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Wed 12 Dec 2007 10:57 AM

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Palestinian, Israeli firms urge end to conflict

Leaders called on to resume trade talks to prepare economies for Palestinian state.

Palestinian and Israeli businessmen have urged their leaders to resume immediately trade talks to prepare both economies for a possible future Palestinian state.

Key members of the Israeli and Palestinian private sectors recommended in a joint study that peace negotiators adopt a "Free Trade Agreement Plus" (FTA Plus) as the basis for economic relations between Israel and any future Palestinian state.

"An FTA Plus should provide for free trade in goods and services but with economic borders and hence economic sovereignty," said the study, conducted by 30 Israeli and Palestinian businessmen and researchers over a period of six months.

An FTA Plus would also involve deeper integration of the two economies to make doing business easier, the study said.

Israel and the Palestinians launched peace talks last month at a US-sponsored conference and agreed to try to reach a deal on Palestinian statehood by the end of 2008.

The economic study shows businessmen believe the two economies would gain up to $25 billion in combined exports and income as well as more than one million new jobs between them if they adopted an FTA Plus agreement.

The economic study was obtained by Reuters ahead of a conference for leading Israeli and Palestinian businessmen to be held by the Palestine International Business Forum (PIBF) in Jerusalem on Wednesday.

Key tool for peace

The Palestinian territories are Israel's second largest export market. According to the PIBF study, the Palestinian territories imports are worth $2.4 billion from Israel, 6% of Israel's total exports.

"Trade is not only good for business. It is a key tool for building peace. We need to do our best to make it happen," leading Palestinian businessman and PIBF chairman Zahi Khoury was quoted as saying in the document.

Talks about a free trade agreement between Israel and the Palestinians came to a halt after the outbreak of the uprising against occupation in 2000.

Seven years of conflict, plus the impact of Israeli restrictions on the movement of goods and people, badly damaged the Palestinian economy. International sanctions imposed in 2006 after Hamas won parliamentary elections also took a toll.

These sanctions were lifted when president Mahmoud Abbas sacked the Hamas-led government after the Islamist group violently seized the Gaza Strip in June. Abbas appointed Western-educated Salam Fayyad as prime minister in the West Bank. Sanctions on Gaza remain.

Fayyad will ask international donor states to provide $5.5 billion in aid to the cash-strapped Palestinian Authority over the next three years to help its ailing economy recover and to cover its budget deficit.