Economics of the Arab-Israeli Peace Process

The last year and a half has brought exceptional change to that comer of the Middle East formerly known as the Levant, now less glamorously called the Eastern Mediterranean. Israel has signed two major agreements, one with Jordan and one with the Palestinians; has begun to normalize relations with Tunisia, Morocco, Qatar, Oman, and other Arab states; has freed itself de facto from the Arab embargo; and looks forward hopefully to successful peace negotiations with Syria and Lebanon.

Astonishingly, all this has happened absent the causes commonly associated with a war’s end. There was no new conquest, no exhaustion on both sides (though to some extent the intifada did wear down Israelis and Palestinians alike). There was no singular upheaval-revolution, civil war, or key assassination -no cultural or religious rapprochement, and no grand, new political vision. No common, external enemy drove together old foes. Certainly no change occurred in the personal or intellectual chemistry between leaders: Prime Minister Yitzak Rabin and King Hussein had talked to each other for years; Rabin and Palestine Liberation Organization (PLO) president Yassir Arafat still loathed each other as much as ever. Nor did any significant alterations take place in the domestic political structure of the various parties. And, lastly, no expectations of vast, new regional trade provided an impetus to peace; total intra-Middle East trade is only 5-7 percent of the area’s combined gross national product (GNP) because economies in the area are in general competitive, not complementary.

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