Abstract
The Oslo peace process established a modified economic union between Israel and the Palestinian Authority. Economic unions require extensive collaboration and are generally found between states that enjoy pacific relations and are looking to deepen integration and political ties. The choice of an economic union between these adversaries is puzzling given that the aim of the peace process was to disentangle Israelis and Palestinians by establishing two separate states. Today, after the optimism surrounding the process has faded, it is easy to see the arrangement as a perpetuation of Israeli control over Palestinian life. However, such assessments fail to consider, first, the depth of the negotiations; second, the significant differences between the outcome of the negotiations and what was previously imposed by Israel; and, third, the gap between what was negotiated and what was later implemented. This article traces the genealogy of the economic union by exploring all three factors. While the negotiators did not start with a tabula rasa, they attempted to alter the existing economic arrangement along the European neo-functionalist model of integration. This approach was later largely abandoned, and what followed bore little resemblance to the positive spillover effects in Europe.
Highlights
Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slave of some defunct economist
Numerous studies have discussed the economic framework of the Oslo peace process subsequent to its breakdown, but few studies have systematically explored why an economic union was picked over other available options in the first place
Several authors have come to the conclusion that the economic arrangement was little more than an extension of conditions that Israel imposed after occupying Palestinian territories in 1967
Summary
The Oslo negotiations, an unofficial exercise, departed dramatically from the official talks taking place simultaneously in Washington, D.C. The Israeli team’s faith in the neo-functionalist approach was influenced by the European experience They believed that economic integration would lead to positive spillover effects, reinforcing a fledgling peace, much as it had in postwar Europe. The diffusion model is informative in explaining why the idea of economic integration had less purchase on the Palestinian negotiators. They had significantly less contact with their European counterparts. From negotiation to implementation While the process did trigger an huge influx of foreign aid to the fledgling PA and ushered in a period of sustained modernization and liberalization of the Palestinian economy, the later rejection by Israel of numerous aspects of the protocol largely negated any of the promised economic gains. Pundak concludes that “the economic situation on the ground for the Palestinians became worse than they were before [the Oslo peace process].”28
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