Sherine Abdel-Razek looks at the feasibility of changing the lanscape between Gaza and Egypt into a free-trade area For more than 1.5 million people living in Gaza, tunnels have provided a lifeline bringing in all kind of goods, especially after the Strip came under total Israeli blockade in 2006, when Hamas came to power and the occupying power placed the most densely populated area in the world under sanctions. All crossings into the coastal Strip were closed, isolating Gazans from the world. The only available route in and out was the Rafah Crossing into Egypt -- but even that route was not always open. An agreement signed by the Palestinian Authority and Israel in 2005 included plans for formal trade, but the deal was frozen when Hamas came to power in Gaza in 2006. The only crossing that allows the movement of goods is the Israeli Kerem Shalom, where the passage of most items is restricted. This pushed Palestinians to dig new tunnels on the borders between Egypt and Gaza, through which they smuggle commodities such as food, medicine, cigarettes, fuel and construction materials. A recent report by the International Crisis Group indicates that goods of a value of $500 million to $700 million travel through the tunnels every year, with Hamas charging about 14.5 per cent of that cost. The problem with the tunnels is that they can be used by people to travel illegally. As such, Egypt considers them a security threat. After last month's border attack in the Sinai Peninsula, which killed 16 Egyptian soldiers, hundreds of tunnels were demolished by the Egyptian authorities. Hamas has led calls to use the Rafah border crossing for commercial trade, a suggestion that appears impossible because both Egypt and the PA have a treaty with Israel and the EU prohibiting trading through the border. So the only available option is a free trade area. Egyptian Minister of Parliamentary Affairs Mohamed Mahsoub said at the end of August that a free trade area on the Egyptian-Palestinian border is soon to be announced, and this will be paralleled by a law criminalising the digging of tunnels. Moreover, the land authority in Gaza has submitted 200 acres to the Ministry of Economy to establish a trade zone on the borders with Egypt, west of the Rafah Crossing, land authority director Amal Shamali told the Palestinian News Agency Maan earlier this week. Abdallah Badawi, head of the North Sinai Chamber of Commerce said that a free trade area would help end informal trade. "We can't assess the exact figure of informal trade activities but we know that subsidised food and fuel are smuggled to Gaza," he said. "Stolen cars are another problem that surfaced after the Egyptian revolution." Many Palestinians in Gaza have large families, and opening the Rafah border crossing for trade in commodities or setting up a free trade area would secure a high income for Egypt, he added. Omar Shaaban, a Palestinian economist and official, noted: "The FTA would open the door for much economic cooperation and the exchange of expertise between the two sides. Palestinian investments would pour into Sinai and Egypt would benefit from a lot of Gazan commodities, while contracting companies can have a stake in the construction boom." Under the UN reconstruction programme, and with Gulf donations, new cities are being built on the Strip ready to accommodate 11,000 Palestinians in the next few months. Hospitals and motorways are also under construction. "Up till now no Egyptian company has participated in the construction bonanza," said Shaaban. Also, according to Shaaban, Sinai residents can learn from the expertise of Gazans in agriculture. "We learnt many sophisticated irrigation techniques from the Israelis," he said. However, the economic benefits are not the main issue here as politics will have the final say in the decision-making process. Israeli-Palestinian, Egyptian-Israeli and intra-Palestinian relations make the idea of a free trade area good-willed but na��ve, said Magdi Sobhi. Shaaban said that the idea of forming a free trade area is not new, and was first proposed in the 1950s, but now an intra-Palestinian split has given the problem a whole new dimension. He noted that Israel would push towards any agreement that deals with Gaza and its ruling authority as independent from the Palestinian Authority. "That is why Israel put Gaza under siege to impoverish it and then annex it to Egypt," said Shaaban. "Any formal and legal trade relations between Egypt and Gaza would undermine the possibility of reconciliation between Hamas and the Palestinian Authority," he added. Sobhi says Israel would never approve the FTA plan unless it monitors all purchases, so it can make sure no weapons are traded. Also there are certain strategic commodities like steel that is banned from entering the Strip, so that it is not used in making bunkers. But would the Egyptian authorities approve of the Israelis monitoring their trade? Plus, the full liberalisation of good transfers would mean that the Egyptian markets would receive Gazan commodities with an Israeli component and that cannot be accepted. Both Shaaban and Sobhi noted that Hamas will not totally demolish the tunnels, as they are an important source of income. Hamas levies a certain percentage on the illegal trade and individuals' movements through the tunnels. Other stakeholders might also oppose the idea. Opening borders for the movement of labour would mean an extra burden on the already oversupplied labour market in Sinai and Egypt in general. Tunnel owners -- who have become millionaires by managing the illegal passages -- would also likely oppose the idea. "These tunnels have created millionaires on both sides of the border," Palestinian President Mahmoud Abbas told British magazine The Economist. "The goose with the golden eggs has created more than 800 new millionaires in the Strip, and another 1,600 about to become millionaires." But the idea of opening the crossings to commodities is not practical as Egypt is committed to an international agreement that prohibits the transfer of any goods through the Rafah border. Sobhi of Al-Ahram Centre for Political and Strategic Studies rules out the possibility that forming a free trade area could lead to Palestinian workers moving to Egypt to compete in an already oversupplied labour market. "Free trade areas mainly concentrate on commodities and money transfer, then on workers' transfers," said Sobhi. "The latter is usually governed by international pacts."
