The absurdity of Trump’s economic peace

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Last week the Trump administration held its Middle East workshop in Bahrain. The workshop was full of slick photo-ops but had little relevance to what was actually happening on the ground in Israel-Palestine. There was in fact a rather shocking disconnect between the topics discussed at Bahrain and the grim reality of Palestinian life under Israeli occupation. According to Hanan Ashrawi, a senior member of the Palestine Liberation Organization, the Trump economic proposal “is totally divorced from reality. The elephant in the room is the occupation itself.”

Because of the occupation, there is today a vast economic disparity between Israelis and Palestinians. The annual gross domestic product of Israel is over $41,000 per capita, while the occupied lands produce around $3,000 per person each year. In Gaza, which is under total Israeli blockade, the unemployment rate has soared to over 50 percent. The absurdity of trying to narrow this gap and fix the Palestinian economy while ignoring the occupation is clearly illustrated by the wide-ranging reforms the Palestinian Authority tried to implement over the last decade, reforms which have been extensively analyzed by scholar and peace negotiator Padraig O’Malley.

In 2007 Palestinian President Mahmoud Abbas appointed Salam Fayyad as Prime Minister. Mr. Fayyad was a distinguished economist and had previously been the International Monetary Fund representative to the West Bank and Gaza. While in office Mr. Fayyad overhauled the West Bank’s governance system and reduced corruption, put in place strict financial controls, and cut public spending. Under Mr. Fayyad’s reform plan the Palestinian territory began to show positive economic growth rates. Between 2002 and 2011, per capita GDP doubled from $1,156.20 to $2,695.20 and by 2011 the Palestinian economy had reached double digit growth rates.

Both the IMF and the World Bank praised the PA’s economic policies, and the IMF concluded that the “PA is now able to conduct the sound economic policies expected of a future well-functioning Palestinian state.” The World Bank was more cautious, warning the occupation could threaten further economic growth. Israel, the World Bank reported, continued to impose heavy restrictions on the flow of people and goods across Palestinian borders, limited Palestinian access to natural resources, limited the ability to buy and sell goods in villages and neighboring cities, and prevented international donations from reaching Palestinian villages. 

While the occupied Palestinian territory initially saw impressive economic growth, the occupation had a devastating toll on the Palestinian economy. In 2013, in the face of budget shortfalls and heavy reliance on foreign donations, the World Bank concluded that the Palestinian economic growth was unsustainable. In its analysis of the deteriorating Palestinian economy, the World Bank pointed several times to the “absence of further easing of Israeli restrictions” and forewarned damage to the Palestinian economy was “posed to remain” even after a peace agreement. 

While the yearly costs of the occupation are difficult to quantify, Jerusalem based economist Hadeel Badarni told Al Jazeera in 2016, “The conservative estimate is that [the Palestinians] are losing $3.4 billion as a result of the occupation’s exploitation.”

A Palestinian farmer harvests citrus fruits at a farm in eastern Gaza City on November 26, 2017. (Photo: Atia Darwish/APA Images)
A Palestinian farmer harvests citrus fruits at a farm in eastern Gaza City on November 26, 2017. (Photo: Atia Darwish/APA Images)

A 2013 report published by the World Bank estimated that simply allowing Palestinians access to Area C, which is under full Israeli control and contains most of the West Bank’s natural resources, would add almost $2.2 billion per year to the Palestinian GDP. The largest portion of that growth would come from the extraction of potash and bromide from the mineral-rich Dead Sea, which lies partly within the West Bank. Israel and Jordan currently earn about $4.2 billion per year from the extraction and sale of those compounds and if Palestinians were allowed access, their economy would increase by an estimated $918 million per year.

The second largest source of growth would come from granting Palestinian access to farmland in Area C not controlled by Israeli settlements. Area C encompasses some of the most fertile land in the West Bank, land which Israel makes readily available for Jewish settlements but not to occupied Palestinians. If Palestinian farmers were allowed access to cultivable parts of Area C, it would add an estimated $704 million per year to the Palestinian economy. 

Additional income could come from lifting restrictions that prevent Palestinians from opening new stone quarries or renewing licenses on existing ones, allowing the Palestinian construction industry to build residential and commercial buildings in Area C, allowing Palestinians access to the bustling Dead Sea tourist industry which is today under full Israeli control, and from lifting restrictions that prevent Palestinians in Gaza from accessing up to half their cultivable land and 85 percent of their fishing area.

In addition to limiting Palestinian access to their own natural resources, the occupation also limits economic growth by preventing Palestinians from importing dozens of items which are critical to the manufacturing and agricultural industries. Israel claims it prohibits these “dual-use” items, which range from Ethernet cables to wood lacquer to plant fertilizer, because they might be used for military purposes. Entire sub-sectors of Palestinian industry have either collapsed or are on the verge of collapsing because of the occupation’s import restrictions.   

If Israel were to withdraw entirely from the occupied territory, allowing Palestinians full freedom of movement and access to their own natural resources, then according to a report by the United Nations Conference on Trade and Development (UNCTAD), the effect on the Palestinian economy would be dramatic: Without the occupation, the Palestinian economy “could easily produce twice the gross domestic product (GDP) it generates now, while unemployment and poverty could recede significantly.”

The Trump administration hopes that pouring $50 billion into the Middle East over the next decade might encourage Palestinian GDP to double, while economists conclude that simply ending the occupation will quickly and easily double Palestinian GDP. The absurdity of the Trump economic plan is that it tries to fix the Palestinian economy while completely ignoring the primary reason the Palestinian economy is failing. The elephant in the room, as Ms. Ashrawi sharply noted, is the occupation.