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

Introduction to the Day Valerie Yorke London School of Economics May 2005 Economic Policy Introduction to the Day Valerie Yorke London School of Economics May 2005 Economic Policy Programme 2

This document is an output from a project funded by the UK Department for 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 2005 Economic Policy Programme 3

Purpose of Presentation • To provide overview of EPP work • To present: – Purpose of Presentation • To provide overview of EPP work • To present: – Main results – Interconnectedness of parts – Relevance and operational applicability – Contribution to requirements for workable WTO-compatible sovereign trade framework for statehood and beyond • To introduce EPP Overview “Planning for Statehood: – What has been achieved? What remains to be done? – Matrices of trade-related activities - suggested priorities – Work-plan with sequencing & timescales to statehood & beyond May 2005 Economic Policy Programme 4

What is the EPP? Who are the stakeholders? • Collaborative venture • Coordinated by What is the EPP? Who are the stakeholders? • Collaborative venture • Coordinated by MNE and LSE • Guided by MNE; Palestinian public and private sectors • Supported by multi-disciplinary team of senior international and regional lawyers, economists, technical experts • Funded by DFID; formerly by EU May 2005 Economic Policy Programme 5

Overall Purpose – 1 To Support an Economically-Viable Palestinian State Programme of policy support Overall Purpose – 1 To Support an Economically-Viable Palestinian State Programme of policy support : • Providing PA with policy analysis and advice, policy options, proposals for legal texts and strategies - across four interrelated tracks May 2005 Economic Policy Programme 6

Overall Purpose -2 To Support an Economically-Viable Palestinian State EPP Mandate • Economic permanent Overall Purpose -2 To Support an Economically-Viable Palestinian State EPP Mandate • Economic permanent status negotiations and transition • Development of trade and tariff options • WTO-compatible sovereign frame for trade • WTO accession May 2005 Economic Policy Programme 7

How is EPP implemented ? • • • PA horizontal guidelines and assumptions Drawing How is EPP implemented ? • • • PA horizontal guidelines and assumptions Drawing up of detailed TORs Co-ordinating and strategy sessions Missions to Palestine (fieldwork and interviews) Roundtables (Ramallah /London /Geneva) E-mail communications Studies, opinions, options, strategies Palestinian and consultant feedback Peer Review, Editing, Submission May 2005 Economic Policy Programme 8

PA Political and Economic Assumptions - 1 • Foundation of an independent, sovereign, viable PA Political and Economic Assumptions - 1 • Foundation of an independent, sovereign, viable Palestinian state • Separate customs territory • Political boundaries, territorial continuity, contiguity, one geographical unit • East Jerusalem as capital of Palestinian state Jerusalem an Open City or Divided • No Israeli settlement on territory • Open economic relations with Israel based on WTO rules May 2005 Economic Policy Programme 9

PA Political and Economic Assumptions -2 • Application for WTO observership leading to membership PA Political and Economic Assumptions -2 • Application for WTO observership leading to membership as soon as possible • Economic relations with Israel based either on NDTP or, as (as fall back), on FTA; • No formation of a CU this stage • No continued reliance on Paris Protocol • Continuation of Free trade arrangements with EU and US • Recognition of legitimate security interests only May 2005 Economic Policy Programme 10

What has Been Achieved? Legal / economic analysis and advice, options papers, proposals for What has Been Achieved? Legal / economic analysis and advice, options papers, proposals for draft legislation, strategies • Complementing each other • Within an overall coherent approach • Providing building blocks for – – – May 2005 negotiations development of trade policy options WTO – compatible domestic legislation and development of institutions to implement laws Economic Policy Programme 11

Diagram • Capturing / bringing together – PA assumptions – EPP mandate – Choice Diagram • Capturing / bringing together – PA assumptions – EPP mandate – Choice of options • Demonstrating flexibility of work in planning alternative outcomes • Sequencing the above for WTO accession May 2005 Economic Policy Programme 12

DAY ONE TRANSITION TO STATEHOOD = Path based on assumptions provided by PA for DAY ONE TRANSITION TO STATEHOOD = Path based on assumptions provided by PA for EPPIII D NDTP + FTA MINUS FTA Blocks `C` NDTP + SECTORAL AGREEMENTS Blocks `A` NDTP + SECTORAL AGREEMENTS = Decision Point PARIS PROTOCOL D NDTP ONLY TRANSITION TO DECISION PHASE May 2005 POST STATEHOOD D NDTP ONLY D CRITICAL PATH Economic Policy Programme TRANSITION TO WTO MEMBERSHIP AND BEYOND MEMBERSHIP 13

Session One -1 Preparations for Negotiations on Economic Permanent Status and Transitional Arrangements on Session One -1 Preparations for Negotiations on Economic Permanent Status and Transitional Arrangements on the Way Presentation of alternative forms of agreement with Israel (building blocks) • To meet economic / trade requirements of transition (including through a planned withdrawal from Gaza) • Which may accompany NDTP (MFN) and also constitute steps toward an eventual FTA with Israel later on May 2005 Economic Policy Programme 14

Session One - 2 Preparations for Negotiations on Economic Permanent Status and Transitional Arrangements Session One - 2 Preparations for Negotiations on Economic Permanent Status and Transitional Arrangements on the Way • Twenty Points Framework (2000) - reflecting Palestinian interests & principles • Legal studies (2000) • Transitional Arrangements (2000) • Options (legal texts) for trade arrangements with Israel (2003) May 2005 Economic Policy Programme 15

Session Two -1 Future Trade Policy Options: NDTP and keeping options open for an Session Two -1 Future Trade Policy Options: NDTP and keeping options open for an FTA with Israel Irrespective of shape of Palestine-Israel trade relations at statehood, Palestine will need a trade policy and tariff structure of its own, if it is to break out of the Paris Protocol May 2005 Economic Policy Programme 16

Session Two -2 Future Trade Policy Options: NDTP and keeping options open for an Session Two -2 Future Trade Policy Options: NDTP and keeping options open for an FTA with Israel • Options for Tariff Policy for Palestine - 4 scenarios – low and uniform - maintain FTAs with EU and US • NDTP: Risks and Challenges May 2005 Economic Policy Programme 17

Session Three -1 Towards a sovereign trade framework: main components, domestic legislation, reform and Session Three -1 Towards a sovereign trade framework: main components, domestic legislation, reform and WTO accession To conduct international trade relations and taking into account aspiration to accede to WTO Palestine will require: • Indispensable WTO-compatible domestic legislation • Institutions to implement that legislation. May 2005 Economic Policy Programme 18

Session Three - 2 Towards a sovereign trade framework Presentation of key features for Session Three - 2 Towards a sovereign trade framework Presentation of key features for Day One of Statehood, how they interrelate : • Foreign Trade Act • Border Control and transit • TBT and SPS issues including Food Safety Act and Technical Normative Infrastructure Law • Competition and Procurement Laws • [Tariff Act] Other areas to be addressed later on : foreign direct investment, IP May 2005 Economic Policy Programme 19

Session Three - 3 Towards a Sovereign Trade Framework Progress in developing WTO-compatible legislation Session Three - 3 Towards a Sovereign Trade Framework Progress in developing WTO-compatible legislation in line with best practice But challenge remains: To create infrastructure for Palestine to benefit from WTO agreements May 2005 Economic Policy Programme 20

Session Four Planning for Statehood: Next Steps for Palestine • How can EPP results Session Four Planning for Statehood: Next Steps for Palestine • How can EPP results be used in short, medium & long term? • What has been achieved? What remains to be done? Open discussion May 2005 Economic Policy Programme 21

Chart: Timescales, Sequencing and Countdown to Statehood May 2005 Economic Policy Programme 22 Chart: Timescales, Sequencing and Countdown to Statehood May 2005 Economic Policy Programme 22

Timescales, sequencing and countdown to statehood May 2005 Economic Policy Programme 23 Timescales, sequencing and countdown to statehood May 2005 Economic Policy Programme 23

ECONOMIC POLICY PROGRAMME TOWARDS AN ECONOMICALLY-VIABLE PALESTINIAN STATE: The Regulation of External Trade Monday ECONOMIC POLICY PROGRAMME TOWARDS AN ECONOMICALLY-VIABLE PALESTINIAN STATE: The Regulation of External Trade Monday May 23, 2005 Grand Park Hotel, Ramallah May 2005 Economic Policy Programme 24