Hegemony through free trade: Interview with Daoud Hamoudi

The separation wall near Qalandia checkpoint, between Jerusalem and the West Bank city of Ramallah. (Fadi Arouri/MaanImages)


Economics is a central element of US-driven military policy in the Middle East. A series of free trade agreements initiated by the US are currently being negotiated or have recently been signed throughout the region.

From Bahrain, to Jordan, to Egypt to Saudi Arabia, these economic agreements aim to crack the long-standing boycott of Israel maintained by the majority of countries in the Middle East. These bilateral trade accords include a condition for countries to recognize Israel.

Apartheid economics is critical to US and Israeli policy in the region, implemented through neo-liberal bilateral trade accords, or on the ground in Palestine where Israel is pushing a plan to build industrial processing zones. Proposed industrial zones will see Israeli corporations’ factories operating with a Palestinian labor force, similar to maquiladoras, Mexican factories which became notorious for human and labor rights abuses in the 1990s.

At the recent US-sponsored summit in Annapolis, joint Israeli-Palestinian industrial zone projects were designated as an object of future collaboration and a peace-building initiative between Israel and the Palestinian Authority (PA). Major industrial zones backed by the World Bank and European Union are slated to be constructed in the occupied West Bank.

The proposed industrial projects will see thousands of Palestinians working at Israeli-operated factories in closed military zones where labor laws don’t apply. A grassroots movement against these industrial zones is spreading throughout Palestinian society as part of the international boycott, divestment and sanctions campaign. Israel’s occupation of Palestine and the construction of the apartheid wall is a huge burden on the Israeli economy; these industrial processing zones are being promoted as economic engines for Israel.

The Grassroots Palestinian Anti-Apartheid Wall Campaign is organizing against the establishment of these industrial processing zones. Campaigner Daoud Hamoudi spoke with The Electronic Intifada contributor Stefan Christoff on the issue of US-driven free trade agreements in the Middle East and the economics of apartheid in Palestine.


Stefan Christoff: Can you first speak about the impact on the Palestinian economy of the apartheid wall being constructed in the West Bank, and can you describe the current status of the wall’s construction?

Daoud Hamoudi: In 2002 the Israeli government started building a wall in the occupied West Bank. It’s a 700-kilometer-long wall that Israel claims is a security wall to separate the Palestinians from Israel. However, the path of the wall splits Palestinian lands, creating small ghettos, closed ghettos with a limited number of exit and entry points that are controlled by Israeli military checkpoints. Israel’s wall has had many severe impacts on Palestinians, including major economic impacts.

Each kilometer of Israel’s wall costs an estimated $2.5 million at minimum, while there is a great deal of infrastructure, high-tech military equipment that additionally lines the wall, costing an estimated $400 million. It has been very, very expensive for Israel to build this wall.

After completion, the wall will include an estimated 35 checkpoints that will cost additional millions. Given this economic reality, Israel launched a parallel economic plan to coincide with the wall’s construction, a plan to control the Palestinian economy in order to fund the wall’s construction. Israel’s parallel economic plan started in 2005, approved by both the US government and the EU; now Israel is attempting to force this economic plan on Palestinian society.

SC: I understand you are documenting an economic plan put forward by Israel, to compensate for hundreds-of-millions of dollars through siphoning money from the Palestinian economy. Can you explain in specifics how this is happening?

DH: For example, there was a proposal from the World Bank in 2005, to build between nine and twelve industrial zones throughout the West Bank. Each Palestinian ghetto will have two or three industrial zones to which Israeli factories will be moved. Palestinians will become the cheap labor force for Israeli industry. Also, these industrial zones will be built along the border, so they will not be part of Israel or Palestine and the labor force will not be officially working in either Israel or Palestine.

Palestinians will be forced to work in areas where Palestinian [and] Israeli labor laws don’t apply. In this context, if a Palestinian worker has a problem with an Israeli factory owner, the worker can’t use the Israeli court system or Palestinian regulation to address the labor issue.

Also within this proposal, the announced salary for the Palestinian workers within the industrial zones will be $300 US a month, a fraction of the minimum allowed for Israeli workers inside Israel. For the first time, Israeli industry or factory owners are openly talking about competing with Asian productions within European and North American markets.

Another example is a project funded by the Japanese government, an agro-industrial zone, built on Palestinian land in the West Bank that today has become a closed Israeli military zone, in which the agro-industrial areas will be launched, based on the same conditions for Palestinian workers proposed in the industrial zones.

SC: Can you expand on the examples that you put forward, both the agro-industrial zone and the industrial zone project in the West Bank? Could you expand on the economic implications for the Palestinian people and Palestinian economy?

DH: To build any state you need to have an independent economy, which in turn fuels national development. Today, if the West Bank became free from the Israeli economy, this break would have a major negative impact on the Israeli economy, as the Palestinian territories are the second largest market for Israel after the US. For example, Israeli gas companies generate around 40 percent of their income from the West Bank and Gaza markets alone.

Today, Israel is attempting to impose conditions on any future Palestinian state, [over] which Israel will continue to control economic trade, [the] national economy, the borders, all to secure economic benefits for Israel from any future Palestinian state.

A group of economic agreements … under negotiation since 2005 include the establishment of the industrial zones. [The] issue behind this project is the fact that, internationally speaking, Israel’s labor force maintains extremely high standards in relation to international wage standards.

Israel can’t compete with industrial production costs in South Asia, Latin America or China, including clothing, food and other production. Israel is attempting to build the national economy through these industrial zones, through moving Israeli factories into these areas, then bringing in cheap Palestinian labor to work in slavery-like conditions at the lowest wages possible, in order to allow Israeli industry to compete in the world market.

Now these economic projects are promoted as “peace-building” projects internationally. These industrial zones will be placed along the border, so they will not be considered either Israeli or Palestinian. However, the companies operating within the zones will be Israeli companies or multi-national corporations, like Turkish or US-based companies.

Israelis will own the factories [and] also will supervise the Palestinian workers. Israel will additionally control the export of products created within the industrial zones. Estimates project that there will be 40,000 Palestinian workers within the industrial zones.

Already land has been confiscated in different Palestinian districts in the West Bank to build these industrial zones, which will be funded initially by different governments internationally. To explain, one in the north will be funded by the German government, one in the northwest of the West Bank will be funded by [the US development agency] USAID, one in the south will include infrastructure funded by the World Bank and Turkish government and finally one in the eastern West Bank will be funded by the Japanese and US governments.

Supporters of this industrial zone project hope that eventually half-a-million Palestinian workers will be working in these industrial areas. Again it’s important to remember that the Palestinian workers will not be working in either Israel or a potential Palestinian state, so no labor laws can be implemented on these industrial or agro-industrial zones.

Israelis will maintain control [over] the exports over these industrial zones, as all the supervisors will be Israeli, so Israel will have total economic control over the zones.

SC: Based on your reading of the proposal to establish these industrial zones, can you describe the potential conditions for thousands of Palestinian workers who would fill this labor vacuum for the industrial zones that you have described?

DH: First, it’s important to recognize that to enter these industrial zones you will need a permit from Israeli authorities; if at any point in your history you were considered an activist against the Israeli occupation of the West Bank and Gaza, you will never receive the permit to enter and work at the factories in the industrial zones. So these industrial areas will remain under strict Israeli control.

Now looking at Gaza, the area has been a ghetto since 1994, as a wall has been surrounding Gaza since that time. Already two industrial zones have been built where thousands of Palestinians worked. As the intifada started in 2000, Israel simply started closing the entrance to the factories, collectively punishing Palestinian workers. Finally in 2004 Israel closed the industrial zones in Gaza.

Also it’s important to note that the Israeli permits to enter the zones are considered tourist visas, not working visas. Now if a Palestinian worker wanted to travel to work in Canada, for example, I would need a work visa not a tourist visa. In Canada, if I worked while on a tourist visa I would be considered an illegal worker — in the legal sense, a worker without any rights.

Now within these industrial zones, they are on the border areas, so under Israeli law a Palestinian working on a tourist visa within the zones would be considered an illegal worker. So in these conditions, the Palestinian workers are unable to create a union. If a conflict or dispute happens … between the Palestinian workers and the Israeli factory owners, the Palestinian workers would have no recourse within either the Palestinian or Israeli legal system.

No labor rights would exist, no health insurance for workers. If a Palestinian worker becomes sick, or is injured within one of these factories, the Palestinian would simply be thrown out of the industrial zone without compensation or anything.

At this time, these industrial zones are being promoted as peace-building projects, which Israel argues the international community should support. Each industrial or agro-industrial zone will be funded by international governments or international funding agencies, such as USAID.

In promoting these industrial zones as peace-building projects, Israel is attempting to ensure support from the European Union and other states around the world. Through the free-trade agreements that Israeli maintains internationally with different countries in Europe [and] Canada, a market exists for the goods that would be produced within these industrial zones by Palestinian workers.

SC: Can you talk about the role of the Palestinian Authority in the creation of these industrial zones? What has been the position of the PA?

DH: [When] the Oslo Agreement was signed and the Paris Protocol, an economic agreement that was signed between the Israelis and the PA, Palestinian politicians thought that they could really benefit from these projects. So throughout the early 1990s the PA promoted such projects internationally, including the two industrial zones that were built around Gaza. In the West Bank, no industrial projects were built during the Oslo period in the end.

Once the intifada started and the PA was persuaded [by] the grassroots [organizations] … that Israel was offering the Palestinians nothing, most of these industrial projects were stopped, while a movement against economic cooperation with Israeli spread throughout the Palestinian territories, even up to the highest levels of the PA. This movement against economic cooperation with Israel also promoted the idea of developing economic alternatives to cooperation with Israel for the Palestinians.

This movement continues. In 2004 Israelis began seeking independent economic partners within Palestinian society, attempting to negotiate direct agreements with different Palestinian businesspeople. Israel targeted the most important 50 Palestinian businesspeople, attempting to persuade these Palestinians to co-launch these industrial zones directly with Israel and without the approval of the Palestinian Authority. [The] first step was an Israeli military order to confiscate the land from Palestine for the industrial zones, then Israel surrounded this territory by the wall and also by checkpoints, then they pressured Palestinians to buy these confiscated lands.

The Palestinian Authority managed to block this project in cooperation with grassroots organizations and civil society organizations, including ours, which was active in this effort. Palestinians managed to block the project [for Israelis] to sign direct deals with Palestinian businesspeople.

In 2005 the World Bank managed to re-open debate on the industrial project, presenting through research the zones as the only solution for the Palestinian economy. Since this time Israel and the World Bank managed to collect funding for these projects, mainly from the IMF [International Monetary Fund], USAID, the US government, the Japan International Cooperation Agency, the Turkish government and the German government.

At the recent summit in Annapolis in the US, these industrial zone projects were jointly approved by the PA and Israeli officials, at which time they announced that they will attempt to finalize these projects by the end of 2008. Now in Palestine, through civil society networks, we are trying to raise the level of pressure on the PA to stop all Palestinian cooperation in these industrial zone projects, for the PA to cancel the approval they made at Annapolis.

SC: Can you speak about the grassroots reaction to the PA agreement to participate in the establishment of industrial zones in collaboration with Israel? On a grassroots level, what are people in Palestine saying about these projects?

DH: [The] launching of a grassroots campaign took different dimensions; a key dimension is rooted in our appeal for boycott, divestment and sanctions against Israel, which is led by different organizations world-wide. Also, there have been many meetings between activists in Palestine and different officials within the PA. Also, we are pushing to include an anti-Israel-cooperation position within the mandate for Palestinian trade unions for the upcoming five years.

At this point many politicians in Palestine have been persuaded to work against the creation of these industrial zones within the framework of the PA. Also at [the] grassroots level, we have been organizing demonstrations and events next to the locations for the industrial zones and outside of PA buildings in the West Bank, led by the people with land confiscated by Israel in order to begin establishing these industrial zones. Many efforts are taking place to stop these industrial zone projects.

SC: Let’s talk about the way that economics is used throughout the Middle East to push normalization with Israel. Clearly, the issue of economic and political normalization with Israel is contested throughout the region. Currently a number of trade agreements are being negotiated between the US and different countries in the Middle East, agreements that include points of economic normalization with Israel, an issue that gained a great deal of attention from Jordan to Bahrain. Can you talk about the regional context?

DH: An important point concerning recent history on this issue was a presentation made by US President [George W.] Bush at a conference at Columbia University in which Bush stated that the US’s goal was to have a free trade agreement between the Middle East and the US. Also within this address, Bush stated that the agreement would be about establishing US political control within the Middle East, linking the trade agreements to the US war on terror.

Also Bush stated clearly that this trade strategy involved bring[ing] Israel into the Middle East as a fully recognized country, as a Jewish country living next to its neighbors in peace. So trade agreements were presented as the path for the US push for normalization with Israel. In this same period, Robert Zoellick traveled to the Middle East in [his] capacity [as] US Trade Representative. In a talk, Zoellick stated clearly that the goal for this agreement was to have Israel recognized in the region, as part of the effort to combat the Arab boycott of Israel.

As the US started negotiating these agreements, the first countries that they targeted were the smallest or weakest countries in the Middle East. In an attempt to create an opening in the Arab boycott against Israel, the US targeted Jordan, Bahrain [and] Morocco.

At the same time, US Congress representatives announced that the US would peruse a free trade agreement with Saudi Arabia only if the monarchy officially recognized Israel. In signing these agreements, for example with Jordan, the US now allows exports in to the US without taxes if the product included a minimum of ten percent Israeli material.

SC: Can you discuss the current situation in Palestine in terms of the economic context of Israel’s occupation?

DH: If you look back to history, it’s clear that many colonial projects were started for economic reasons and came to an end when the price of occupation became higher than the profits gained from the occupation or colonization project. For example, in Algeria, the French greatly benefited from Algerian agricultural production, especially grapes which were used in the French wine production.

British colonization in India was greatly connected to the spice trade and to cotton production. Also, British colonization in Egypt was connected to cotton production. Each example of colonization in history was connected to economics, ending when the human and financial price became higher than the profit the colonizers could gain by continuing colonial policies.

Today, Israel’s occupation controls all of Palestine’s resources, [including] water resources [and] tourist resources, as Jerusalem and the West Bank are rich in Muslim, Jewish and Christian tourist sites. At the time that Israel’s occupation began, a central goal was to control the economic resources of Palestine. However, today the price of this occupation is becoming higher and higher.

In examining the current economic situation facing Israel today it’s clear that the occupation will collapse unless Israel creates new ways to benefit from the occupation. In the face of this crisis arrives the industrial zone projects or the free trade agreements as a solution.

Robert Zoellick, the US Trade Representative, explained it best at the Doha meetings of the World Trade Organization in 2001, [by] saying that the US is pushing free trade agreements throughout the global south in order to force the US political agenda, which translates in the Middle East to accepting Israel’s occupation or accepting the US occupation of Iraq.

People throughout the Middle East are attempting to build a movement against the economic side of the war. However, unfortunately, the majority of the people in the region live under dictatorships, which makes it extremely difficult to create the space to build a movement against these economic policies.

Major demonstrations against these US-driven trade agreements have taken place. However, these demonstrations face serious repression. Many social activists who have been involved in fighting US trade policies have been arrested, detained or interrogated. Despite this, our movement continues: a movement against US trade policies throughout the Middle East.

Stefan Christoff is a member of Tadamon! Montreal and frequent contributor to the Electronic Intifada. This interview was originally produced for the Fighting FTAs project, an international project that provides a global picture on free trade agreements (FTAs), and insight into struggles being waged by social movements fighting back.

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