Canada's Free-Trade Deal with Palestinians: A Smokescreen to Help Israel's Economy?

By Kutty, Faisal | Washington Report on Middle East Affairs, March 31, 1999 | Go to article overview
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Canada's Free-Trade Deal with Palestinians: A Smokescreen to Help Israel's Economy?

Kutty, Faisal, Washington Report on Middle East Affairs

Canada's Free-Trade Deal With Palestinians: A Smokescreen to Help Israel's Economy?

Canadian and Palestinian authorities are reportedly in the preliminary stages of negotiating a free-trade deal. According to an exclusive exposé in the National Post, there have been a number of meetings and a preliminary understanding could be signed as early as February of this year. A spokesperson for International Trade Minister Sergio Marchi confirmed that these talks are under way and may result in a framework agreement being tabled soon. "It's really old news for us," said spokesperson Leslie Swartman. "We're not breaking any new ground, but this is certainly part of our contribution to the peace process."

The contemplated deal comes two years after the Canada-Israel Free Trade Agreement (CIFTA) signed with great fanfare on July 31, 1996. The regulations passed to implement CIFTA were adopted on Dec. 30, 1996, and came into force on Jan. 1, 1997. The Canada-Israel pact removed tariffs from industrial products of Canadian or Israeli origin. Only women's swim wear, at Canada's request, and certain cotton fabrics, at Israel's request, were to continue to be subject to tariffs; even these were to be phased out over the first two and a half years.

The agreement also called for duty-free access or low duties on a variety of agricultural and fisheries products exported by both countries. For Canada, such items include grains, grain products, beef, maple sugar, alcoholic beverages and various processed foods. Both sides have excluded dairy, poultry and egg products. The countries also agreed to hold discussions on further liberalizing agri-food trade.

Since the agreement, two-way trade between the two countries has grown by 34 percent to $750 million. Israel attracted a record $3.7 billion in foreign investment last year, and despite the political risks, investors are still bullish. If not for the Palestinian thorn in the side, according to some observers, trade and industrial growth could be even higher. David Israelson wrote last year in the Toronto Star that "the troubled relationship between Israel and the Palestinians remains a stumbling block to even more growth in Israel's trade with countries such as Canada." This may explain the move toward the Canada-Palestinian Authority agreement.

The new agreement would cover the areas under the administrative "control" of Yasser Arafat's Palestinian Authority -- the West Bank and the Gaza Strip. According to Swartman, the deal would be signed by Canadian and Palestinian officials. Canada has never recognized Israeli claims over territory illegally annexed in the 1967 Six-Day War. Nevertheless, when the Canada-Israel free-trade pact was ratified on Jan. 1, 1997, Israeli settlers in the occupied territories benefited from the preferential economic relationship, but the Palestinians were left out. The new pact is supposedly aimed to remedy this situation. In fact, Swartman pointed out that it was explicitly stated when Canada and Israel agreed to free trade two years ago that similar treatment for Gaza and the West Bank would follow.

"We don't want to put anyone in an embarrassing position."

As expected, the news has elicited conflicting reactions from Arab/Muslim leaders and their Jewish counterparts. Bakr Abdul Munem, the Palestine Liberation Organization (PLO) representative in Canada, said that the pact would be another step closer toward nationhood. "Economically it will not benefit much for the time being," he told the National Post. "The most important [meaning] is a political one." This feeling is echoed by Atif Kubursi of the the National Council on Canada Arab Relations who feels that "It's not significantly substantive in terms of trade but it's extremely important in terms of symbolism." They may be jumping the gun. There is some indication that the deal will merely be an extension of CIFTA.

Israeli advocates counter that the pact only signifies economic support and not political recognition.

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Canada's Free-Trade Deal with Palestinians: A Smokescreen to Help Israel's Economy?


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