ECONOMIC POLICY PROGRAMME

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

2. Towards a Sovereign Trade Framework: Border Regime Tom Hughman Economic Policy Programme

3. 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. Economic Policy Programme

4. Continuing Assumptions • NDTP on statehood • Contiguous border • Sovereign corridors / `Safe Passage` • Early membership of WTO & WCO Economic Policy Programme

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

6. Trade Policy Choice • Irrespective of trade policy responsibilities of Customs greatly extended on Day 1 Statehood • Develop from audit-based monitoring role to direct responsibility for financial and physical clearance at the customs frontier • Greatest challenge is following a strategy to create and implement minimum standards of operation Economic Policy Programme

7. Continuing the Customs Union • PA / EPP assumptions focus on NDTP & FTA • Limited comment regarding the existing quasi Customs Union (CU) or a full CU with Israel • Much of procedural change, institutional development and reform strategy are similar • Key differences relate to levels of co-operation and amount and location of resources • Considering both Customs and other border related controls. Economic Policy Programme

8. Statistics and Trade Policy • Increase in the number of formal Customs declarations from current levels: • Full import declarations = 35,000 • Simplified VAT declarations = 110,000 • Under NDTP the number of full declarations will increase to 145,000 (400%) • Even under an FTA same number of declarations – although format might be simpler Economic Policy Programme

9. Strategy and Planning • Supporting legislation (Customs Act) • Institutional capacity building • Building border infrastructure • WCO membership • Transit & Safe Passage • Jerusalem • Agreements with Israel Economic Policy Programme

10. Legislation – Customs Act • Provides legal basis for the administration and enforcement of customs operations • Replaces the Paris Protocol • Ministry of Finance in 2002 requested GTZ, to assist with drafting • Created in parallel to FTAP • Legislation to reflect international standards and complement the FTAP • Draft reportedly submitted by GTZ in late 2003 Economic Policy Programme

11. Customs Administration • Need to develop straightforward and efficient customs operations • In 2002 / 3 EPP examined implications for customs development under NDTP or FTA • Identified minimum customs institutional requirements - `international best practice` • Suggested strategies how new roles and responsibilities might be managed • Provided likely timescales and work plan for the transitional period to statehood Economic Policy Programme

12. Development Strategy • Study submitted to MNE & MOFin April 2003 • Subsequently used as a strategic planning tool by Customs Department • Shared with the World Bank in Summer 2003 • Period of 4 years to develop and implement required procedures and infrastructure • Timescale conditional on: • agreed programme of development • local commitment • government support • provision of major donor investment Economic Policy Programme

13. Border Regimes and Infrastructure • Need to develop border clearance infrastructure as soon as practicable • If no agreed border line – consider placing facilities near the perceived border line to allow immediate commencement of development • Development stage of 4 years is likely to form the `critical path` in any strategic planning Economic Policy Programme

14. Agreement with Israel • Agreements with Israel to facilitate trade through customs cooperation involving • exchanges of information • development programmes to fight cross border crime • simplification of procedures • establishment of joint committees to oversee /monitor the agreements Economic Policy Programme

15. Further Agreement with Israel Under FTA better political and economic relations should allow • enhanced levels of cross-border co-operation • Increased negotiated agreement • a greater sharing of operational intelligence • longer term possibilities for shared border control facilities Economic Policy Programme

16. Transit - Priorities • Priority to be given to development of transit agreements with neighbours (including Israel) • Required to secure access of goods to the Palestinian territory • Need to be in accordance with pertinent international standards and agreements • Consider becoming a contracting party to the TIR Convention at the earliest opportunity • Liaise with the International Road Union (IRU) regarding preparations for accession to TIR Economic Policy Programme

17. Safe Passage • West Bank and Gaza Strip to be considered legally contiguous • Principles of sovereignty to be agreed • Movement of goods, people, and transport between the territories not “traffic in transit” • Agree that routes will not: • Disrupt Israeli transportation and other infrastructural networks • Endanger the environment, public safety or public health Economic Policy Programme

18. Jerusalem - Principles • PA / EPP work assumes mutually recognised sovereign capitals in East & West Jerusalem respectively • Trade policy and associated border regime account for specific needs of Jerusalem • Jerusalem assumed to be an Open City where goods and people circulate freely Economic Policy Programme

19. Jerusalem - Approach • Many functions need to be undertaken by a joint municipal structure • Special control mechanisms need to be employed • labeling of goods destined for consumption in the city • statistical control of goods entering and leaving Jerusalem • number plate readers to monitor the flow of traffic and trade • audit-based customs controls to provide a ‘light touch’ Economic Policy Programme

20. WCO Principles • Principles contain international best practices for Customs activities • Minimum operating standards within the Kyoto Convention. • WCO would provide guidance, support and an international forum • Currently criteria not met for WCO observership and accession • WCO internal guidelines hinge on “the absence of any obvious geopolitical sensitivities” Economic Policy Programme

21. WCO Membership • Once `sensitivities` subside Palestine to request invitation to attend WCO meetings • Become an official `Observer` • Meanwhile consolidate position by; • expressing an interest in the work of the WCO • aligning Customs development to WCO principles and Kyoto standards. • Whilst negotiating full WCO Membership status of `Observer` will continue • Transition to full membership on becoming an independent customs territory Economic Policy Programme

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