The joint customs system (or customs union, as it is variously known) established under the Oslo Accords between Israel and the Palestinian Authority, the geographic proximity and the obstacles impeding [Palestinian] exports to foreign countries are the factors due to which most of the Palestinian foreign trade is conducted with Israel. However, in recent years, things seem to have changed.

According to the figures released by the Palestinian Central Bureau of Statistics, in each of the past few years, exports from the West Bank to Arab countries increased by approximately 20 to 30 percent — a trend which is evident especially since 2005, the first year of recovery following the Second Intifada. Having examined the data relating to exports from the West Bank (there are almost no exports from the Gaza Strip), economist Yitzhak Gal of the Tel Aviv University Dayan Center [the Moshe Dayan Center for Middle Eastern and African Studies] characterizes the trend as the "buds" of change.

In 2010, 85 percent of Palestinian Exports Went to Israel

On the whole, Palestinian exports are rather limited. In 2010, Palestinian exports amounted to less than $600 million, and for the most part, they are directed to Israel. However, it transpires that, while in 2005 Palestinian exports to Arab countries stood at $23 million. In 2010 the sum soared to $54 million. And while in the past, 95 percent of Palestinian exports were channeled to Israel, only 85 percent of Palestinian exports currently go to Israel. In other words, it may well be that the Palestinian economy is gradually shifting away from the Israeli market and moving toward Arab markets. One should be careful about the wording, as the Palestinian economy is still closely tied to the Israeli economy. However, the backdrop against this trend has emerged is worthy of note.

The huge markets of the six Gulf countries (Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman), which are bound by regional agreements, particularly with Jordan, are among the greatest markets in the world — ranking around 11th or 12th, along with India, South Korea and Australia.

The Gulf countries import goods worth some $600 billion annually. Jordan, for instance, has boosted its exports to the Gulf countries in recent years to about $1.5 billion a year. The Jordanians export a large variety of goods to the Gulf countries, manufactured in part by the Palestinians. The Jordanians enjoy geographic and cultural proximity to the Gulf countries — and the same holds true for the Palestinians, hundreds of thousands of whom are living and working in these countries.

A Two-Day Drive From the West Bank to the Gulf

The list of goods the Palestinians have been selling in recent years to Gulf countries is surprisingly varied. It includes cheese, that  amounts to about  $7 million dollars, and olive oil at more or less the same amount, preserved vegetables, plastics (mainly plastic sheets), metal products, timber, electrical appliances and cosmetics.

The transportation of goods to the Gulf countries is quite easy and relatively cheap. It's a two or three-day drive by truck from the West Bank to any point in the Gulf region. The Palestinians living in the Gulf countries serve as a network of agents and trade bureaus. I recently  met an East Jerusalem jewelry merchant who buys and sells jewelry in Abu Dhabi, a refrigeration engineer from Bethlehem who set up business in Kuwait and a Ramallah owner of a pharmaceutical plant who was exploring the Saudi market.

Given regional circumstances, it is not at all surprising that Palestinians are moving toward the Arab markets. So far, only the first buds of change can be discerned, but this may well be the future course that the Palestinian economy is going to take.