Expert Group Meeting on Preferential Trade Agreements in the Arab region UN Economic and Social Council for Western Asia (ESCWA) Tunis Dec 5 – 6, 2012 PALESTINIAN TRADE POLICIES, REGIONAL INTEGRATION & TRADE AGREEMENTS 1 Palestinian National Authority Ministry of National Economy

Key economic indicators (2011) (Sources: 1.Palestinian Central Bureau of Statistics (2012), Press Report Preliminary Estimates of Quarterly National Accounts Second Quarter Palestinian Central Bureau of Statistics (2012), Labor Force Survey (April-June, 2012) Round (Q2/2012) report, Ramallah, Palestine. 3. PCBS: Registered Foreign Trade, 2010 (2012). 2 GDP at constant prices $6.3 billion Consumer expenditure $5.9 billion Investment expenditure $1.3 billion Government expenditure $1.6 billion Exports $ 575 million, Imports $3.9 billion (Note:2010) Net Exports $ -3.3 billion Labor force 1,059,000 Unemployment rate 20.9%

Sectoral Contribution to GDP (2011) (Source: Palestinian Central Bureau of Statistics – PCBS, National Accounts 2012 and Special Data Dissemination Standard – SDDS, IMF 2012). 3

Palestinian Exports by value and destination in 2010 (thousand $US) 4

Palestinian Exports by value and commodity in 2010 (thousand $US) 5

Palestinian Imports by value and commodity in 2010 (thousand $US) 6

Palestinian Imports by country of origin in 2010 (thousand $US) 7

Trade Regime and Policy 8 Palestinian trade is governed by the Paris Protocol (1994) which provides for “free” trade. As upheld by the Paris Protocol, the PNA has opted for a relatively open trade regime which provides a liberal and business-friendly environment. There are no restrictions on foreign exchange, repatriation of funds and capital transfers. Palestinian trade policy is formulated and implemented by the Ministry of National Economy. Other PNA bodies involved in the regulation of trade include, for example, 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. Palestine is in the process of establishing a trade regime that can become fully compatible with the principles and disciplines of the multilateral trading system.

Trade Regime and Policy 9 T ARIFFS AND I NDIRECT T AXES :Under preferential trade agreements concluded between the PLO and the Arab States (Great Arab Free Trade Area), the European Communities, EFTA, Turkey and Canada, most goods originating in these countries enjoy preferential access to the Palestinian market. C USTOMS : The processing of imports by the Palestinian Custom Administration is done through ASYCUDA-Tawasol, the automated customs clearance system developed with donor and UN technical support.

Trade Regime and Policy 10 Import Licensing: Import licensing is maintained by the PNA for purposes of tariff quota administration, safety and security reasons. The issuance of import licenses, in most cases, is automatic. There are certain exceptions, such as automobiles, military products, fissionable and radioactive materials, and products which pose a threat to human, animal or plant health or life, or to national security. E XPORT R EGIME : The PNA does not currently apply export duties, taxes or other charges on exported goods. A range of products is subject to export control and licensing, mainly for sanitary and quality control. Automatic export licensing is the basis for the PNA export regime, with some exceptions of products that cannot be exported without a license, relevant to security and security related technology. There are no export subsidies applied by the PNA.

Trade Regime and Policy 11 T RADE IN S ERVICES : The PNA has full regulatory jurisdiction over trade in services. It maintains a relatively free trade regime for most services; both for exports and imports. I NTELLECTUAL P ROPERTY : The PNA has committed to ensure that legislation and enforcement of intellectual property rights will be consistent with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The PNA is in an advanced process of drafting legislation to conform to international standards. L EGAL F RAMEWORK : The Palestinian legal framework is a combination of several layers of laws; ranging from British Mandate laws, Ottoman laws, Israeli military orders, Jordanian pre-1967 laws in the West Bank and Egyptian legislation in the Gaza Strip, and Palestinian laws issued after Comprehensive legal reform continues. New laws which have been adopted have replaced old laws; and several drafts of new laws are pending approval.

Trade Agreements 12 The 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, Recently, on April 13, 2011, the PNA and the EU signed a Duty Free-Quota Free Agreement, giving all agricultural products, processed agricultural products and fish and fishery products originating in the West Bank and Gaza Strip immediate duty free access to the EU market. 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.

Trade Agreements 13 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 Great Arab Free Trade Area (GAFTA), which was launched in 1997, and to which the PLO is an original signatory; opens the door for Palestinian exports to a large number of regional markets. The Technical and Economic Cooperation Accord Between the Arab Republic of Egypt and the Palestinian Liberation Organization of January 1994; eases border restrictions and provides for the creation of free-transit areas, and the use of Egyptian ports, air ports and land borders.

Trade Agreements 14 The Interim Free Trade Agreement between the Republic of Turkey and the Palestine Liberation Organization for the benefit of the Palestinian Authority, of February 12, 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. Negotiations of a trade agreement with MERCOSUR has been finalized, and the Palestinian Cabinet has approved the agreement. It is pending parliamentary ratification by the MERCOSUR members to come into effect. Furthermore, the participation of Palestine in the Agadir Agreement has been agreed in principle with the member countries, and negotiations will be soon launched.

Conclusions 15 Most of our trade (about 85%) is with Israel. Border closures and other barriers make trade very costly. Transport costs have added about 30-50% to the price of Palestinian products. Trade is not “free” in light of these very high transport and transaction costs. Apart from traditional Non-Tariff Barriers (NTBs), Palestinian trade is faced with Non-Traditional Non-Tariff Barriers (NTNTBs) which reflect the fact that Palestinian products are constrained twice!