ECONOMIC POLICY PROGRAMME

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

2. Preparation of Negotiations on Economic Permanent Status and Transitional Arrangements Professor Thomas Cottier and Daniel Crosby Economic Policy Programme

3. 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. Economic Policy Programme

4. 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 Economic Policy Programme

5. 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 Economic Policy Programme

6. The Context • Total fluidity of current situation (Gaza, West Bank and Jerusalem) • Uncertainty of political planning • Economic relations essential part of Permanent Status agreement Economic Policy Programme

7. 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 Economic Policy Programme

8. 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) Economic Policy Programme

9. 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) Economic Policy Programme

10. Building Blocks Relationshipto 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 Economic Policy Programme

11. Option A • Sectoral Agreements from Day One • Self-Standing • Ensure critical trade infrastructure with Israel • May subsequently be incorporated in comprehensive agreements Economic Policy Programme

12. Sectoral Agreements Prepared (Option A) • Border Controls, Jerusalem and Customs Cooperation Agreement • Transit Agreement • TBTs and SPS Agreement • Labour Agreement Economic Policy Programme

13. 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 Economic Policy Programme

14. 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 Economic Policy Programme

15. 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 Economic Policy Programme

16. 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 Economic Policy Programme

17. Contents – 2 • Services • Intellectual Property Rights • Competition and Government Procurement • Protection of Investment • Labour • Dispute Settlement • Institutional and Final Provisions Economic Policy Programme

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

19. 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 Economic Policy Programme

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