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A Trade War with Israel Could be the Best Thing for Palestine

It would give impetus to initiatives by Palestinians seeking to weed themselves from decades of economic dependence

Last September, the Palestinian government headed by Prime Minister Mohammad Shtayyeh decided not to import calves from Israel.

Israel is not a calf-producing country, but its farmers often import calves, which they resell to Palestine at a hefty profit. Annually, 120,000 calves are imported for the Palestinian market at a price tag of about $200 million.

Israeli farmers, like other Israeli businesspeople who have been milking the Palestinian economy for decades, were caught off guard. They reacted angrily, putting pressure on the right-wing Israeli defense minister, Naftali Bennett, who, as part of his job, is the de facto military ruler of the occupied territories.

Bennett, in turn, ordered the army’s coordinator of activities in the territories to bar the import of Palestinian agricultural products.

With Palestinians undeterred, the Israeli army then escalated the trade war, this time by banning the export of Palestinian products via Jordan. The Palestinian government retaliated in kind in February by banning the import from Israel of most agricultural products, juices and bottled water.

Ironically, attempts by Israel and the United States to deny the fact that Palestinian territories are occupied can’t help but expose them to the fact that it is the Israeli military that makes all decisions in regard to Palestinian life.

A protracted trade war between the occupied Palestinian areas and Israel would be painful to the Palestinian economy, but not catastrophic. Current trade favors Israel so much that any long trade war would hurt Israelis more than it would Palestinians.

As of 2017, Palestine exported only $94.8 million worth of products compared to imports of $935 million, resulting in a negative trade balance of about $840 million. That year, the GDP of Palestine was $14.5 billion and its GDP per capita was $4,890; compare that to Israel’s GDP in 2017, which was $350.9 billion, or $40,559 per capita.

While Israeli political leaders, especially in an election year, might be tempted to begin a trade war with Palestinians, a prolonged trade war would not be to their advantage, as this one is giving impetus to initiatives by Palestinians seeking to weed themselves from a decades-long Israeli occupation and economic dependence.

Palestinian farmers have been given a great incentive to produce more and diversify their products, knowing they have a government that will protect and support them, one that is willing to take on the powerful Israeli occupiers while doing so.

A trade war would also encourage much more robust economic activities between Palestine and the overall region.

Arab countries, especially Jordan and Egypt, will be able to do much more business now that Israel has decided to flex its economic/military muscle against the Palestinians. Both have peace deals with Israel, and the Israelis are not going to want to hurt this strategic relationship with their Arab neighbors over the issue of trade between Palestinians and other regional players.

Naturally, the current problems require revisiting various Palestinian-Israeli agreements.

While there is a lot of talk on the Palestinian side about ending the Oslo Accords, there has been little discussion about ending the1994 Paris Protocol, which set out the economic relationship between Palestine and Israel. In fact, Palestinians have been calling for some time for the need to revisit this important agreement with an eye to widening it and relaxing some of its restrictions.

While the current trade war will not make such a request easy, it is highly possible that in the absence of a political deal in the near future, sane leaders on both sides will understand and even encourage economic reforms, ensuring that Palestine and its government do not collapse under man-made economic pressures.

Ever since Shtayyeh, a Fatah leader close to Palestinian Authority President Mahmoud Abbas, become prime minister, he has been publicly talking about – and quietly enforcing – a policy of gradual disengagement from the Israeli occupation. He understands that ending the occupation will not happen while Palestinians are so dependent on Israel.

The current economic troubles are the perfect opportunity for a strategic change of policy toward a more independent economic outlook. Such a change might not be easy and might be costly in the short and medium terms, but in the long term, it could be the most important step toward political independence.