OCCUPIED JERUSALEM, 10 May 2003 — Israel and the Palestinians prepared yesterday to welcome US Secretary of State Colin Powell on a peace mission as US President George W. Bush unveiled a free trade plan for the region and reaffirmed his commitment to a Palestinian state.

But violence continued on the ground, a day after five Palestinians were killed in the occupied territories, including a Hamas fighter in a fresh “targeted killing” by the Israeli Army which has sparked vows of bloody revenge.

And the Israeli Army introduced tough new curbs on foreigners, including journalists and humanitarian workers, in the Gaza Strip, as peace activists said the aim was to remove unwanted witnesses to its depredations. Basking in the afterglow of Iraqi strongman Saddam Hussein’s defeat, Bush told a graduation ceremony audience at the University of South Carolina: “We have reached a moment of tremendous promise, and the United States will seize the moment for the sake of peace.”

Bush called for creating a US-Middle East free trade area in 10 years’ time, vowing to reward reform-minded Arab nations and capitalize on Saddam’s demise.

He said that his proposal would “bring the Middle East into an expanding circle of opportunity” and pave the way for creating a Palestinian state at peace with Israel by 2005.

“Now, with a liberated Iraq, with new leadership for the Palestinian people, with efforts of leaders like (Egyptian) President (Hosni) Mubarak and (Saudi) Crown Prince Abdullah, the hope of peace is renewed,” the president said.

“If the Palestinian people take concrete steps to crack down on terror, continue on a path of peace, reform and democracy, they and all the world will see the flag of Palestine raised over a free and independent nation.”

Powell was expected to arrive in the region today to hold talks with Israeli Prime Minister Sharon and his Palestinian counterpart Mahmoud Abbas and kickstart the so-called road map for peace in the Middle East.

The three-phase plan aimed at ending the violence, resuming negotiations and creating a Palestinian state by 2005 calls on the Palestinians to crack down on militant groups and on Israel to freeze settlement activities and pull its forces back to their positions before the outbreak of the Palestinian uprising. But the road map has made little impact on the ground since its publication a week ago, with each side waiting for the other to make the first move toward its implementation.

The Israeli Army, meanwhile, slapped tough new curbs on foreigners in the Gaza Strip, a military spokesman said.

They are barred from flashpoint areas and have to sign a document absolving the army from any blame if they are killed or wounded as a result of military activity, the spokesman said, while peace activists are effectively banned.

The Israeli Army also arrested three members of the International Solidarity Movement (ISM), including two foreigners, in a raid on the group’s main office near Bethlehem in the West Bank.

They confiscated equipment in what the organization, which uses foreigners as human shields for non-violent actions aimed at protecting Palestinian civilians, said was part of a campaign to expel them from Israel and the territories.