The Palestinian economy is a small economy that relies heavily on trade. It operates within a Customs Union regime with Israel, as formalized by the Paris Protocol on Economic Relations in 1994. The Paris Protocol was explicitly written as a transitional 5- year arrangement, to take the Palestinian economy from where it had been before the Oslo Accords towards greater economic autonomy. However, the Protocol was never completely implemented as envisaged and is still governing the Palestinian-Israeli economic relationships.
The Palestinian economy is highly dependent on Israel. Imports from Israel accounts for about 63% of the Palestinian imports of goods and services (not including energy), while Israel accounts for 79% of Palestinian exports of goods and services.
The Palestinian economy’s trade deficit with Israel is estimated to account for 75% of its total trade deficit, amounting to more than 30 percent of Palestinian GDP.
The USG is taking a leading role in improving economic cooperation between the Israeli and the Palestinian sides. Discussions between Israel and the PA are currently taking place to activate the Joint Economic Committee (JEC) to discuss issues related to trade, industrial zones, standards, and dual use items. Economic discussions of this sort are encouraged by the USG.
USAID is a leading supporter to private sector development in the West Bank and Gaza with an aim to create a more vibrant private-sector led economy.
USAID works with the Palestinian Authority (PA) to strengthen the enabling environment, the economic policy, and the institutional framework within which the Palestinian private sector operates.
USAID works with the Government of Israel to facilitate trade between the West Bank and Gaza and Israel, and ease the restrictions of movement and access through the border crossings. USAID assisted in the deployment of scanners at the border crossings, paved roads leading to the crossings, and engaged with the Israeli authorities to extend operating hours at the crossings (e.g. in the season of baby cucumber that is exported to Israel), leading to improved movement of cargo to and from Israel.
USAID works with the Palestinian private sector directly to identify new products and markets, to improve product quality, to increase access to finance and to incorporate new technologies thereby improve competitiveness. Increasing access to finance is a pillar in our work.
In our work, and whenever opportunities permit, USAID fosters Israeli-Palestinian cooperation.
Transfer of technology between Israel and the Palestinians is crucial. We have worked hard since more than a decade to transfer technologies in the Agricultural sector from Israel to the West Bank. In this regard, we were able to introduce new high value-added, exportable products such as fresh herbs and dates to the West Bank.
We are currently in the course of designing a program in cooperation with the Near East Foundation (NEF), an American NGO, and a leading Israeli Company for water solutions (Netafim) to transfer new drip irrigation technology to 475 Palestinian farmers in the West Bank. This is an important activity that will address chronic water access to agriculture.
ICT is another area where USAID helped connect Multinational firms in Israel to Palestinian ICT companies, creating job opportunities to Palestinian graduates.
USAID also works increase the access of Palestinian products to international and regional markets, including Israel (e.g. linking textile companies in Gaza to Israeli buyers).