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Not surprisingly, then, the Oslo peace process and related initiatives did not receive solid support from the Palestinian leadership and Palestinians in the territories and diaspora. According to a Center for Policy Research poll, 38 percent of Palestinians in the WBGS opposed the DOP and 20.4 percent were not sure how they would evaluate the agreement.16 On 3 September 1993, Arafat convened the PLO executive committee in hopes of ratifying the DOP. Some of the most prominent members of the PLO, such as Mahmoud Darwish and Shafiq al-Hout, resigned and a number of members abstained. The cabinet resolution in favor of the DOP passed by only one vote, compared to sixty-one in favor and fifty opposed in the Israeli Knesset.17 Prominent Palestinian intellectuals, as well as political organizations such as Hamas, Islamic Jihad, and the leftist PFLP and DFLP, opposed the DOP. Even former PLO negotiators, most notably Haidar Abdel Shafi,18 and to a lesser extent Hanan Ashrawi, were vocal in their opposition to Oslo. The PPP did not outright reject the Oslo Accords, but adopted more of a wait and see approach.
A series of agreements followed that effectively outlined the nature of implementation after the DOP. Among the most important of these agreements was the Paris Protocol,19 Gaza-Jericho First Agreements, the Oslo II Agreements, and the Protocol concerning redeployment from Hebron. The two parties signed the Paris Protocol in April 1994; this agreement outlined the economic arrangements between the two parties, including issues related to the customs union, import tariffs, trade taxes, import licensing regulations, and trade standards. One month later, in May 1994, the two parties signed the Gaza-Jericho First Agreement, also known as the 1994 Cairo Agreement. These agreements gave the Palestinians autonomy in the Gaza Strip and the West Bank town of Jericho and established the Palestinian self-governing entity, the PA.20 On 27 August 1995, the parties signed the Protocol on Further Transfer of Powers and Responsibilities, which put the PA in charge of labor, commerce and industry, gas and petroleum, insurance, postal services, local government, and agriculture.21
The two parties then signed the Interim Agreements on Implementation of the DOP, Oslo II, on 28 September 1995. The Oslo II Agreements fully detailed the interim arrangements between the two parties during the next five years and the transfer of certain powers to the PA. These agreements established institutions of self-government including a legislative council and an elected “President,” and also elaborated on redeployment arrangements outlining how the WBGS would be divided into three distinct areas—A, B, and C—each with different security and civil power arrangements. There would be four different phases of Israeli military redeployment from the WBGS. By the third military redeployment, Area A would consist of approximately 17.2 percent of the West Bank. In this area, the PA would be responsible for internal security and civil affairs, and Israeli checkpoints would surround each of these areas. Area B would consist of 21.8 percent of the West Bank, over which the PA would have civil control over Palestinians and maintain a police force to protect “public order for Palestinians,” and Israel would maintain overall security control. Area C would consist of 60 percent of the territory where Israel would retain full territorial jurisdiction, and the PA would have functional jurisdiction over Palestinians and “only in matters not related to territory.”22 The two sides, however, did not agree on the territorial size of the fourth and final redeployment. Once the Israeli military redeployment from any area was complete, the Israeli government would transfer the civil powers for education and culture, health, social welfare, direct taxation, and tourism of that area to the PA. These agreements would come to supersede the Gaza-Jericho Agreement and the Protocol on Further Transfer of Powers and Responsibilities. On 15 January 1997, the two parties signed the Protocol concerning redeployment from Hebron, which outlined the nature of Israeli withdrawal from this Palestinian town.23
Formidable Undertakings
The PA became responsible for public sector functions in the WBGS under substantial adversity in a conflict situation. The body was expected to build public sector institutions and assume responsibility for these functions while promoting good governance, democratic political institutions, a robust civil society, security (both internally and for Israel), and a free market while lacking key requisites such as jurisdiction over the land for whose population it would be responsible, or control over water resources. Moreover, it was expected to build a fiscal administration and guarantee fiscal stability without control over monetary policy or its own currency.24 A substantial portion of the PA’s budget would rely on the value-added tax (VAT) and other fees transferred from Israel. From the onset, it would be confronted with the challenge of Israeli closure policies that disrupted the movement of goods and labor, dealing an immense blow to the economies of the WBGS.25 Israel would retain control over the external borders, airspace, water, and the electromagnetic spheres of the WBGS.26 Despite these challenges, the PA succeeded in establishing functioning state institutions.27 From the onset, however, the founding of these institutions privileged certain groups and political organizations.
Opposition to the unfolding Oslo Accords was by no means limited to extremists. The implementation agreements would draw mounting criticism, as each stage increasingly appeared to address Israel’s security concerns at the expense of Palestinian nationalist aspirations. The negotiation of these agreements did not expand beyond the initial narrow participation of the DOP,28 further entrenching the noninclusivity of these agreements. The institutions that historically represented all Palestinian political organizations, such as the PNC and the Executive Committee of the PLO, were not included in this process. An overriding criticism revolved around the PA’s lack of control over jurisdiction. The unfolding agreements also did not bring an end to settlement expansion; on the contrary, settlement expansion would continue unabated as negotiations were under way.29 The issue of Israel’s control over almost every land aquifer in the West Bank was also absent from these agreements and postponed to final status negotiations. Moreover, the subsequent agreements of the Oslo Accords did not move beyond the autonomy framework, with no guarantees toward sovereign statehood.30
The Paris Protocol, Annex IV of the Gaza-Jericho Agreement, established the transitional framework that would govern economic relations, including policies related to trade, specifications, taxation, and banking between Israel and the PA for the next five years, until 1999. The agreement extended control to the PA in some areas, such as the authority to collect domestic taxes, set its own industrial policy, and resume limited imports from Arab countries. The agreement also stipulated a gradual elimination of export restrictions on agricultural products, and it allowed for the establishment of an autonomous Palestinian Monetary Authority for the interim period. The Monetary Authority would perform limited central bank tasks, such as financial sector supervision and regulation; this would not include the issuing of a national currency.31 As the permanence of the agreement took hold, and its disadvantages to the Palestinians became increasingly apparent, it would draw damning condemnation from many quarters. One of the overriding criticisms centered on the creation of a “Customs Union,” and the aligning of Palestinian customs tariff rates, procedures, and taxation policies with those of Israel.32 This arrangement reinforced Israel’s economic control over external borders. Moreover, the alignment of the Palestinian economy with a more advanced, industrial outward-looking economy would not help equip the Palestinian economy to become more competitive in international markets. Since Israel would be required to transfer import taxes and VAT pertaining to revenues collected for goods and services sold in Israel and destined for the WBGS, the overdependence on the Israeli economy facilitated fiscal leakage. According to a 2011 United Nations Conference on Trade and Development (UNCTAD) study, over US$300 million was “leaked” or not transferred to the Palestinian economy, as a result of weak customs control, dated clearance arrangements, and tax avoidance on the part of Israel.33 Control over these transfers also provided Israel with additional political leverage to penalize the PA if it deemed necessary. Initially, proponents rationalized that the arrangements would allow Palestinian labor free access to Israeli markets. Israel, however, unilaterally and gradually limited the entry of Palestinian laborers into its markets.
The Hebron Agreements of January 1997 divided the city into H1 and H2 zones; H1 was handed over to the Palestinians, and H2, the Old City, where 450 Israeli