ECONOMIC POLICY PROGRAMME

May 2005 Economic Policy Programme 1

ECONOMIC POLICY PROGRAMME

TOWARDS AN ECONOMICALLY-VIABLE PALESTINIAN STATE:

The Regulation of External Trade

Monday May 23, 2005Grand Park Hotel, Ramallah


Towards a Sovereign Trade Framework: Border Regime

Tom Hughman


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.


Continuing Assumptions

• NDTP on statehood• Contiguous border• Sovereign corridors / `Safe Passage`• Early membership of WTO & WCO


NDTP + SECTORAL

AGREEMENTSBlocks À`

NDTP + SECTORAL

AGREEMENTS

FTABlocks `C`

NDTP ONLY

D

NDTP ONLY

NDTP + FTA MINUS

TRANSITION TO STATEHOOD

POST STATEHOODDAY ONE

= Path based on assumptions provided by PA for EPPIII = Decision Point

CRITICAL PATH

TRANSITION TO DECISION PHASE

TRANSITION TO WTO MEMBERSHIP AND BEYOND

MEMBERSHIP

PARIS PROTOCOL D

D

D


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


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.


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


Strategy and Planning

• Supporting legislation (Customs Act)• Institutional capacity building • Building border infrastructure• WCO membership• Transit & Safe Passage• Jerusalem• Agreements with Israel


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


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 - ìnternational best practice`• Suggested strategies how new roles and

responsibilities might be managed• Provided likely timescales and work plan for

the transitional period to statehood


Development Strategy• Study submitted to MNE & MOF in 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


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


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


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


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


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


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


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’


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”


WCO Membership• Once `sensitivities` subside Palestine to

request invitation to attend WCO meetings• Become an official Òbserver`• 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 Òbserver` will continue• Transition to full membership on becoming

an independent customs territory


ECONOMIC POLICY PROGRAMME

TOWARDS AN ECONOMICALLY-VIABLE PALESTINIAN STATE:

The Regulation of External Trade

Monday May 23, 2005Grand Park Hotel, Ramallah

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ECONOMIC POLICY PROGRAMME