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The 1994 Paris Protocol on Economic Relations between Israel and the Palestine Liberation Organization (PLO) supposedly aimed to achieve two objectives: to enhance the parties' interest in peace and to strengthen the Palestinian economy. Twenty years after, neither of these goals were realized. If anything, the prospects of achieving them worsened over time. This study argues that the protocol's failure was largely due to the overall political and territorial context within which it was implemented. This context was so restrictive and damaging for the Palestinian side that any alternative economic arrangement which could have been negotiated between the parties in 1994 would have been equally incapable of delivering a different outcome.
Soon after Israel and the Palestine Liberation Organization (PLO) signed the Declaration of Principles on Interim Self-Government Arrangements (DOP) on September 13, 1993, two technical teams from both sides met intermittently in Paris, France over a period of six months to negotiate future economic arrangements. The product of their work, signed on April 29, 1994, was a formal document titled "Protocol on Economic Relations between the Government of the State of Israel and the PLO, representing the Palestinian people," more commonly known as the Paris Protocol.1 The protocol was originally intended as a five-year interim arrangement, but with the failure to reach a permanent political settlement by May 1999, the agreement has continued, de facto, to govern economic relations between the two sides.
The main goals of the Protocol were laid out in its preamble. "The two parties," it reads, "view the economic domain as one of the cornerstone [sic] in their mutual relations with a view to enhance their interest in the achievement of a just, lasting and comprehensive peace." "This protocol," it adds, "lays the groundwork for strengthening the economic base of the Palestinian side and for exercising its right of economic decision making in accordance with its own development plan and priorities"2 (empha sis added). Twenty years after, however, neither of these goals had been achieved. If anything, peace remained an elusive quest, no more attainable than it had been over the previous two decades. The Palestinian economy, meanwhile, is structurally weak and territorially fragmented, with the Palestinian Authority (PA) financially strained and chronically dependent on foreign aid for its...