In the spring of 1994, negotiators meeting in Paris signed an economic annex to the Oslo Accords that was supposed to be temporary — a five-year framework while Palestinians built the institutions of statehood. Thirty years later, the Paris Protocol remains in force. It governs almost everything Palestinians can buy, sell, export, or import, and economists across the political spectrum largely agree on what it has produced: a Palestinian economy that is structurally prevented from growing on its own terms.
The numbers are stark. The United Nations Conference on Trade and Development (UNCTAD) estimated in its 2023 report on Palestinian trade that Gaza’s economy had contracted so severely over the decade and a half of blockade that the territory’s GDP per capita in 2022 was lower than it had been in 1994 — the year the Protocol was signed. That is not stagnation. UNCTAD uses a specific term for it: de-development, the deliberate or structural reversal of an economy’s productive capacity.
What the Paris Protocol Actually Does
The Protocol established a customs union between Israel and the Palestinian territories — but not one between equals. Palestinians were required to adopt Israeli import tariffs and trade policies toward third countries. They cannot sign independent free-trade agreements. They cannot set their own customs rates to protect nascent industries. The Palestinian Authority collects its own tax revenues — VAT, income tax, import duties — but those revenues are gathered by Israeli authorities on Palestinian goods passing through Israeli ports and then transferred, in a system known as clearance revenues, to the PA. Israel has demonstrated repeatedly that it can withhold those funds for political reasons: it did so in 2015, 2019, and again following the October 7, 2023 Hamas attack, in each case depriving the PA of funds that constitute roughly two-thirds of its domestic revenue base.
The World Bank has documented the dependency this creates in multiple reports. Its 2021 assessment, Economic Monitoring Report to the Ad Hoc Liaison Committee, found that the Palestinian economy’s integration into Israeli supply chains — as a captive market and as a source of low-wage labor — had crowded out independent Palestinian productive capacity in manufacturing and agriculture. Palestinian exports face bureaucratic friction at every border crossing controlled by Israel, while Israeli goods enter Palestinian markets freely. The trade deficit with Israel is structural, not incidental.
Area C: Where Palestinian Resources Are Off-Limits
The Oslo II agreement divided the West Bank into administrative zones. Area C — approximately 60 percent of the West Bank’s land area — remained under full Israeli civil and security control. It is also where the West Bank’s most agriculturally productive land lies, along with its mineral resources, its largest contiguous spaces for industrial development, and the majority of its water aquifers.
Palestinians in Area C face near-total barriers to economic use of that land. The World Bank estimated in a widely cited 2013 report, Fiscal Crisis, Economic Prospects, that Palestinian access to Area C resources could add as much as $3.4 billion annually to Palestinian GDP — roughly equivalent to the entire PA budget at the time. That figure has been updated and referenced in subsequent UNCTAD and World Bank analyses. Palestinians cannot build on most of Area C without Israeli Civil Administration permits, which are denied at rates exceeding 98 percent for Palestinian applicants, according to data compiled by the Israeli human-rights organization B’Tselem and the planning rights group Bimkom. Meanwhile, Israeli settlement construction in the same area proceeds with state support.
The quarrying and mining of Dead Sea minerals, the extraction of gravel and stone, and large-scale agriculture in the Jordan Valley — all of these take place under Israeli control or Israeli settler enterprises on land Palestinians cannot develop. The Palestinian economy is, in the language of development economics, resource-rich and access-poor.
Gaza: The Textbook Case of De-Development
UNCTAD’s concept of de-development was applied most directly to Gaza long before October 2023 made the territory’s destruction total. The agency’s annual reports on the Palestinian economy tracked the blockade’s cumulative effect after Israel imposed it following Hamas’s takeover in 2007. By 2022, UNCTAD reported that Gaza’s unemployment rate had reached approximately 45 percent, with youth unemployment above 60 percent. The manufacturing sector, which had employed tens of thousands in textiles and furniture before the blockade, had been largely destroyed — partly by recurring military operations, partly by the near-impossibility of importing raw materials or exporting finished goods.
The blockade restricts the movement of virtually all goods and all people. Exports from Gaza to the West Bank and to international markets require Israeli approval and passage through Israeli-controlled crossings. UNCTAD noted that Gaza’s exports in 2022 were a fraction of their pre-blockade levels. The agency’s 2023 report on assistance to the Palestinian people called the blockade “a dramatic reversal of the development process” and stated plainly that it had “locked Gaza into a cycle of aid dependency.”
The water and electricity infrastructure that a productive economy requires had also deteriorated below functional thresholds before the October 2023 war. The World Health Organization and UNICEF had documented for years that Gaza’s aquifer was over-extracted and contaminated with seawater and sewage, rendering more than 95 percent of its water unfit for human consumption without treatment — and that treatment capacity was itself constrained by fuel and electricity shortages enforced by the blockade.
Labor, Movement, and the Permit System
One of the most intimate mechanisms of economic control is the permit system governing Palestinian movement. Palestinians in the West Bank who wish to work inside Israel or access certain areas require Israeli-issued permits. The Israeli human-rights organization HaMoked and the economic access monitor Gisha — which focuses specifically on Gaza — have both documented how permit availability fluctuates with Israeli security policy, is used as leverage in political negotiations, and creates a labor market in which Palestinian workers have no job security, no ability to organize effectively, and no path to independent livelihood formation.
For West Bank Palestinians, working in Israel or Israeli settlements has become, paradoxically, one of the highest-wage options available — not because those wages are generous by Israeli standards, but because the Palestinian private sector has been so suppressed that Israeli labor markets offer a comparative premium. The World Bank has described this dynamic as a “labor market distortion” that reduces pressure to develop the Palestinian private sector while keeping Palestinian workers dependent on Israeli demand decisions.
What Growth Would Require
Economists studying the Palestinian economy — including those at UNCTAD, the World Bank, and scholars such as Raja Khalidi, who has written on Palestinian political economy for decades — identify a consistent set of structural requirements for genuine economic development: sovereign control over borders and trade policy, access to natural resources, freedom of movement for goods and people, and a stable fiscal base not subject to external withholding. Under the current framework, none of these conditions exist.
The Paris Protocol was written with an expiration date that passed in 1999. Its continuation is not the result of Palestinian choice. Every year it remains in force, it compounds the asymmetry it was meant to be a temporary bridge across. UNCTAD’s conclusion, repeated across multiple annual reports, is that Palestinian economic recovery is not possible without ending the occupation that structures these constraints. That is not an ideological claim. It is a description of how the system was designed and how it functions.
Sources
- UNCTAD, Report on UNCTAD Assistance to the Palestinian People: Developments in the Economy of the Occupied Palestinian Territory, 2023
- World Bank, Economic Monitoring Report to the Ad Hoc Liaison Committee, 2021
- World Bank, Fiscal Crisis, Economic Prospects: The Imperative for Economic Cohesion in the Palestinian Territories, 2013
- B’Tselem, data on Area C planning and demolitions, btselem.org
- Bimkom — Planners for Planning Rights, reports on Area C building permits
- HaMoked: Center for the Defence of the Individual, reports on permit system
- Gisha — Legal Center for Freedom of Movement, Gaza access reports
- WHO and UNICEF, joint reports on water and sanitation in Gaza
- Raja Khalidi and Sobhi Samour, “Neoliberalism as Liberation: The Statehood Programme and the Remaking of the Palestinian National Movement,” Journal of Palestine Studies, 2011
- The Paris Protocol on Economic Relations, April 29, 1994
