The Price of Peace: A Reevaluation of the Economic Dimension in the Middle East Peace Process

Article excerpt

The economic offshoot of the Oslo Accords governing Israeli-Palestinian economic cooperation failed in 2000. The Paris Protocol as it was known, has become increasingly irrelevant due to the Israeli closures policy, disengagement, and economic policies aimed at maintaining the status quo, asymmetry, and dependence in Israel-Palestine economic relations. This article argues that not only is a new version of the Protocol urgently required, but that it should facilitate cooperation on some final status issues, including the future of Palestinian refugees and the economic status of Jerusalem. The greatest threat to a new protocol is a lack of trust and security that stems from political issues, ongoing disputes over settlements, and the non-resolution of final status issues. For international donors such as the US, the price of peace stacked against tackling the accumulating economic cost of related conflicts, terrorism and regional insecurity will make even long term and sustained investment look favorable.

Although Mahmud 'Abbas declared that he wanted to resume permanent status nego- tiations just after his election as president of the Palestinian National Authority (PNA) in January 2005, progress toward achieving a final settlement to the Israeli-Palestinian conflict has been stymied by a lack of political will to support it; from the Israeli gov- ernment, the PNA, and in particular from the US. A two-state solution was made more complex by the split between Fatah and Hamas after Hamas won Palestinian elections in Gaza in 2006, and then seized control of the territory in 2007. However, a moment of change came in September 2010, when the US government announced that fresh direct talks would begin between Israel and the PNA and would be concluded within one year.1 A year later, both sides were trying to distance themselves from any blame for their collapse. Notwithstanding the current impasse in negotiations, Shimon Peres, the president of Israel, has stated that that "you have to be prepared to pay the price of peace."2 This implied an Israeli willingness to negotiate all final status issues in the Road Map (RM), released on April 30, 2003.3 Such issues have generally included borders, the establishment of a viable Palestinian state, cessation and removal of Israeli settlements in the Occupied Palestinian Territories (OPT), a sustainable solution for the future of Palestinian refugees, the status of Jerusalem, and guaranteed security for all.4 However, there is an economic dimension to the peace process, originally articulated by the Israel/Palestine Center for Research and Information (IPCRI) and the Konrad Adenauer Stiftung (KAS ) economic working group in the Economic Road Map (ERM) of July 21, 2003, which placed economic cooperation at its core. The rationale was to mirror the US State Department's three phase Road Map for a Permanent Solution to the Israeli-Palestinian Conflict. The three phases included: returning to pre-intifada conditions in phase one, a modified Paris Protocol (hereafter, the "Protocol") in phase two, and determining final status economic issues in phase three.5 The Aix Group - a France-based partnership of Israeli, Palestinian, and international economists - has also built on this framework in 2007 following the failure at Camp David in 2000, and included a number of "fast track" issues: Palestinian labor, economic aspects of Pales- tinian refugees, economic cooperation in local development areas such as the Jordan Valley, and the economic status of Jerusalem.6

It is accepted that the ERM will follow the third phase of the Road Map. However, former PNA prime minister Salam Fayyad said that "there are opportunities" in building stability, security, and economic growth even under Israeli occupation.7 His resignation in April 2013, which many linked to the struggling Palestinian economy, has dealt a blow to future direct negotiations.8 Setting the right conditions on the ground is important, and there are already a number of NGOs working in the OPT and elsewhere that root their operations in the economic sphere, in areas such as developing "financial and physical infrastructure, trade, training and entrepreneurship" to contribute positively to confidence building, stability, and peace. …