- The Washington Times - Sunday, September 27, 2009

GENEVA | Still struggling to resume peace talks with Israel, the Palestinian Authority has launched a diplomatic blitz to win observer status at the World Trade Organization.

“We are seeking observer status at the WTO as a preparation for statehood,” Bassim Khoury, Palestinian economy minister, told reporters here ahead of a meeting with the organization’s director general, Pascal Lamy.

The move is part of a broad effort by the Palestinian government, in particular Prime Minister Salam Fayyad, an economist and former International Monetary Fund (IMF) official, to create the institutions of statehood to show the world - and especially Israel - that Palestinians will be ready for independence in the next few years.

The chances for resuming full-scale peace negotiations look bleak, despite a meeting among Israeli Prime Minister Benjamin Netanyahu, Palestinian Authority President Mahmoud Abbas and President Obama at the United Nations last week.

Mr. Netanyahu has refused to suspend construction of Jewish settlements in the West Bank and East Jerusalem, as demanded by Mr. Obama and the Palestinians.

But Israel has taken steps to ease movement for Palestinians within the West Bank and encouraged economic and security progress there. As a result, daily life has improved somewhat for local residents.

Mr. Khoury, a former chief executive of a pharmaceutical company, told a U.N. forum here, “We need to increase the Palestinian private sector’s access to the outside world for trade, access to technology and access to finance in accordance with international rules.

“This need is the foremost reason for the Palestinian bid to join the WTO,” he said.

“The economy is a major focus for the government,” said Mr. Khoury, noting that the WTO move is part of “our plan for statehood in two years.”

He said the Palestinian government would try to have WTO observer status for five years and then apply for full membership.

Membership talks are complex and demanding and can take many years to conclude.

A report on the Palestinian economy by the U.N. Conference on Trade and Development notes that the WTO principles of free trade could serve to guide the resolution of Israeli-Palestinian trade disputes.

Re-anchoring the Palestinian economy on global rules also could help enhance market liberalism, transparency and equity, the U.N. report adds.

Developing nations in Asia, Africa, the Middle East and South America, along with China and the European Union, have signaled that they would support a Palestinian request.

“I don’t think the WTO’s General Council (the agency’s ruling body) will say no to it,” said Debapriya Bhattacharya, until recently Bangladesh’s ambassador to the WTO.

“We will be supportive,” said a senior official in the European Union who spoke on the condition of anonymity because of the sensitivity of the issue.

Diplomats said that Saudi Arabia - a major donor to the Palestinians - has taken the lead in mustering the support of Arab and Islamic countries for the Palestinian request.

“It sounds to me like a useful thing,” especially if it is part of a process in which “gradual recognition of the emerging Palestinian state is in parallel with gradual Arab recognition of Israel,” Stephen J. Hadley, former U.S. national security adviser, told The Washington Times.

A green light from the Obama administration is seen as key to whether the Palestinians go forward with the application next month.

The office of the U.S. Trade Representative declined to comment on the Palestinian request. The State Department also declined to comment.

However, the U.S. noted at the same forum where Mr. Khoury spoke that the Palestinian Authority “deserves great credit for its efforts over the past two-plus years.”

“A program of reform and a strategy for development first laid out by Prime Minister Fayyad in 2007 is producing results.

“The IMF is now forecasting significant growth in the West Bank economy in 2009,” the U.S. statement said. “The Palestinian Authority’s program of reform, support from donors, and Israel’s easing of internal movement and access restrictions in the West Bank have contributed to these positive indicators. We agree that more progress is needed to maintain this momentum and create the conditions for sustainable economic growth.”

Trade diplomats said Israel likely would not move to block the request if the U.S. comes onboard. As a full WTO member, Israel can veto any such bid because the agency works under the principle of consensus.

Asked about the Palestinian initiative, Aharon Leshno-Yaar, Israel’s ambassador to the WTO and U.N. organizations in Geneva, told The Times, “At this stage, what is necessary is to check what the institution of the WTO says about observer status.”

He added, “Everything should be done according to the rules of the organization.”

WTO norms allow a government to apply for observer status even if it does not have full control of its territory. For example, Lebanon was granted observer status in 1999 even though the southern part of the country was then under Israeli occupation.

Barbara Slavin contributed to this article from Washington.

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