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Israel and the Palestinian Economy: Integration or Containment?

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The paper analyses the Paris Economic Protocol drawing conclusions on the relationship that it established between Israel and Palestine. Designed to be an interim agreement to expire in 1999, the Paris Protocol was never withdrawn and established a de facto control of Israel of the Palestinian economy and policies. The protocol’s provisions in fact ruled that: Palestine could not have its own currency, which undermined its capacity to develop its own economic policies; the movement of labour from Palestine to Israel, an important part of the Palestinian economy from 1967, was restricted; while a de facto custom union was created, with Israel deciding over the tariffs, sensible restrictions on the movement of goods were provided, with all the borders controlled by Israel; imported goods were only taxed if directly imported by Palestinian company, but those imported by Israeli companies and then shipped to the territories were not eligible for customs duty; the refund of purchase taxes to the PA was often refused by Israel and it periodically freeze tax revenues. The analysis of the mechanisms, restrictions, control of Israel over the territories shows that Palestine was de facto unable to develop its own economic policies and thus to plan for the and what kind of developmental path it wanted to take. The PEP unveils itself as a control mechanism aimed at protecting the Israeli economy, while constraining the Palestinian one.  

Final Review Date: 
Saturday, April 17, 2021
Publication Year: 
Routledge Curzon
London|New York
Book Title: 
State Formation in Palestine: Viability and Governance During a Social Transformation