May 2005Economic Policy Programme1 ECONOMIC POLICY PROGRAMME TOWARDS AN ECONOMICALLY-VIABLE PALESTINIAN STATE: The Regulation of External Trade Monday May 23, 2005 Grand Park Hotel, Ramallah

May 2005Economic Policy Programme2 Preparation of Negotiations on Economic Permanent Status and Transitional Arrangements Professor Thomas Cottier and Daniel Crosby

May 2005Economic Policy Programme3 This document is an output from a project funded by the UK Department for International Development (DFID) for the benefit of developing countries. The views expressed are not necessarily those of DFID.

May 2005Economic Policy Programme4 Background Two States Close economic interdependence of the Region Vital importance of workable economic relations between Palestine and Israel for lasting peace The Twenty Points Framework (2000) Legacy of Oslo Accords and Paris Protocol

May 2005Economic Policy Programme5 Key Assumptions Viable independent and autonomous State of Palestine No settlements and contiguity in and between territories Principles of open-market economy Respect of WTO rules and other international agreements

May 2005Economic Policy Programme6 The Context Total fluidity of current situation (Gaza, West Bank and Jerusalem) Uncertainty of political planning Economic relations essential part of Permanent Status agreement

May 2005Economic Policy Programme7 Final Goals Stable legal framework for the conduct of foreign trade compatible with WTO rules Optimal treaty relations with Israel Participation in multilateral and potential regional trading system Development of suitable, flexible, workable and adaptable transitional arrangements

May 2005Economic Policy Programme8 Options Under WTO rules, the following long-term options are available: –Unilateral trade regime based upon MFN (NDTP) –Sectoral Agreements compatible with WTO –Trade Agreements based upon NDTP including tariffs –Free Trade Agreement (no tariffs and QRs, services)

May 2005Economic Policy Programme9 Concept of Building Blocks Composite texts of fully drafted trade agreements with Israel (and possibly in part with other partners): –Option A: Self-standing sectoral agreements on specific issues –Option B: Comprehensive Trade Agreement –Option C: Comprehensive Free Trade Agreement, including services Building Blocks allow for different combinations (tool kit)

May 2005Economic Policy Programme10 Building Blocks Relationship to Overall Programme Building Blocks are part of overall Programme of support for Palestinian trade policy decisions Complement EPP papers and output: –Foreign Trade Act –Competition Law –Food Safety Law –Technical Normative Infrastructure Law –Intellectual Property

May 2005Economic Policy Programme11 Option A Sectoral Agreements from Day One –Self-Standing –Ensure critical trade infrastructure with Israel –May subsequently be incorporated in comprehensive agreements

May 2005Economic Policy Programme12 Sectoral Agreements Prepared (Option A) Border Controls, Jerusalem and Customs Cooperation Agreement Transit Agreement TBTs and SPS Agreement Labour Agreement

May 2005Economic Policy Programme13 Labour Agreement Access to labour markets and status of workers Preferential access to labour market (minimum quotas) National Treatment and MFN Professional Qualifications Border Controls Taxation and Social Security Labour Unions Access to Courts and International Dispute Settlement

May 2005Economic Policy Programme14 Option B Trade Agreement –Based upon MFN and NDTP –Less extensive coverage –Foresees combination of various sectoral agreements –Preparing for further economic integration, if and when desired

May 2005Economic Policy Programme15 Option C Free Trade Agreement –Comprehensive Agreement according to Article XXIV GATT and Article V GATS (services) –Abolition of all trade barriers in goods and services –Comprehensive economic integration

May 2005Economic Policy Programme16 Contents – 1 Preamble and General Principles General and Security Exceptions Safeguards and Subsidies Anti-dumping and subsidies TBT and SPS Border Control and Customs Transit

May 2005Economic Policy Programme17 Contents – 2 Services Intellectual Property Rights Competition and Government Procurement Protection of Investment Labour Dispute Settlement Institutional and Final Provisions

May 2005Economic Policy Programme18 Horizontal Rules to Limit Abuse of Exceptions (B/C) Foresee potential problems Detailed security exceptions Integrate problem avoidance and mitigation provisions in agreements

May 2005Economic Policy Programme19 Rules on Dispute Settlement (B/C) Effective and rapid dispute settlement by Joint Committee arbitration panels (B) and third party (Quartet) participation in Joint Trade Committee (C) and fast track Dispute Settlement Tribunal (C) Mandatory time limits National treatment in commercial arbitration Importance of WTO Membership to back up dispute settlement

May 2005Economic Policy Programme20 ECONOMIC POLICY PROGRAMME TOWARDS AN ECONOMICALLY-VIABLE PALESTINIAN STATE: The Regulation of External Trade Monday May 23, 2005 Grand Park Hotel, Ramallah