This article examines the West Bank and Gaza Strip (WBGS) economy following the 1967 occupation within the analytical framework of settler-colonialism.ⁱ Indeed, the occupation was only a continuation of the Zionist settler-colonial project. Israel’s control over the WBGS has been colonial because it involves a foreign entity that is seeking to appropriate the land of the indigenous population and establish a new colonial society. It has also been based on the disarticulation of the WBGS economy, making it heavily dependent on the Israeli economy and thus preventing Palestinian independence and sovereignty.ⁱⁱ

What are the structural mechanisms of Israeli colonial control and how has the relationship between the Israeli economy and the WBGS economy changed over the years?

For the purposes of this issue of TWIP, this article focuses only on the period from 1967 and on the WBGS economy. The term “Palestinian economy” is not employed in order to avoid limiting the “Palestinian economy” to the West Bank and Gaza.

 

Limited economic integration of the WBGS into the Israeli economy (1967–1993)

After the occupation in 1967, Israel sought to incorporate the WBGS economy into the Israeli economy in such a way as to allow for maximum expropriation of land, while precluding Israeli dependence on cheap Palestinian labor.ⁱⁱⁱ However, as a result of the manner in which the system was implemented, the WBGS economy became heavily dependent on the Israeli economy.

Trade and labor constituted the two main pillars of partial economic integration. In the area of trade, Israel imposed a one-sided customs union on Palestinians. In theory, a customs union is an economic agreement among countries in which the parties allow for free trade of goods within the union, and agree on a common external tariff with regard to imports from the rest of the world. However, in practice, only one side – Israel – dictated the terms of the trade arrangement to meet its own needs.

For example, while Israeli products had free access to the Palestinian market, Palestinian goods had very restricted access to the Israeli market. Israel also protected itself from certain Palestinian goods, especially in the area of agriculture.^iv In addition, the trade arrangement raised tariffs approximately fourfold, thus redirecting WBGS trade away from neighboring Arab countries and the rest of the world toward the Israeli market.^v

Consequently, the WBGS economy became dependent on the Israeli economy in the area of trade. The Palestinian market was a captive market for Israeli products, especially given the absence of economic borders between the two economies and the low transportation costs. For instance, in 1984, imports from Israel accounted for 88 percent of WB imports.^viMoreover, as Palestinian producers lost their competitive edge in international markets and faced fierce competition from advanced Israeli manufacturers, Palestinian production and exports stumbled. A large trade deficit was thus characteristic of this period as export growth was well below import growth.^vii

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