During February, 2006 the Aix Group officially marked the commencement of its third stage of research with a 4 day conference in Marseille, France. The Aix Group will be divided into four working groups:(1) Cooperation in Infrastructure; (2) Cooperation in Jerusalem; (3) Refugees; and (4) "Fast Track". These groups will meet in the Middle East and abroad over a two-year period.
The topics selected for analysis and investigation by the Aix Group have been chosen precisely because they are issues of major importance that will help to determine future peace negotiations and will ultimately form the basis for a just and lasting peace agreement in this region. Additionally, such issues have not been sufficiently examined and investigated. Indeed, the non-resolution of such issues will make the creation of a final agreement impossible. Therefore, the Aix Group's examination of these important issues is a vital link in the chain toward political and economic development in the region.
In this stage of research, the Aix Group researched and analyzed the risks and opportunities associated with the Unilateral Disengagement Plan, implemented by Israel in August 2005. Published in May 2005, the position paper sought to assess the conditions that would be created by the disengagement and analyze how they would affect the economic prospects for recovery of the Palestinian economy. Moreover, the group aimed at finding the conditions necessary to link the disengagement to the scenarios presented by the group in their earlier position paper - the Economic Road Map.
In this paper, the Aix Group recognized the potential for a positive context for the disengagement, in light of the mutually declared policy to consider avenues for improving the economic situation in the Palestinian Authority. However, the group was also aware of the significant risks associated with the implementation of such disengagement; the new arrangements, which ended the Israeli presence in Gaza and the northern West Bank, significantly altered the Palestinian Authority's links to Israel and the rest of the world, thereby affecting various economic capacities of the Palestinian Authority.
Although the Disengagement Plan stated that the economic arrangements in effect at the time (the Paris Protocol) would remain valid, the group demonstrates that certain parts of the plan suggest otherwise. From an economic point of view, the group foresaw that the Gaza Strip would have very restricted economic links to the Israeli market, the West Bank, Egypt and other foreign markets. Moreover, the group warned that if an extreme version of the plan was implemented, (that being a plan which included closed external borders for the Gaza Strip), Gaza would turn into an isolated and economically weak region.
In its conclusions, the group proposed that if the Disengagement Plan fell within the parameters set by the Road Map, as its architects claimed, the new arrangements would not lead to an economic regime in the Gaza Strip that differs from that in the West Bank, nor to separating the Gaza Strip from the West Bank.
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This paper aims to establish an economic counterpart to the Road Map for Peace. The paper concentrates on economic arrangements associated with Phase III of the Road Map, since the group believes that the economic content of Phases I and II can only be determined correctly if a clear vision of permanent status arrangements first exists.
In accordance with the Road Map, the paper assumes the emergence of a two state-solution embodying Palestinian economic sovereignty, unambiguous borders and the conduct of economic relations in a spirit of cooperation and mutuality. The group's economic vision of permanent status is based on economic arrangements that will seek a convergence of Palestinian living standards with those of Israel, and promote independence in economic policy-making while acknowledging economic interdependency.
Central to the discussion is a recognition that future Palestinian economic strategy can no longer afford to rely so heavily on the export of labor and remittance income. It is unlikely that the number of Palestinians working in Israel will again approach historical levels; moreover, domestic Palestinian production and exports are compromised by the upward pressure on domestic wages and prices exerted by higher Israeli wage levels.
Accordingly the group assessed future policy options in the trade, labor, fiscal, monetary and investment policy areas.
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