May 2005Economic Policy Programme1 ECONOMIC POLICY PROGRAMME TOWARDS AN ECONOMICALLY-VIABLE PALESTINIAN STATE: The Regulation of External Trade Monday May 23, 2005 Grand Park Hotel, Ramallah

May 2005Economic Policy Programme2 Towards a Sovereign Trade Framework: Border Regime Tom Hughman

May 2005Economic Policy Programme3 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.

May 2005Economic Policy Programme4 Continuing Assumptions NDTP on statehood Contiguous border Sovereign corridors / `Safe Passage` Early membership of WTO & WCO

May 2005Economic Policy Programme5 NDTP + SECTORAL AGREEMENTS Blocks `A` NDTP + SECTORAL AGREEMENTS FTA Blocks `C` NDTP ONLY D NDTP ONLY NDTP + FTA MINUS TRANSITION TO STATEHOOD POST STATEHOOD DAY 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

May 2005Economic Policy Programme6 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

May 2005Economic Policy Programme7 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.

May 2005Economic Policy Programme8 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

May 2005Economic Policy Programme9 Strategy and Planning Supporting legislation (Customs Act) Institutional capacity building Building border infrastructure WCO membership Transit & Safe Passage Jerusalem Agreements with Israel

May 2005Economic Policy Programme10 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

May 2005Economic Policy Programme11 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 - `international best practice` Suggested strategies how new roles and responsibilities might be managed Provided likely timescales and work plan for the transitional period to statehood

May 2005Economic Policy Programme12 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

May 2005Economic Policy Programme13 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

May 2005Economic Policy Programme14 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

May 2005Economic Policy Programme15 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

May 2005Economic Policy Programme16 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

May 2005Economic Policy Programme17 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

May 2005Economic Policy Programme18 Rules of Origin In the case of a Palestinian NDTP –Rules of Origin (RoO) will be needed to administer existing preferential agreements e.g. EU, US, etc. Under an FTA with Israel –need to issue and process a much larger number Certificates of Origin (COO) COO’s to be issued to identify Palestinian claims for preferential treatment COO’s to be processed for Israels FTA claims

May 2005Economic Policy Programme19 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

May 2005Economic Policy Programme20 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’

May 2005Economic Policy Programme21 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”

May 2005Economic Policy Programme22 WCO Membership Once `sensitivities` subside Palestine to request invitation to attend WCO meetings Become an official `Observer` 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 `Observer` will continue Transition to full membership on becoming an independent customs territory

May 2005Economic Policy Programme23 NDTP + SECTORAL AGREEMENTS Blocks `A` NDTP + SECTORAL AGREEMENTS FTA Blocks `C` NDTP ONLY D NDTP ONLY NDTP + FTA MINUS TRANSITION TO STATEHOOD POST STATEHOOD DAY 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

May 2005Economic Policy Programme24

May 2005Economic Policy Programme25 ECONOMIC POLICY PROGRAMME TOWARDS AN ECONOMICALLY-VIABLE PALESTINIAN STATE: The Regulation of External Trade Monday May 23, 2005 Grand Park Hotel, Ramallah