European Commission Directorate-General for Trade

Occupied Palestinian Territory

In 2009, total EU trade with the Palestinian Authority amounted to €59 million, of which €52 million of EU exports and €7 million of EU imports. EU–Palestine bilateral trade contracted by 13% year-on-year (2008: €68 million) on account of the impact of the crisis on European demand and persisting access and movement restrictions. About 72% of EU imports of Palestinian goods currently consist of agricultural products, predominantly strawberries and cut flowers, while EU exports are composed mainly of machinery, chemicals and transport equipment. Preliminary figures for the first quarter of 2010 point at a recovery on trade flows compared to the same quarter in 2009, with EU exports and imports to/from the Palestinian Authority increasing by 26.3% and 32.6%, respectively.

The Palestinian Territories are part of the Euromed process and have an Association Agreement with the EU that includes duty free trade with the EU. The EU believes that greater trade with Europe can offer a potential source of economic growth and stability for the Palestinian Territories. It works closely with Israel and other Southern Mediterranean partners in an effort to improve Palestinian access to international markets.

Due to the difficult economic situation and restrictions on movement and access, trade with the EU is very limited.

Israeli-Palestinian relations

The difficult nature of relations between Israel and the Palestinian Authority makes it hard for the Palestinian Authority to achieve greater economic integration with their neighbours or the EU. Economic relations between the Palestinian Authority and Israel are formally managed according to the Paris Protocol (1994), which allows the Palestinian Authority to establish trade relations with third countries, provided that such agreements do not deviate from Israel's import policy. This Protocol will have to be updated to reflect any future settlement between the two. In May 2005 the EU agreed with Israel and the Palestinian Authority to set up a trilateral working group to improve trade relations between the three parties. Two meetings of the working group have taken place up to 2006, when activities were suspended due to political developments.

The Palestinian Authority has signalled their intention to implement the Pan-Euro-Mediterranean system of cumulation of origin which will allow them to re-export processed goods from other countries while maintaining preferential access to the EU market. To this end, the Palestinian Authority is participating in the negotiations on a single regional convention on preferential rules of origin for the Pan-Euro-Mediterranean area.

Products originating in the Israeli settlements in the West-Bank, Gaza Strip, East Jerusalem and the Golan Heights are not entitled to benefit from preferential tariff treatment under the EU-Israel Association Agreement.

These products must carry proofs of origin made out in Israel that show the name of the city, village or industrial zone where production conferring originating status has taken place. More details on these regulations in the Official Journal of the EU.

The European Neighbourhood Policy

The Palestinian Authority (PA) and the European Union first established contractual relations in 1997 when the EU and the Palestine Liberation Organisation (PLO), on behalf of the PA, concluded an Interim Association Agreement on Trade and Cooperation. This provides for duty-free access to EU markets for Palestinian industrial goods, and a phase-out of tariffs on EU exports to Palestine over five years. On the basis of the agreement, the EU-PA ENP Action Plan was approved in May 2005 for a period five years.

Financial assistance

The European Union is the biggest donor of financial assistance to the Palestinians. The EU is also the key donor to the Palestinians in the area of Trade Related Technical Assistance. In recent years the EU has financed trade policy experts to assist the Ministry of National Economy, and supported the modernisation of the Palestinian Customs. For more on these programmes and ENPI projects visit the website of the EU Technical Assistance Office in Jerusalem.

WTO

The Palestinian Authority is not a member of the WTO, but obtained observer status at the Ministerial meeting in Hong Kong in December 2005. The Palestinian Authority requested in 2009 to become a permanent observer in the governing bodies of the WTO.