Summary
A single customs area with free trade and a common tariff. In the Palestine Partition Commission Report, a customs union between the proposed Arab State, Jewish State and Mandated Territories is held necessary to partition’s economics — the Jewish State needs the larger assured market, the Arab State needs an outlet for its surplus produce in the Mandated Territories — but a union that leaves the two states’ fiscal sovereignty unimpaired is in the end not recommended, because the Mandated Territories’ financial dependence on the United Kingdom makes the constitutional objections decisive (Palestine Partition Commission Report, PDF p.204-214, 225-233).
Details
-
The Royal Commission contemplated sovereign states determining their own tariffs, with a treaty-system commercial convention establishing a common tariff over the widest possible range and the freest interchange of goods; the Partition Commission fully agrees with the principles (PDF p.204).
-
Three models are compared: the Palestine-Syrian Agreement (free trade in goods manufactured in either country, separate foreign tariffs; it has proved of far greater benefit to Syria than to Palestine), the Indo-Burma Agreement (free trade and each country’s preferential position maintained for an initial three years) and the Belgium-Luxemburg Agreement (complete freedom of trade and complete identity of tariffs). Only the Belgium-Luxemburg model is held able to satisfy the Jewish State, which needs both free trade within as large an area as possible and an assured protected market (PDF p.207-210).
-
The treaties should provide identity of tariffs and complete freedom of trade between the Mandated Territories and each state, indefinitely, terminable on notice after not less than ten years; all customs duties of Palestine and Trans-Jordan should be collected by a single customs service and paid into a central fund controlled by a central authority of the three areas, the residue apportioned by an agreed formula; fiscal policy is to be settled by a tariff board of equal area representatives chaired by the High Commissioner or his nominee (PDF p.211-214).
-
Under Formula A, the central fund first pays the central authority’s and customs service’s expenses and the whole of the Palestine Government’s financial obligations, and the net surplus — £P.1,439,709 on the 1938-39 figures — is divided in equal shares of £P.479,903; applied to the forecasts this leaves the Arab State with a revised deficit of £P.334,603, the Jewish State with a revised surplus of £P.388,324 and the Mandated Territories with a revised deficit of £P.564,150. Under Formula B the Arab State would also receive a supplementary share making good its initial deficit and then abating, cutting the initial United Kingdom liability from about £1,250,000 to about £1,075,000 (PDF p.226-231).
-
The conclusion is that a contribution by the Jewish State in return for joining the union would benefit the Arab State and the British Exchequer while it lasts, but the benefit is liable to modification after five years and withdrawal after ten, and the constitutional objections — above all that H.M. Government could not be denied the right to insist on fiscal-policy changes in the financially dependent Mandated Territories as a condition of its grant-in-aid — are decisive against a union preserving the states’ sovereign fiscal rights; a union letting the Mandatory’s will prevail would be inconsistent with the proposed grant of independence (PDF p.232-233).
-
Chapter XXII returns to the union as the report’s way past its own conclusion: strictly under the terms of reference no boundaries affording a reasonable prospect of self-supporting states can be recommended, so the states are instead to be required, as a condition of the Mandate’s surrender and unalterably without the League’s approval, to enter a union whose customs service the Mandatory Government administers and whose fiscal policy the Mandatory determines after consultation — a procedure the report terms Economic federalism, the states so established being admittedly not sovereign independent states in the Royal Commission’s sense (PDF p.245-248).
Related pages
Palestine Partition Commission Report, Partition, Palestine Partition Commission, Economic federalism