Protocol on Economic Relations

The Protocol on Economic Relations, commonly known as the Paris Economic Protocol or the Paris Protocol, is an economic agreement between the Government of Israel and the Palestine Liberation Organization (PLO) signed on 29 April 1994 in Paris, France. Formally titled the Protocol on Economic Relations between the Government of the State of Israel and the Palestine Liberation Organization, the agreement forms Annex V of the Gaza–Jericho Agreement and is an integral component of the Oslo Accords. The Protocol established the legal and institutional framework governing economic relations between Israel and the Palestinian territories during the interim period of the Israeli–Palestinian peace process, covering areas including trade, taxation, customs, banking, monetary affairs, labor, agriculture, industry, tourism, and economic cooperation.

The Protocol established a customs union–based framework under which Israel and the Palestinian territories share a common external customs envelope while granting the Palestinian Authority limited autonomy over selected economic matters. It regulates customs duties, import and export procedures, value-added tax (VAT), income taxation, indirect taxation, labor movement, standards, licensing, insurance, banking, telecommunications, transportation, and energy. The agreement also introduced a mechanism under which Israel collects customs duties and certain taxes on behalf of the Palestinian Authority and periodically transfers these clearance revenues, which constitute a major source of public finance for the Palestinian government.

The Protocol also provided the legal basis for establishing the Palestinian Monetary Authority (PMA) and the development of the Palestinian banking and financial system. Although it authorized the creation of a monetary authority with many central banking functions, it did not provide for the issuance of an independent Palestinian currency. As a result, the Palestinian economy continues to operate primarily using the Israeli new shekel, the Jordanian dinar, and the United States dollar. The agreement further established frameworks for banking supervision, payment systems, financial regulation, and economic coordination between Israeli and Palestinian institutions while promoting private-sector development and cross-border economic cooperation.

Since its adoption, the Protocol on Economic Relations has remained the principal legal framework governing Israeli–Palestinian economic relations and has been widely studied by economists, policymakers, and international organizations. While supporters argue that it facilitated the establishment of Palestinian economic institutions and provided a structured basis for economic cooperation, critics contend that it has constrained Palestinian economic autonomy and reinforced dependence on the Israeli economy in areas such as trade, taxation, and monetary policy. The Protocol continues to inform the work of institutions including the Palestinian Monetary Authority, the Palestinian Ministry of Finance, the Government of Israel, the World Bank, the International Monetary Fund (IMF), the United Nations Conference on Trade and Development (UNCTAD), and other organizations engaged in the analysis and development of the Palestinian economy.