). Paragraph 3 of Annex 2 states that the "purpose of observer status

in the General Council and its subsidiary bodies is to allow a government to

better acquaint itself with the WTO and its activities, and to prepare and

initiate negotiations for accession to the WTO Agreement". This rule indicates

that observer status is reserved for those entities that are eligible for the

accession process.

Furthermore, Paragraph 4 of Annex 2 provides that governments requesting

observer status must express “the intent to initiate negotiations for accession

to the WTO Agreement within a maximum period of five years”. This

provision further confirms that observer status is inextricably linked with

accession.

4. Paragraph 5 of Annex 2 states: "The General Council shall examine requests

for observer status on a case by case basis." In other words, each case will be

handled on its own merits and a determination whether to grant observer status

in one case will not necessarily determine the outcome of other cases. This

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provision should not be viewed as granting carte blanche permission to allow

for „bending the rules‟ concerning observer status. To the contrary, under the

WTO‟s rule-oriented multilateral trading system, it is important to follow

established rules and procedures. These rules and procedures are essential for

ensuring clarity and predictability.

Since the creation of the rules in Annex 2, there has only been one case --

where the General Council granted observer status to the Holy See an entity –

not seeking accession to the WTO. As stated in the minutes of the General

Council meeting where observer status was granted to the Holy See, “Taking

into account the uniqueness of the Holy See’s situation, the General Council

further agreed to waive the requirement concerning the intention to initiate

accession negotiations set out in Annex 2 of the Rules of Procedure

(WT/L/161), on the understanding that this did not constitute a precedent for

further decisions on requests for observer status.” (WT/GC/M/21 dated

August 6, 1997). The major difference in the case of the Holy See is the fact

that it had submitted its request for observer status on behalf of the Vatican

City State which would be eligible for accession. This is not the case with the

Palestinians at this stage.

As we will discuss, the Palestinian Authority is not a “State,” or a “separate

customs territory possessing full autonomy,” and is not eligible at this time to

request the initiation of the accession process. Therefore, the Palestinian

Authority is not eligible for observer status in the General Council and its

subsidiary bodies and granting observer status would be contrary to the WTO

rules.

5. Under the above provisions, the requirements regarding a request from a

government for observer status involve at least the following two key points

that are dispositive of the Palestinian Authority‟s request:

a. there is a threshold question as to whether the applicant government is

a “State” or a “separate customs territory with full autonomy” under

Article XII(1) of the WTO Agreement.

b. there is a question under Paragraph 4 of Annex 2, as to whether the

government requesting observer status has the requisite intention to

accede to the WTO Agreement. (Although this was the consideration

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that was waived with respect to the Holy See it is irrelevant since the

Vatican City State would be eligible for accession to the WTO.)

6. First, the Palestinian Authority‟s request cannot survive the threshold

consideration. The Palestinian Authority does not fulfill the requirements for

observer status to the WTO in accordance with the WTO Agreement itself and

the General Council rules of procedure, because it is neither a "State" under

customary international law nor a "separate customs territory possessing full

autonomy in the conduct of its external commercial relations and of the other

matters provided for in this Agreement."

7. In addition, the Palestinian Authority cannot claim that it is a “separate

customs territory possessing full autonomy.” The Palestinian request refers to

various areas of Palestinian commercial and trade policy including tariffs,

customs, import licensing and technical regulations. However, as indicated by

the many references to the Paris Protocol (Protocol) signed in 1995, which

addresses bilateral economic relations between Israel and the PLO, the

Palestinian Authority does not have “full autonomy” with respect to these

areas.

8. The Protocol, particularly the provisions of Article III – Import Taxes and

Import Policy, demonstrates that the Palestinian Authority does not possess

“full autonomy” as required by Article XII(1) of the WTO Agreement and that

the Palestinian Authority lacks the “separate tariffs or other regulations of

commerce . . . for a substantial part of the trade of such territory with other

territories” to constitute a “customs territory” under Article XXIV(2) of GATT

1947.

Article III(10) of the Protocol states as follows: "Except for the goods on Lists

A1 and A2 and their Quantities - in which the Palestinian Authority has all

powers and responsibilities, both sides will maintain the same import policy

(except for rates of import taxes and other charges for good in List B) and

regulations including classification, valuation and other customs procedures,

which are based on principles governing international codes, and the same

policies of import licensing and of standards for imported goods, all as

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5

applied by Israel with respect to its importation. Israel may from time to time

introduce changes in any of the above, provided that changes in standard

requirements will not constitute a non -tariff barrier and will be based on

considerations of health, safety and the protection of the environment in

confirm with Article 2.2 of the Agreement on Technical Barriers to trade of the

Final Act of the Uruguay Round of Trade Negotiations.

Israel will give the Palestinian Authority prior notice of any such changes and

the provisions of par. 6 above will apply."

This provision clearly provides that, except for the goods identified in Lists

A1 and A2, the Palestinian Authority is subject to policies and regulations

established by Israel.

Rights and obligations under the Paris Protocol

9. The Protocol also distinguishes between goods identified in Lists A and B,

for which the Palestinians have been granted "power and responsibilities

in the sphere of import and customs policy" and all other goods imported

by the Palestinians, for which no complete autonomy exists. These Lists

contain a limited number of goods and specify the quantities that the

Palestinians may import. They cover a negligible portion of the

Palestinian imports and do not provide evidence that “separate tariffs or

other regulations of commerce are maintained for a substantial part of the

trade” of the Palestinian Authority.

10. The Palestinian Authority‟s description of the Palestinian Economic Policy

and Foreign Trade Regime further highlights that it lacks “full autonomy”

in commercial and trade matters. The Palestinian request refers in par. 34

to the fact that the Palestinians are free to raise import tariffs at will.

However, it should be noted that they are not permitted to charge less than

the prevailing rate of customs, purchase tax, levies, excise and other

charges prevailing at the time the Protocol was signed, as changed from

time to time by Israel for goods not listed in the Appendix to the Protocol

(see Article III.5.a).

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11. Para. 35 of the Palestinian request states that Israel and the Palestinians act

in coordination under the Protocol in implementing trade liberalization.

More accurately, as noted above, Article III.10 of the Protocol mandates

that the Palestinians maintain the same import policies as applied (and

amended) by Israel for goods (other than those in the Lists annexed to the

Protocol).

12. Para. 37 of the Palestinian request refers to post audit clearance

undertaken by the Palestinians. It should be noted, however, that customs

clearance as stipulated in the Protocol (Article III.10) is performed by the

Israeli Customs Authority and that the post audit clearance is an internal

procedure which in no way serves as a substitute for Israeli Customs

Authority clearance of goods.

13. Despite the fact that the Palestinians do have a certain degree of

independence with regards to issuing of import licenses, SPS and TBT

measures, as a result of the Protocol negotiations and a gesture of good

will on the part of Israel, their imports (except as regards the Lists) are,

in accordance with Article III.10 of the Protocol, under the Israeli import

policy regime.

14. The Palestinian request lists the trade related agreements they have signed

in addition to the Protocol. It is Israel's view that the signing of those

agreements are inconsistent with the provisions of the Israeli- Palestinian

Interim Agreement on the West Bank and the Gaza Strip signed in 1995.

Article IX of Chapter 1 of the Interim Agreement allows for the signing of

economic agreements between the Palestinian Liberation Organization

(PLO) with states or international organizations only "as specifically

provided in Annex V of this Agreement". Since, Annex V (the Protocol)

does not contain such provisions the agreements referred to in the

Palestinian request for observer status were signed without a legal basis

and in violation of the Protocol .

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7

15. The Protocol, as well as actual practice under the Protocol, has established

"a customs envelope" between the Palestinian Authority and Israel. In

response to the comparison of the Palestinian – Israeli relationship to that

of a customs union ( e.g. Lichtenstein and Switzerland – two independent

states), it should be noted that the Palestinians are not a "state" or a

"customs territory" in accordance with the definition of Article XXIV of

GATT 1947, therefore they can not become partners in a "customs

union". It is clear from the Protocol that Israel and the Palestinians do

not form a " customs union" but rather an "envelope" in which trade

policy is by and large determined by Israel. The Protocol does not confer

to the Palestinian Authority the status of a "customs territory" under

Article XXIV(2) of GATT 1947, much less a “separate customs territory

with full autonomy” under Article XII(1) of the WTO Agreement. It is

clear that the independence given to the Palestinians (through the Lists)

established in the Protocol is very limited and partial, and thus cannot be

said to fulfill the definitions of a “customs territory” provided for in

Articles XII of the WTO Agreement and XXIV (2) of GATT 1947.

16. Even though the Palestinian Authority‟s request states that the Palestinian

Authority intends to apply for accession in the near future, that intention

to accede to the WTO is inconsistent with the obligations and limitations

on the autonomy of the Palestinian Authority under the Paris Protocol, as

previously discussed. The Palestinians cannot accede to the WTO when it

has significant limitations on its autonomy under a valid, existing

agreement. Therefore, the Palestinian Authority does not have the

capacity to have the requisite intention to apply for accession.

In conclusion, it is Israel's view that at this point in time the Palestinian request for

observer status in the General Council and its subsidiary bodies can not be

accepted.

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http://wikileaks.org/cable/2010/02/10JERUSALEM357.html

Viewing cable 10JERUSALEM357, PALESTINIAN AUTHORITY REQUEST FOR WTO OBSERVER If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss themwith others. See also the FAQs

Reference ID Created Classification Origin

10JERUSALEM357 2010-02-26 17:50 CONFIDENTIAL Consulate Jerusalem

VZCZCXYZ0000

RR RUEHWEB

DE RUEHJM #0357/01 0571750

ZNY CCCCC ZZH

R 261750Z FEB 10

FM AMCONSUL JERUSALEM

TO RUEHC/SECSTATE WASHDC 7704

INFO RUEHXK/ARAB ISRAELI COLLECTIVE

RUEHSW/AMEMBASSY BERN 0179

RUEHBY/AMEMBASSY CANBERRA 0134

RUEHOT/AMEMBASSY OTTAWA 0001

RUEHKO/AMEMBASSY TOKYO 0656

RUEHGV/USMISSION GENEVA 0001

RHEHNSC/NSC WASHDC

RUCPDOC/DEPT OF COMMERCE WASHDC

RUEATRS/DEPT OF TREASURY WASHDC

C O N F I D E N T I A L JERUSALEM 000357

SIPDIS

NEA FOR IPA AND SEMEP; NSC FOR KUMAR; USTR FOR FRANCESKI,

KLEIN, AND VENKATARAMAN; GENEVA FOR USTR/SHARK

E.O. 12958: DECL: 02/25/2020

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2

TAGS: PREL ETRD USTR WTRO ECON KWBG IS

SUBJECT: PALESTINIAN AUTHORITY REQUEST FOR WTO OBSERVER

STATUS: USTR MEETINGS WITH PALESTINIAN OFFICIALS AND

PRIVATE SECTOR

REF: A. STATE 14912

¶B. 09 JERUSALEM 1993

¶C. 09 GENEVA 961

Classified By: CG Daniel Rubinstein, reasons 1.4 (b) and (d)

Summary

-------

¶1. (SBU) Representatives of the Office of the United States

Trade Representative (USTR) met with Palestinian Authority

(PA) and Palestinian private sector representatives to

discuss the PA's pending request for World Trade Organization

(WTO) observer status. PA Prime Minister Fayyad and Minister

of National Economy Abu-Libdeh described PA plans to use

observer status as a framework for needed reforms,

development of legislation, and institution building. They

emphasized that the PA would not use observer status as a

platform to politicize the WTO General Council. USTR

representatives also met with the PA Ministry of National

Economy's WTO Team to continue the joint review of the

existing trade regime begun in January (ref A), and with the

Palestinian Private Sector Coordination Council to stress the

importance of private sector involvement in the WTO process.

PA officials expressed appreciation for USG support of their

observership application in the General Council and its

subsidiary bodies, and asked for USG assistance and advice

for obtaining this objective. USTR, USAID, Embassy Tel Aviv,

and Post discussed potential areas for assistance, and the

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needed follow-up in Geneva and Washington. End summary.

¶2. (U) Cecilia Klein, Senior Director for WTO Accessions and

Import Licensing Issues, and Arun Venkataraman, Associate

General Counsel, from the Office of the U.S. Trade

Representative visited Jerusalem and Ramallah February 22-24.

Fayyad: WTO as a Tool for Statebuilding, Reform

--------------------------------------------- ---

¶3. (C) Prime Minister Salam Fayyad told USTR representatives

that the PA had made the decision to use the WTO agreements

as a framework for economic reform and institution building.

He stressed that observership would lend critical support to

his statebuilding efforts, and help ensure implementation of

reforms that conformed to international standards. Fayyad

acknowledged that there was a political dimension to the PA's

application, explaining that the political benefit of

observer status would be a natural consequence of membership

in the WTO community. However, the political benefit was not

itself the reason for the PA's efforts, Fayyad said.

¶4. (C) Fayyad stressed that the PA would approach the WTO in

a "serious way," and that it did not "serve our interests to

say we are ready for accession when we are not." He

underscored the PA's need for both technical and diplomatic

assistance in supporting these efforts, adding "we could wait

on observer status, but I honestly think that we can benefit

from association with the WTO."

¶5. (C) Fayyad acknowledged that Israeli acquiescence to the

PA application would be necessary, given the consensus-based

nature of the WTO. He called the road to WTO observership

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4

"tricky," adding that the GOI might try to link the PA's

request to other political issues. But, he said, "I'm

interested in getting to where we are going, not winning a

debate." The PA was prepared to discuss this issue frankly

with the GOI, he said.

¶6. (C) Turning to trade issues, Fayyad said that Palestinians

should take advantage of being next-door to an economic

powerhouse like Israel. "You will find," he told USTR, "that

on the basic WTO principles such as open market access, an

enabling investment environment, and low tariffs, you are

pushing on an open door -- these are all things I want." He

acknowledged that protectionist practices existed,

attributing them largely to aspects of the PA's customs

envelope with Israel (Israeli agricultural quotas, certain

high tariffs, and high taxes on luxury goods). The PA is

nonetheless trying to liberalize, he said.

¶7. (C) Fayyad said that his ideal would be a

non-discriminatory system with low tariffs across the board,

one that would be granted to trading partners "regardless of

reciprocity." In reference to the Paris Protocol, Fayyad

stated that he was "not keen on changing what exists." While

the Protocol is a much better a system than most people give

it credit for, he said, it is not being implemented as it

should be, and parts of it could be improved. Overall,

Fayyad claimed that the Protocol had served the PA well and

he could "live with it."

Abu-Libdeh: This is not a political issue

------------------------------------------

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¶8. (C) Minister of National Economy Hasan Abu-Libdeh pointed

to the inclusion of WTO observership in PM Fayyad's two-year

plan for statehood, noting that the PA intended to use

observer status as an impetus for timely implementation of

reforms based on WTO provisions and increased market access.

He emphasized that the application is not an "academic

exercise," but rather is necessary to bolster the PA's

ability to use international standards as the basis for

institution building. We are "toddlers, maybe even infants"

in trade policy, he said, and "we need your help and the help

of other members."

¶9. (C) Abu-Libdeh said that the PA is building the

infrastructure of a state, including a trade regime and a

functioning economy that does not depend on donor assistance.

"Everyone agrees that some day there will be a Palestinian

state," he said. "The difference between Israelis and

Palestinians is the definition of 'some day.'" He asked USTR

to inform the GOI of the PA's intention to request a

working-level meeting with the GOI to discuss their bid for

WTO observer status. Note: Ministry officials subsequently

confirmed to EconChief February 25 that they were moving

forward to request working-level meetings with the GOI on WTO

"and other issues." End note.

Review of the PA's Trade Regime

-------------------------------

¶10. (SBU) USTR representatives also met with the Ministry of

National Economy's (MoNE) WTO team for a full day to review

the PA's existing trade regime, clarify issues discussed in

the January PA-USTR telcon, and identify current trade policy

authorities and gaps in authority. The team included Hatem

Yousef, the PM's Advisor on Custom Reform and Taxes; Bashar

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6

Abaza, PA Customs and Excise; Fuad Shubaki, PA Customs; Tareq

Abu-Liban, Ministry of Agriculture; Hazem Shunnar and

Mohammed Sayyed, Palestinian Standards Institute; Saeb Bamia,

Private Sector Coordination Council; Maha Sabya, Corporate

Registration; Ramadan Bdieh, WTO Center; Saad al-Khatib,

advisor to the Minister of National Economy; and Nahid

al-Qudsi, IPR enforcement, MoNE.

¶11. (C) The MoNE team laid out its current efforts to use

WTO provisions as the framework for institution-building and

a thorough revision of trade and commercial legislation, and

briefed on the "WTO Roadmap for Palestine," a copy of which

is available on the unclassified website

www.intelink.gov/communities/state/palecon. USTR

representatives and the MoNE team reviewed in detail the

questions that USTR had prepared (ref A) on importation,

exportation, customs, trade agreements, tariffs, taxation,

policy mechanisms, transparency, lawmaking, trading rights,

price controls, technical barriers to trade and sanitary and

phytosanitary, agriculture, export duties, services, and

intellectual property. A more detailed report on this review

will be provided by USTR septel.

¶12. (C) During the review, USTR representatives noted that

the PA appears to have the authority under the Paris Protocol

over a significant number of areas covered by WTO provisions,

such as internal distribution of goods, trade in services,

import licensing, export regulation, intellectual property

rights, and agriculture support, even if this authority is

not currently fully exercised. At the same time, they noted,

there are also other areas, principally in customs processing

of imports, tariffs, and other border formalities, where the

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7

PA does not have full autonomous control. There are also

significant gaps in IPR protection enforcement and commercial

legislation. Authority in the area of standards and sanitary

measures is in the hands of the PA, but is exercised mainly

to enforce Israeli requirements on imports, as provided for

in the Paris Protocol.

¶13. (C) Klein stressed that WTO observership does not mandate

that an applicant for observer status be WTO-compliant, but

that it must have intent to initiate accession at some point.

USTR offered to ask U.S. experts to review draft PA

commercial legislation and provide comments. She also noted

that USTR would work with other USG agencies to ensure that

U.S. technical assistance supports PA reform efforts based on

WTO and to refine current programs, as necessary.

The Role of the Private Sector

------------------------------

¶14. (C) In a separate meeting with the heads of PA private

sector associations, Klein stressed the importance of

involving the private sector early in trade policy

decision-making and PA participation in WTO, since the

resulting reforms and tariff reductions would impact them

first and foremost. At their request, she outlined USG legal

requirements for trade policy coordination with the private

sector, Congress, and among agencies participating in the

Trade Policy Staff Committee (TPSC). She pointed out the

importance of communication with the PA concerning private

sector interests, in order to ensure effective use of trade

policy.

¶15. (C) Private sector representatives asked for USG

consideration of how technical assistance could be utilized

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8

to build capacity among their organizations to use the WTO to

benefit their members. The MoNE reported that it had

established several coordination mechanisms when WTO observer

status was first approached in 2001, including a "National

Task Force for Economic Development," composed of public and

private sector representatives and a WTO resource center that

acts as a technical advisory team. While coordination

activities have stalled since then, Saeb Bamian, chair of the

Private Sector Coordination Council (composed of

representatives from chambers and industry associations)

noted that the Council could provide mechanisms for ongoing

private sector involvement as the PA developed its trade

regime.

Next Steps for the USG and PA

-----------------------------

¶16. (C) Based on the results of the three days of

discussions, the USTR team stressed the importance of

re-focusing the PA's approach to WTO observership. They

suggested emphasizing that while the PA is not yet a state

nor a separate customs territory (with full autonomy over its

trade regime and the issues covered by WTO provisions), it is

recognized as a state in the making, it has significant trade

regime functionality, and it clearly intends to join the WTO

at some point. The PA was encouraged to consult with other

delegations in Geneva (not just missions in Ramallah and

Jerusalem) to build consensus for the application, dealing

frankly with current limitations in their trade regime and

emphasizing their efforts to use observer status to help

build the economy and expand the trade regime. She suggested

that the PA prepare a presentation for the consultations that

focused on economic reform and statebuilding and defused

concerns about political posturing. Klein also urged the PA

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9

to focus on observer status, rather than on accession.

¶17. (C) Klein emphasized that, as a WTO member, Israel's

acquiescence to the request would be necessary for the PA to

become a WTO observer. Klein noted the GOI's concerns about

the PA's efforts to prohibit sale of goods produced in

Israeli settlements and the possible use of PA WTO observer

status as a political platform that would disrupt legitimate

WTO work. She urged the PA to follow up on its proposal to

meet with the GOI at a working level. She said that USTR

intended to help as much as possible, and would review the

information and the materials provided by the PA in these

discussions, work with other USG agencies to refine suggested

technical assistance, and seek TPSC confirmation of the USG

position and a plan to support it in Geneva.

¶18. (U) This cable has been cleared by USTR's Cecilia Klein.

RUBINSTEIN

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مسودة ليست لمتداول

مقترح أولي لمأسسة عممية صياغة السياسات التجارية والمالية الخارجية الفمسطينية

2010ايار - كبير االقتصاديين في مؤتمر األمم المتحدة لمتجارة والتنمية –مقدم من رجا الخالدي

تحديات غير مسبوقة في مجالي التفاوض حول الوضع الدائم مع إسرائيل من جية، وميمة صياغة سياسة . ف.ت.تواجو ماقتصادية تنموية لمدولة المستقمة العتيدة من جية ثانية وكل ما يترتب عمى كمتي الميمتين من ضرورة اإلسراع في صياغة

برام اتفاقيات مع سائر الشركاء من خالل استراتيجيات تفاوضية تستند إلى الخبرة االقتصادية قرارسياسات تجارية وا وا والمعرفة الفنية والقانون التجاري الدولي، وتسعى لتحقيق المصالح التنموية الوطنية الحيوية واألمن االقتصادي الفمسطيني

. الدائم

وألسباب مختمفة ىناك اليوم تعددية غير مفيدة، بل مضرة، في القنوات والجيات الفمسطينية المتداخمة والمكمفة بقسم أوآخر :من ىذين الممفين المترابطتين

(الجانب التجاري لمعالقة االقتصادية مع إسرائيل ولالتفاقات التجارية الخارجية)وزارة االقتصاد الوطني

(الجانب الضرائبي لمعالقة االقتصادية مع إسرائيل)وزارة المالية

(الدبموماسي لالتفاقات التجارية الخارجية/الجانب السياسي)وزارة الشؤون الخارجية

(العالقة االقتصادية مع إسرائيل عامة)دائرة شؤون المفاوضات . / ف.ت.م

(السياسات االقتصادية والتجارية والمالية لمدولة العتيدة)رئاسة الوزراء

و تطرح المرحمة الراىنة تساؤالت حول مستقبل األراضي الفمسطينية المحتمة بين احتمال المزيد من اإللحاق بإسرائيل والخضوع لمصالحيا واإلمكانية األقل وضوحًا في نيل االستقالل وبسط سيادة الدولة في كل الميادين السيما االقتصادية

قامة مؤسسات الدولة.منيا :ومن اجل تفعيمةدور الممف االقتصادي والتجاري الفمسطيني في إطاريو التفاوضي وا

يجب أن توضع ممف العالقات التجارية واالقتصادية عمى طاولة التفاوض مع إسرائيل في مرحمة مبكرة لمايحممو ىذا الممف من أمور مصيرية تتعمق بمدى القدرة في تحقيق السيادة في القطاعات االقتصادية من جية و

ما سيكشف من مواقف إسرائيمية حول مدى االستعداد لمتعامل االيجابي مع المطالب السيادية االقتصادية الفمسطينية من جية ثانية؛

ذا كان سيحظى برنامج الحكومة ال بالحظ المنشود لو، فانو ال بد من تزويده بمضمون اقتصادي شامل 13وا الخارجية، ليس فقط مع إسرائيل بل أيضا (واالقتصادية)بما قي ذلك تصوير وتنفيذ منظومة العالقات التجارية

مع الجوار العربي واالتحاد األوروبي وتركيا والواليات المتحدة وغيرىا من الشركاء؛

بغض النظر عما سيترتب عمى الفترة القادمة من نتائج في مجالي التفاوض مع إسرائيل وفي التمييد المؤسسيإلقامة الدولة، فانو من المفيد استغالل الظرف الدولي االيجابي الحالي وقبل تقمب األوضاع لمسعي الجاد

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والمنيجي لدخول منظمة النجارة العالمية مراقبًا وذلك لما قد توفره ىذه الصفة مستقبال من إطار متعدد األطراف . لمتفاوض التجاري الخارجي، حتى ولو لم تحرر األراضي الفمسطينية من االحتالل اإلسرائيمي غداً

:وبغيةمعالجة التعددية المذكورة أعاله وتحقيق مزيد من االتساق والتكامل في األداء التفاوضي التجاري يقترح

إنشاء مرجعية مركزية لصياغة السياسات واالستراتيجيات التفاوضية التجارية الفمسطينية تعمل عمى تجميع الممفات التجارية الخارجية تحت مظمة واحدةوالتفاوض عمى أساسها مع األطراف الخارجية بالتعاون الوثيق مع

. المعنية. ف.ت.سائر مؤسسات السمطة الوطنية و م

أنأفضل صيغة تتجاوب مع االحتياجات الفمسطينية المذكورة أعاله عمى غرار الترتيبات المتبعة لدى الواليات المتحدة :، يتمتع بالصفات التالية"المفوض العامممتجارة الخارجية"واالتحاد األوروبي، أي ما تسمى ب

برام االتفاقيات التجارية بمرسوم رئاسيوبرتبة وزير .يمنح المفوض العام بصالحيات التفاوض التجاري وا ال يعمل بمفرده، بل يساىم مع الجيات المعنية األخرىفي عممية صياغة السياسات التجارية والمالية الخارجية.

مكون من" مجمس استشاري"يعمل المفوض العام بتوجيو و إشراف من قبل: o (رئاسة المجمس االستشاري)وزيرا القتصاد الوطني أو نائبو

o وزير المالية أو نائبو

o وزير الشؤون الخارجية أو نائبو

o وزير الزراعة أو نائبو

o رئيس سمطة النقد أو نائبو

o رئيس الجياز المركزي لإلحصاء أو نائبو

o مندوب مجمس تنسيق مؤسسات القطاع الخاص

o رئيس المجنة االقتصادية لممجمس التشريعي

o (والدائرة االقتصادية)دائرة شؤون المفاوضات . / ف.ت.م

o (عضو مراقب وأمانة سر المجمس االستشاري )مدير عام معيد ماس لمسياسات االقتصادية

يقوم المفوض العام بصياغة رؤية وأىداف ومواقف واستراتيجيات تفاوضية تجارية يتم إقرارىا من مجمس الوزراء . ف.ت.ومن رئاسة السمطة وم

تنشئ أمانة عامة مكونة من فنيين وباحثين ومفاوضين تجاريين لمساعدة المفوض عمى تأدية ميمتو.

يقومالمفوض العام بالتفاوض لتحقيق األىداف المعتمدة رسميًا وتوفر لو كل التسييالت الالزمة لذلك. يقوم المفوض العام بإشراك مسؤولين من الوزارات المذكورة في جوالت التفاوض المختمفة بحسب التخصص

.والممف وبجانب الفريق الفني الذي توفره األمانة العامة