Viewed against the deep-rooted rejection of recognizing the state of Israel ever since it was established on what was Palestine, the Arab initiative of March 2002, which offered establishing normal relations, constitutes a historical breakthrough. But as is typical in political jargon, translating a broadly-phrased framework into tangible policy measures may prove to be far more difficult and unpredictable than getting adversaries to sign something which they may interpret differently. The economic implications of a probable settlement of the Arab-Israeli conflict, as based on the recent Arab initiative, may provide a stark example.
The key word in the Arab initiative, as far as depicting the type of future relations with Israel, is “normal.” Obviously, this word has profound and fairly well-defined political connotations, but it says nothing in regard to the scope and depth of economic relations between concerned sides. There are too many examples of countries with “normal,” and certainly non-belligerent, relations, which nonetheless seem to have failed to establish substantive bilateral economic relations. Many Arab countries provide clear examples on the paradoxical relations between economics and the fine intricacies of politics.
There are several key questions which have to be addressed whenever Arab countries begin talking with Israel on bilateral economic relations, among the most fundamental of which are the following:
What kind of regime will govern trade relations between both sides? Obviously, trade regimes may vary widely, from highly selective and quota-based trade to more advanced formats, like free trade areas and custom unions.
What would be the governing framework relative to labor flows between both countries? This will be a particularly sensitive issue in the case of those countries with a common border with Israel.
Where does the political leadership in each Arab country stand on the question of joint ventures with Israel? This relates not only to profit-oriented business enterprises, but also to major infrastructure projects involving public sector institutions.
Obviously, the stand of each Arab country on these and other questions may vary considerably, even when all of them seem to accept the more fundamental benchmark of establishing “normal” relations with Israel. A key factor in this connection relates to the “inherent” political stand of each Arab regime in regard to the Arab-Israeli conflict, as there could be wide differences in how far each will go beyond ending all forms of belligerence with their former adversary. But what should also be taken very seriously is the public stand on the question of normalization of relations with Israel, including free trade and joint ventures. The deep-rooted resentment of normalization with Israel at the grass-roots level may constitute the major constraint to full-fledged cooperation in several Arab countries.
Notwithstanding the above-mentioned boundaries for the scope of economic relations between Arab countries and Israel, all forms of such relations will still have to be carefully evaluated on pure economic grounds. Such assessment is likely to reveal significant differences between the perceptions of various Arab countries in regard to economic relations with Israel, as indicated in the following examples.
Jordan may decide to engage in some major joint infrastructure project, and it will probably expand on the industrial ventures which it established with Israeli firms over the past five years. With such close proximity to Israel, the Jordanians may seek to promote considerably more collaborative relations in the areas of tourism, trade, and even labor flows. Similarly, Egypt can do a lot more in joint industrial and agricultural ventures, and of course in tourism. Syria, and therefore Lebanon, will most likely opt for a much more reserved stand on any form of economic cooperation, even after all their occupied territories are restored.
The Gulf countries, on the other hand, are expected to be noticeably forthcoming, but still they have to answer the big question of how far they will go in normalizing economic relations with Israel in the advent of peace. For obviously good reasons, Israeli firms will look earnestly for trade opportunities with the Gulf. Even though a very restrictive framework has governed their relations with the Gulf countries during the past seven years, several Israeli firms have managed to establish fairly substantial trade relations with partners in the area. After conflicting speculation regarding Israeli trade prospects with the Gulf, the experience of the past few years has provided ample evidence on the huge scope of potential trade, both in goods and services.
Nevertheless, it should always be remembered that the exploitation of imminent economic opportunities can only be ushered in after the political leadership in respective countries feel that Israel has honored its obligations on the issues which lie at the center of this endemic conflict. Given the erratic record of successive Israeli governments on their respect for signed agreements, no one can take that for granted — certainly not the Palestinians.
It will be extremely important, however, that all concerned parties realize that the welfare of the Palestinians in the West Bank and Gaza Strip, both before and after a regional peaceful settlement is concluded, should be constantly given a higher priority over purely profit-driven forms of cooperation. In most cases, there should be no negative impact on the Palestinian side for various facets of Israeli economic cooperation with Arab partners, but in some cases the Palestinian interests may risk being seriously compromised.
It is probably too early to talk about details, but it should be emphasized that allowing preferential access to the Palestinians in regard to the flow of labor and commodities across the Green Line should be viewed as one of the underpinnings of Israeli-Arab future economic relations. This is underpinned by profound economic and political arguments which will be scrutinized by both sides when the peace process is put back on track.
— Hisham Awartani is professor of economics at An-Najah University, Nablus, and director of the Center for Private Sector Development. (CGNews)
Arab News Features 3 December 2002
