WORLD TRADE  
ORGANIZATION  WT/L/770/Add.1 
23 October 2009 
 
 (09-5265) 
 Original:   English 
  
 
PALESTINE – REQUEST FOR OBSERVER STATUS 
 
Communication from Palestine
 
 
Addendum  
 
  The following additional communication, date d 22 October 2009, addressed to the Chairman 
of the General Council, has been received from the Permanent Observer Mission of Palestine to the 
United Nations and other Interna tional Organizations with the request that it be brought to the 
attention of the General Council. 
 
_______________ 
 
 
Palestine’s Request for WTO Observers hip – Normal Case, Normal Rules 
 
A "Separate Customs Territory” on the Way to Statehood  
  A few days ago Palestine's
1 formal request for Observership in the WTO General Council and 
its subsidiary bodies was circulated to WTO Me mbers (WT/L/770).  Numerous discussions have 
indicated widespread support among Members for th e Palestinian quest.  During these discussions, 
some Members expressed an interest in further factual and legal information that would assist them in 
developing a better understanding of ho w Palestine fits into the WTO System, in particular in view of 
certain de facto constraints on the Palestinian gove rnment and the economic relationship with Israel 
under a bilateral agreement, th e so-called Paris Protocol. 
  This note aims to respond to that interest in so me detail.  It explains that Palestine's case for 
observership (and eventual membership) in the WTO is, in fact, a rather normal one:  A "separate 
customs territory" aiming to make the first of the classical steps towards membership in the 
organization, as foreseen by the rules.  There can be no doubt that Palestine under the Palestinian 
Authority is such a "separate custom s territory".  The very fact that Palestine entered into a bilateral 
trade agreement with partners such as Israel, th e EC, EFTA, Canada or Turkey confirms its legal 
autonomy in trade matters.  But ev en if the agreed cooperation with  Israel under the Paris Protocol 
were taken as defining Palestinian regulatory auto nomy (a result no government engaged in bilateral 
trade agreements would want to accept), the remaining policy space s till leaves a Palestinian "separate 
customs territory" with regulatory authority in  all key WTO areas such as tariffs, quantitative 
restrictions, subsidies, SPS, TBT, Services and IP. 
 
 The Palestinian Authority through the Ministry  of National Economy and Palestine's Mission 
in Geneva, remains at Members' disposal should additional background information or explanations 
be required.  
                                                     
 
1 The term "Palestine", referring to the West Bank an d Gaza, is used here for easier readability, without 
prejudice to questions of status. WT/L/770/Add.1 
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  INTRODUCTION AND OVERVIEW 
 
  The WTO system is characterized by the aim to foster a world trading system based on non-discrimination, market access, transparency, pred ictability, reliability and the rule of law.  Both 
the WTO and its predecessor, the GATT,  have cultivated a pragmatic appr oach in their aim to achieve 
universal coverage of disciplines on the regulation of international trade.  Palestine, where trade 
regulation encompassing all areas covered by WTO law is practiced daily by the Palestinian Authority, can and should be included in this coverage.  
Palestine and the WTO 
 
 
 Palestine seeks to proceed on its way towards full integration into the world trading system. 
Following its participation as an ad hoc observer in the session of the WTO Ministerial Conference in 
Hong Kong in 2005, Palestine is now seeking to obtain "full" WTO observership status, i.e., 
observership in the General Council and its subsid iary bodies as an interim step on the way towards 
WTO Membership.  
  Palestine is on the way to becoming a norma l member of the international community.  
A logical aspect of this normalization is the country’s  integration into universal systems, including the 
international economic systems.  Palestine specifically seeks integration as a normal player into the rules-based world trading system under the umbre lla of the WTO, with rights and obligations. 
Palestine is ready to play by the rules, and wishes to  rely on the rules, when trading with its partners. 
Integration into the world trading system also mean s to establish a firm basis and reference for current 
and future bilateral and regi onal trading arrangements.  
  While continued and growing trade with Israel  as a neighbour will remain a key element of 
Palestine’s current and future economic policy, Pal estine’s producers, traders, service providers and 
intellectual property owners are taking a global out look to gain and retain competitiveness in the 
future.  WTO rules will provide an essential underp inning for their activities by guaranteeing 
important rights such as market access under agreed  terms, non-discrimination and respect for proper 
administrative procedures .  These rights will apply in relationships  with all trading partners, except to 
the extent that bilateral or regional agr eements specifically determine otherwise.  
 
Palestine as a "Separate Customs Territory"
  
 
 Unlike in other contexts where stateh ood might matter, Palestine’s situation vis-à-vis the 
WTO is rather simple.  WTO observership (and me mbership) does not presuppose statehood.  It is 
sufficient to be a "separate cust oms territory" – a criterion Palestine under the Palestinian Authority 
clearly meets.  The very fact that the Palestinians  concluded reciprocal trade agreements with Israel, 
the EC, EFTA, Canada or Turkey leaves no doubt about  the required legal authority of the Palestinian 
side in all trade matters. This authority, incidental ly, is also explicitly confirmed in the text of the 
Paris Protocol itself.  The agreement under the Paris Protocol of both the Israeli and the Palestinian 
side to set standards for, and cooperate on, aspects of the regulation of trade with third parties does 
not diminish, but rather confirms their autonomy.  No government could accept the alternative 
position – that autonomy as understood by WTO rules for purposes of status and eligibility is relinquished upon the entry into bilateral trade agreements.    But even if the Paris Protocol were seen as defining somehow a priori the degree of 
Palestinian (and Israeli) autonomy in economic and trade policy making (which, as indicated, is 
obviously not the case), it is important to note that th e agreement is in fact ra ther limited in its scope, 
as far as the regulation of trade with third parti es is concerned.  While the agreement establishes 
administrative cooperation and a certain degree of ha rmonization, key third-party trade competencies 
in all areas of WTO coverage, including in core areas such as tariffs, quantitative restrictions,  WT/L/770/Add.1 
 Page 3 
 
 
  subsidies, SPS, TBT, services and intellectual property ri ghts, are left to the parties.  Even under the 
Paris Protocol the Palestinian side thus clearly  qualifies as a "separate customs territory."  
  This note explains these two considerations in de tail.  It further adds reflections on additional 
aspects, namely the pragmatic tradition of the GATT/ WTO in the furtherance of its regulatory goals, 
and the fact that the separate cust oms territory of Palestine is, accord ing to the International Roadmap, 
arguably on the way to statehood.  The phased integration of Palestine into the WTO system thus follows both the system’s own logic and, almost by coincidence, the logic of the international 
community’s plan for a durab le peace in the Middle East 
 1. Palestine as a "Separate Customs Territory"  
 Palestine currently qualifies as a "separate cust oms territory" for purposes of observership in 
the WTO.  (a) The Relevant Rules  
 The Rules of Procedure for Sessions of the Ministerial Conference and Meetings of the 
General Council (WT/L/161) provide in their respective Rule 10 that " [r]epresentatives of States or 
separate customs territories may attend the meetings as observers on the invitation of [the Ministerial 
Conference / the General Council](…)." Paragraph 1 of Annex 2 to the Rules clarifies that requests 
for observership "shall be examined on a case-by-case basis."  
 
 The rules do not contain a definition of a "separate customs territory" for purposes of 
observership.  The context, namely the idea that observership would be gran ted normally to countries 
that embark on WTO accession, however, appears to suggest that in principle "separate customs 
territories" should be read in light of Article XII of the Marrakesh Agreement, which talks of "any 
State or separate customs territory possessing full au tonomy in the conduct of its external commercial 
relations and of the other matters provided for in this Agreement and the Multilateral Trade 
Agreements."  The interpretation of what defines a wort hy candidate for observership may further 
benefit from a careful contextual reading of Article XXIV:2 of GATT 1994, which defines a customs territory as "any territory with respect to which separat e tariffs and other regulations of commerce 
are maintained for a substantial part of the trade  of such territory with other territories."  However, 
given that WTO coverage has moved well beyond the scope of the GATT 1947, in the context of 
which this provision and the concept of a "separat e customs territory" was or iginally conceived, a 
careful interpretation is required.    It is further important to note that the c oncept of "separate customs territory" is an 
autonomous GATT/WTO concept.  It stands against a particular historical background and must be 
interpreted in light of its object and purpose.  There are two broad functions that stand out.  
  First, the concept serves to allow for, and en sure, coverage of the world trading system not 
only in states but also in all those territories outsi de of states where international trade, autonomous 
trade policy making and trade regulation occurs.  It reflects both the aspiration of universal coverage 
of the multilateral trading system and the GATT’ s traditional pragmatism underlying its focus on 
actual trade and trade regulation, avoiding "sticky" issues of status under international law.  We 
explore this aspect further below.    Second, the concept serves to ensure that every Member (and Observer) government is in a position to meaningfully negotiate, assume and im plement obligations, and pursue rights, under the 
WTO agreements, including tariff concessions, sp ecific commitments in services and the numerous 
disciplines under the Uruguay Round Agreements.  The key question is, negatively put: Is the 
government subject to another government’s legal au thority with respect to relevant areas of WTO WT/L/770/Add.1 
Page 4  
 
  coverage so that a meaningful application of commitments and participation in the WTO system 
cannot be assured.    The Palestinian territory rather clearly qualif ies as a "separate customs territory" under the 
said provisions.  The key considerations in this respect can be summarized as follows.  
 
(b) The Existence of the Paris Protocol and other Trade Agreements Confirms the Status of a 
Palestinian "Separate Customs Territory"  
 Palestinian economic relations w ith Israel are based on a treaty.  The Paris Protocol concluded 
between the Palestine Liberation Organization and Isr ael in 1994, later includ ed as the "Protocol on 
Economic Relations" in Annex V of the Interim Ag reement of 1995.  The Paris Protocol is an 
agreement under international law.  Like other trade agreements it contains rules agreed between the 
two parties on various aspects of their bilateral economic relations and in addition addresses aspects 
of trade between them individually and third parties.   It establishes essentially a weak form of customs 
union, in view of the far-reaching autonomy retained by both parties (for details see section C below).  
 
 Customs unions are, of course,  not unusual in the WTO. Seve ral WTO Members have entered 
into customs unions or close free trade agreements w ith other countries, such as the Member States of 
the European Union, the South African Customs Un ion (SACU) or CARICOM, to name just a few. 
These and other WTO Members would hardly accept th at anyone doubted their retention of "full 
autonomy in the conduct of their external commercial re lations" as this is meant in the context of the 
WTO Agreement.  Like other international trade agre ements, the Paris Protocol is simply a reciprocal 
agreement on trade liberalization between the two par ties, covering in addition certain aspects of their 
respective external (third-party) trade relations.  The very fact that the Israeli and the Palestinian sides 
possessed the legal capacity to enter into this agreement demonstrates their autonomy to regulate 
trade.  
 
 While this conclusion speaks for itself, it is inte resting to note that the Paris Protocol itself 
confirms this autonomy explicitly in its preamb le and throughout its provisions, consistently 
underlining the reciprocal nature of the specifi c obligations undertaken by both parties.  The 
preamble, for example, establishes as the explicit premise of the agreement " mutual respect of each 
other's economic interests, reciprocity, equity and fairness ". It goes on to speak of the Palestinian 
side's " right of economic decision-making in accordance with its own development plan and 
priorities ," and recognizes the different ties the Israe li and Palestinian economies have with third 
parties.  Given this explicit recognition of Pales tine’s "right of economic decision-making", the text 
itself leaves little doubt as to the Palestinian au tonomy in the sphere of trade regulation.  
 
 Article I of the Paris Protocol further speaks of the " contractual agreement " established by 
the Protocol between the two sides. Numerous sp ecific provisions further underline the reciprocal 
nature of the agreement.  Article III:1, for instance, provides that "[t]he import and customs policies 
of both sides will be according to the prin ciples and arrangements detailed in this Article ." Either 
party would not want to see this  interpreted as limiting its " autonomy in the conduct of its external 
commercial relations " – in fact, it of course confirms that autonomy.  
 
 The very existence of the agreement thus dem onstrates that the Palestinian side has autonomy 
in the conduct of its foreign trade relations, which it has exercised inter alia by entering into and 
operating in accordance with the agreement.   
 The same applies with regard to Palestine’s other reciprocal preferential trade agreements 
with other parties, including the EC, EFTA, Turkey  and Canada.  All of these, of course, equally 
presuppose and hence confirm Palestine’s auto nomy in external commercial relations.  
  WT/L/770/Add.1 
 Page 5 
 
 
  (c) Even under the Paris Protocol "Full Autonomy" Continues to Apply  
 Even if, arguendo , the Paris Protocol were seen as defining somehow a priori the degree of 
the parties` autonomy in economic and trade policy making (which, as indicated, is not the case), it is important to note that the agreement is in fact ra ther limited in its scope, as far as the regulation of 
external (third-party) trade is concerned.  As a result, the agreement, primarily concerned with 
bilateral trade and economic cooperation, leaves e nough room to both sides that both would qualify as 
"separate customs territories" even if the agreed cooperation under the Paris Protocol were understood 
to be "superimposed" (as opposed to agreed, as is the case).    This becomes clear when the external trade di sciplines contained in the Paris Protocol (the 
"PP") are compared to the coverage of WTO agreements. To name just a few:  
 
• Tariffs (GATT Article II) :  In the area of tariffs, both sid es, like other members of customs 
unions, have agreed to largely align their polici es.  The construction, however, is unusual. It 
was agreed that the Palestinian side would apply the Israeli applied tariffs as its own minimum 
tariffs, except for goods contained in three lists annexed to the Protocol, where it retained the 
possibility to apply lower tariffs without furt her agreement.  The result of this unusual 
construction is Palestinian "full autonomy" (fo r purposes of the WTO Agreement) even in the 
area of tariffs.  
 
• Symptomatic is that the Parties, logically, maintain separate tariff books.  As the Parties 
agreed in PP Article III para. 5.a that Israeli (applied) tariffs shall serve as the minimum basis for most Palestinian tariffs, the PA retains full autonomy in its ability to raise tariffs. GATT 
Article II, one of the WTO's key market access rules for goods, however, foresees that tariffs 
of WTO Members will be bound, in the form of  upper limits (the "bound rates"), through each 
Members individual schedule of concessions.  The PP thus regulates an aspect that is of little 
interest to WTO law, namely a minimum level of external tariffs, and leaves full Palestinian 
autonomy with respect to what WTO law aims to  discipline, namely the raising of tariffs.  
 
• This, of course, includes the possibility to set tariffs above the Israe li WTO bound tariff levels 
– another rather clear indication that the Palestinian customs territory is separate from the Israeli customs territory.  It also demonstrates th at Palestine is not legally covered by Israeli 
WTO commitments.  Note that the agreement that the PA would not lower its tariffs below Israeli applied tariffs is simply a measure to stem the risk of trade deflection, arising because 
of (at the time) open borders between the parties.  
 
• Of course, as part of the future accessi on negotiations WTO Members may, on certain 
products, seek to negotiate with the PA bound tariffs that are be low the Israeli applied tariffs. 
In that case, the Palestinian side – like any other country engaged in a bilateral trade 
agreement which addresses the harmonization of third party trade – would have to either 
decline the request or seek renegotiation with Is rael.  The PP, incidentally, explicitly provides 
for the possibility of amending the annexed lists  of goods, which would facilitate the process 
if need be.  
 
• Both would be rather normal negotiating situati ons in a WTO context. In any case, Palestine 
retains "full autonomy" to either maintain current tariffs as agreed under the PP, to raise tariffs, as it is completely free to do under the PP, or to renegotiate the PP or its Annexes in 
order to reduce tariffs.  
 
• 
SPS Agreement : PP Article VIII addresses, beyond free bilateral trade in agricultural 
products, the imposition of SPS measures.  The prov ision, however, only aims to ensure that WT/L/770/Add.1 
Page 6  
 
  high standards are applied by both sides' veteri nary and plant protection authorities, and that 
both sides cooperate effectively " based on mutuality " (para. 3) – another reconfirmation of the 
reciprocal nature of the agreement.  With regard to imports from and exports to third 
countries, which is what WTO law would be concerned about, paragr aph 2 of Article VIII 
states that the veterinary and plant protection services of each side will be responsible for 
importation and exportation. Para. 6 further clarifies that " the official veterinary services of 
each side have the authority to issue veterinary import permits ."  While the parties agree to 
apply " the professional veterinary conditions for Israel ", the context makes it clear that this 
means (as for tariffs) minimum conditions -the agreement simply aims to ensure that no 
substandard products get transshi pped through the Palestinian territory to Israel.  Again, 
importantly, the Palestinian side retains full autonomy to set higher standards at will (which 
in practice it occasionally does, including vis-à-vis Israeli products) – something the SPS 
Agreement aims to discipline when it com es to imports from WTO Members.  For the 
importation of plants and plant products from thir d parties the situation is similar. Para. 9 
provides that the permits issued " will be based on the prevailing standards and 
requirements ."  Clearly, thus, the setting of standard s (no upper limits) and the administration 
of SPS measures is left to both parties; Article VIII mainly addresses the mutually agreed need for good cooperation between the SPS authoriti es concerned.  As a result, the Palestinian 
SPS administration is, as far as the trade focus of the SPS Agreement is concerned, almost 
entirely undisciplined by the PP.  
 
• TBT Agreement : Similar to its treatment of SPS measures, the PP in 
Article III para. 10 foresees that for third count ry imports Israeli "standards" (obviously not 
referring to standards but rather to technical re gulations in the diction of the TBT Agreement) 
apply as minimum standards for purposes of third party imports, to avoid deflection of sub-
standard imports to the Israeli market -a nor mal measure in view of the then open trade 
borders between the two parties.  This understanding of the provision results from a 
contextual reading and has never been in doubt in Palestinian-Israeli practice.  Palestinian 
regulatory authorities have always retained and used the right to apply additional or higher 
standards, exemplified for instance by stric tly enforced labelling requirements including, 
incidentally, on Israeli goods. In the area of st andards proper (in the TBT diction), it is worth 
noting that the Palestinian Standards Ins titute has meanwhile issued over 600 national 
standards something the TBT Agreement would cer tainly aim to discipline under its Article 4 
and the annexed "Code of Good Practice."  Again,  "full autonomy" when read in the specific 
WTO legal context is well beyond doubt.  
 
• GATT Article X (Customs Administration):  Article III para. 14.a of the PP expressly states 
that Palestinian customs is responsible for the implementation of the agreed-upon customs 
and importation policy at the entry points of the Jordan River and the Gaza Strip – the borders 
of the Palestinian Territory with parties other th an Israel.  As part of the agreed cooperation, 
Israeli customs officials are to be "present" and receive copies of relevant papers from the Palestinian customs officials. GATT Artic le X deals in particular with the administration of 
customs -here the PA is clearly autonomous, a nd hence, from the vantage point of WTO law, 
susceptible to disciplining under Article X.  Again,  the relevant "full autonomy" can hardly be 
in doubt. This legal result is, importantly, not a ffected by the at times limited adherence to the 
letter of the provision in practice in the past years.  As the example of Georgia has shown, 
which acceded to the WTO with two regions whic h were not under its government’s effective 
jurisdiction,2such de facto limitations do not affect the legal character of the customs territory 
and the applicability of WTO principles.  
 
                                                      
2 See working Party Report on the Accession of Georgia, WT/ACC/GEO/31, para. 39.  WT/L/770/Add.1 
 Page 7 
 
 
  • GATT Article XI: Quantitative Restrictions :  The PP contains no limitations on the PA 
applying import bans or quotas on third-party imports or exports. 
 
• Import Licensing Agreement (AILP ): PP Article III para. 9 provides that each side will 
issue import licenses to its respective importers.  The act of licensing (the actual procedure) by the respective authorities is thus not subject to PP disciplines at all.  Those procedures, 
however, are the major concern of the AILP.   Seen from the disciplines of a key WTO 
agreement, the Palestinian Authority and Isr ael remain entirely unconstrained by the PP.  
Note that the reference in para. 10 to " policies of import licensing, " which are agreed to be 
aligned on the basis of Israeli practice, refers to the requirement of licensing as such.  Apart from the fact that this is only partly regulated  by WTO law, a contextual reading (and the 
corresponding Palestinian-Israeli practice) clar ify that Israeli licensing requirements act as 
minimum requirements, and the Palestinian si de remains free to add to them for goods 
destined for its territory.  The very matter WT O aims to discipline, the potentially excessive 
use of licensing requirements, thus, remains unchecked by the PP.  
 
• Agreement on Agriculture – Subsidies Disciplines :  The PP contains no disciplines on 
agricultural subsidies.  Both sides thus retain  full autonomy in a key area of WTO concern.  
 
• SCM Agreement : PP Article IX expressly allows for the use of direct subsidies and tax 
breaks by the PA, with no limitations.  The subsid ization of products that may be exported to, 
or replace imports from, WTO Members is thus not disciplined at all.  Again, a key area of WTO disciplines is not covered by the PP.  
 
• Trade Remedies under ADA, SCM and SGA :  The PP contains no disciplines on the use of 
trade remedies in third party trade. Palestin e remains thus free to use them at will.  
 
• GATT Article XVII (State Trading Enterprises ):  The PP contains no disciplines on the 
operation of Palestinian or Israe li State Trading Enterprises in th ird-party trade.  The issues 
addressed by GATT Article XVII thus remain unaddressed.  
 
• GATS : The PP contains no regulation of third-part y trade in services by either party, except 
for a mutual agreement on aspects of tourism management.  This leaves almost the entire 
second pillar of WTO law -the GATS -untouched.  The PA is thus entirely free to regulate 
trade in services as it pleases -obviously in "full autonomy."  This applies also in bilateral 
services trade with Israel, with a few scattered exceptions ( e.g. car insurance).  
 
• TRIPS : The PP does not cover intellectual property rights. Elsewhere in the Washington 
Agreement ("Oslo II"), however (Annex III Protocol Concerning Civil Affairs , Article 24 of 
the Appendix), both parties agreed that  
 
   "Each side shall use its best efforts to adopt in its legislation standards of protection 
of intellectual property compatible wi th those in the GATT Agreement on Trade 
Related Aspects of Intellectual Property (hereinafter "GATT-TRIPS").  
 
  Each side will strive to establish an adequate system for the examination of 
applications for registration of intellectual property rights compatible with those in 
GATT-TRIPS."  
  Apart from the weak "best endeavour" nature of the obligation, this provision simply refers to 
the TRIPS Agreement, a part of the single undertaking and as such non-negotiable for WT/L/770/Add.1 
Page 8  
 
  acceding countries.  It is thus obviously a confirmation of, not a limitation on, the "full 
autonomy" referred to in the WTO rules on observership and membership.  
 
• Government Procurement Agreement :  The PP contains no disciplines on government 
procurement.  The Parties remain entirely free in their policies.  
 
 This small "tour de force" (many details c ould be added) shows that the Paris Protocol, 
primarily concerned with bilateral trade, contains virtually no limitations on Palestinian third-party 
trade policy and regulation that have an appreciable effect on any of the key areas addressed by WTO agreements.  Importantly, wherever the parties agreed  to jointly apply minimum levels (as which, for 
practical purposes, they took Israeli measures), the Palestinian Authority retained (and exercises) 
unlimited authority to raise levels of tariff and non- tariff barriers on third country trade. It is thus 
obvious that even under the Paris Protocol the Palestinian Authority retains "full autonomy in the 
conduct of its external commercial relations in  matters covered by [the WTO Agreements]." 
 
2. Interpreting the Rules in Light of the WTO’s Traditionally Pragmatic Approach  
 Quite apart from these technical legal considera tions, which speak for themselves, it is helpful 
to confirm the finding of "full autonomy" by lookin g at the function and history of the concept under 
consideration.  The concept of a "separate cu stoms territory," as indicated, is an autonomous 
GATT/WTO concept.  It stands against a particular historical background and must be interpreted in 
light of its object and purpose.   
 WTO rules both for membership and observershi p, unlike those of most other international 
organizations, are characterized by pragmatism rather than principle.  The WTO system aims to work 
towards universal coverage of world trade, crea ting fair rules of competition, non-discrimination, 
predictability, reliability and the rule of law in in ternational trade in goods, tr ade in services and trade-
related intellectual property rights.  With this aim in mind, and following the example of the GATT 
1947, the WTO therefore treats access to the organization (membership or observership) in a highly 
pragmatic manner, aiming for maximum coverage of  trade and trade regulation where meaningfully 
possible while avoiding to the extent possible political  questions that are not related to the operation 
of the trading system.    A number of cases both of original membership and accessions confirm this approach. 
Examples in point are the current full membership  of the European Communities and their Member 
States, despite the fact that neither has exclusiv e jurisdiction in all matters covered by the WTO 
system (the EC, for example, only "shares" author ity over GATS and TRIPS matters with its Member 
States).  Other examples are the accessions and memberships of Chinese Taipei, Hong Kong and Macao, as well as the original GATT membership of the then not yet independent countries Rhodesia 
(now Zimbabwe), Burma (Myanmar) and, in partic ular, Ceylon (now Sri Lanka).  The latter provides 
an interesting example inter alia because its de facto treaty making power, even in the absence of de 
jure treaty making power, was seen as sufficient to qualify.  
  Illustrative is also the accession of the Princi pality of Liechtenstein, a state, which forms a 
close customs (and monetary) union with Switzerland.  Originally (as expressly agreed in the Swiss 
accession protocol), Liechtenstein was deemed to be covered by the GATT through the Swiss participation.  In 1994, however, without any chan ge in the customs union agreement, Liechtenstein 
acceded as a separate contracting party to the GATT. At the time, both parties confirmed that Liechtenstein had the "full autonomy" required for a meaningful GATT participation. Instructive is 
the formulation used by Switzerland: "The Principality of Liechtens tein is not bound by any 
undertaking that might compromise its autonomy in the conduct of its external  economic relations and 
in other matters covered by  the General Agreement."  This corresponds to the negative test suggested  WT/L/770/Add.1 
 Page 9 
 
 
  above: Is the government seeking observership or accession subject to (constitutive) legal constraints 
that would stand in the way of a meaningful application of WTO obligations and rights?    The observership and later accession of Iraq,  initiated only months after the fall of the 
previous regime, demonstrates that less than full co ntrol by a local authority over security aspects and 
internal order need not be an impediment for m oving ahead on the trade front.  All these examples 
confirm the said trade-oriented pragmatism as a key feature of the WTO system.   In addition to, and apart from, the considerati ons reflected in Section 1 above, it is obvious 
that it would be rather strikingly inconsistent with  the WTO’s aim (universal coverage of relevant 
trade regulation by entities exercising relevant regul atory powers) if the Palestinian territory, where 
separate and autonomous economic policy making and regulation affecting virtually all areas covered 
by WTO law occurs, were not considered eligible for observership.  This should further inform and 
confirm the interpretation of the applicable rules in  view of the object of purpose of the organization 
as such as well as the status of observers hip and the conditions for achieving it.  
 
3. Palestine as a "State in the Making"  
 Irrespective of its current status, however, it is useful to note that Palestine – different from 
several other customs territories that have acc eded to the GATT/WTO – is on its way to full 
statehood.  The International Roadmap for Peace, sponsored by the "Quartet" (UN, US, EU & Russia), supported by the international community at  large and accepted by both the Palestinian and 
the Israeli sides, envisages a "democratic, i ndependent and viable Palestinian state."  
  Palestinian WTO observership should be seen in  light of this unambiguous direction, which 
despite many difficulties is reflected in develo pments on the ground.  The Roadmap process, 
notwithstanding recognized difficulties, makes it likel y that Palestine may start its observership as a 
separate customs territory but complete its accession as a state.  
  This prospect provides important additiona l context for the decision on observership. 
Palestine is not only a "separate customs territory" now but further, supported by an international 
plan, aims to evolve into a state,  at which stage all considerations as to its "full autonomy" will no 
longer matter.  In this sense, the rules’ reference to  "states and separate customs territories", read in 
their context (preparation for WTO accession) and their object and purpose (to identify those 
territories that exercise trade regulation that the WTO system aims to cover), should, arguably, be 
understood to cover Palestine not only as a separate customs territory but also, in addition , as a "state 
in the making."   
 There is, as indicated, no need for Members to express a view on this matter at this stage or 
later.  Because Palestine qualifies as a "separate cust oms territory," the prospect of future statehood 
only provides context to, but is not material for, any decision on observership or accession.  
 
4. WTO Observership as a Reflection of Economic Reality and a Contribution to Peace 
and Prosperity  
 With the increasing importance of principles and disciplines of World Trade Law in the 
region, Palestine’s trade policies should be based upon th ese rules with a view to foster its trade in the 
region and worldwide.  As a first step Palestine th erefore seeks to achieve observer status in the WTO 
in order to become fully acquainted with the multilate ral trading system and with the view to de facto 
application of WTO rules.  As indicated, it is the Palestinian government’s stated aim that the 
initiative shall eventually resu lt in full WTO membership.  
 WT/L/770/Add.1 
Page 10  
 
   In addition to the technical aspects discussed  above, the following broader considerations 
further underline the logic of Palestinian observership:   
• Palestine’s trade policy is increasingly regulated by international agreem ents such as the Euro 
Mediterranean Interim Association Agreemen t between the EU and the PLO/PA and the 
Trade Agreement between the Government of  the Hashemite Kingdom of Jordan and the 
Palestinian National Authority or  unilateral acts under internati onal law extending benefits to 
Palestine, such as the United States’ decision covering imports from Palestine.  It appears logical in this context to anchor Palestinia n trade policy in the global trading system.  
 
• It should be recalled further that Israel was a Contracting Party to the GATT since 1962 and is 
a founding Member of the World Trade Organi zation.  Imports and exports from other WTO 
members not only to Israel, but also to the Palestinian Territory are thus – de facto – often 
conducted in line with WTO rules and disciplines.   Moreover, existing agreements binding to 
Palestine on more than one occasion implicitly or explicitly refer to WTO rules and thereby 
affect the framework of Palestinian trade policy.  It appears therefore logical both for Palestine and its trading partners that Pales tine moves towards formal participation in the 
WTO system.  
 
• Palestine’s future trade talks with its neighbours should be based on and led in the spirit of the 
WTO system of principles and rules.  Palestine is committed to open markets and to the removal of trade barriers which are still para mount in the region and which impair the 
development of Palestine’s economy.  
 
• Palestine is convinced that the principles a nd disciplines of the WTO will assist the peace 
process to which Palestine is committed.  They  also provide a useful basis, and essential 
building blocks, for the processes of cr eating open regional trading systems.  
 
• Observer status, as envisaged by the rules, will bring about full information on the activities 
in WTO.  It will assist Palestine in building  capacities and know-how in the field of trade 
regulation.  It will facilitate the process towards further de facto , and later de jure , application 
of WTO law in Palestine. In the same vein , observer status in the WTO will also support 
Palestine in seeking trade agreements with its neighbouring states in compliance with WTO 
law. 
  
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