Not all Israelis are oriented toward the United States, and Shimon Peres is living proof. U.S.-Israel ties are deep, to be sure, and include everything from close cooperation on the peace process to extensive academic and cultural exchanges. Many of the Israeli political, business, and cultural elite not only know American society, but think automatically about the U.S. when considering international initiatives, be they new efforts by diplomats, marketing campaigns by businessmen, or travel proposals by academics.

Many, but not all. Shimon Peres, the foreign minister of Israel, represents those Israelis who are European to the tips of their fingers. He spent the first ten years of his life in Poland. He had an important role in developing Israel’s close relations with France in 1955-67 which in those years was Israel’s main weapon’s supplier. In domestic politics, he prefers European paternalism to American limited government and entrepreneurialism. In diplomacy, he rejects the Wilsonian notion of open agreements openly arrived at; accordingly, he keeps pleading with the Syrians to open a private negotiation. It is no accident that of the many would-be channels between Israel and the Palestinians, he selected the one based in Norway, for he feels more at ease with Europeans.

And so, it is not surprising that Peres uses his new book, written with Arye Naor, to forward a vision of the Middle East that looks for all the world like the French plan for Europe after World War II: use economic cooperation as the starting point for cementing ties and reconciling peoples, with the goal being a common market that in turn leads to close political ties. The New Middle East is basically a development of this theme, one which he Peres has reiterated tirelessly during recent years, “There are only two alternatives [for the Levant]: Benelux or Yugoslavia,”¹ he holds. In the book, he observes that

In keeping with this emphasis, six of the book’s fourteen chapters deal exclusively with economics and the remaining chapters have a strong economic component (for example, in the proposals about Palestinian refugees). The spirit of Peres’ analysis is well illustrated by his effusive analysis of a canal linking the Red Sea with the Dead Sea. He cites Theodore Herzl’s vision of a canal that makes the Dead Sea look like Lake Geneva in Switzerland with waterfalls resembling Niagara’s,² then comments: “At the end of the nineteenth century, it was fine to dream. At the end of the twentieth, it is time to transform the dream into reality.”

Happily, Peres’ vision does find an echo or two among the Arabs. Crown Prince Hasan of Jordan calls “a free-trade zone across the Middle East” the “ultimate goal” of the peace process and he hopes Palestinians, Jordanians, and Israelis will set up “an arrangement similar to that which exists between Belgium, the Netherlands, and Luxembourg.”³ Prince Hasan also likes the Red Sea - Dead Sea canal and other major infrastructure projects. But this enthusiasm for economic cooperation is rare; Arab reticence is far more common, sometimes fed by fears that Israel had replaced military conquest with economic cooperation as its new strategy to dominate its region.

But the real problem with the Peres vision lies not so much in Arab opposition as in its economic limitations. For all its political attractiveness, a Middle East free trade agreement or a Middle East common market offers very little benefit to the economies of the region. Consider: The total gross national product of the twenty two Arab League members is less than that of Belgium and the Netherlands. Were Israel to develop economic relations with the Arab states as close as those with the Low Countries, the opportunities would still be limited compared to those of the European Union market which is 16 times larger. While some excellent opportunities for profit from Arab-Israeli cooperation exist (for example, package tours combining Israel and its neighbors), the markets are just too small to make much of a macroeconomic effect on Israel.

Furthermore, the Middle East is not a region where countries have close economic relations. Consider, for instance, that Jordan had $54 million in trade with its neighbor Syria and $64 million with Egypt in 1992 -- just 1.2 percent and 1.4 percent respectively of its international trade. The low trade has both economic and political roots. The Middle East economies are more competitive than complementary, e.g., the Levant states all produce the same agricultural products and import industrial goods like automobiles and machine tools. Israelis emphasize the potential for a division of labor, with they providing high technology and the Arabs the cheap labor, but Arab businessmen and politicians have no intention of hewing wood and bearing water for Israelis. Political sensitivities are an obstacle not just between Israel and Arabs but to trade among Arab states. Each of Israel’s Arab neighbors has at various times had a shut border with a fellow Arab state: Egypt with Libya, Jordan with Saudi Arabia (after King Husayn’s pro-Saddam stand in 1991), Syria with Iraq (when Syria took a pro-Iranian stance during the Iran-Iraq war), Lebanon with Syria (at various during the Lebanese civil war).

Worse, Peres’ unrealistic schemes are not innocuous dreams but a grave danger to the real but limited potential for economic cooperation between Israel and Arab countries. Grand hopes for the future can get in the way of practical plans for the present by diverting the precious time of political leaders to chasing after mirages. Megaprojects can absorb so much available financing that small-scale projects with larger social impact go begging. For example, a can mean less funds available for repairing roads in Gaza, a labor-intensive activity useful for putting many of the unemployed Palestinians to work and for facilitating labor-intensive chicken and tomato farms now held back in part by the poor state of the roads.

But the most serious flaw with Peres’ analysis a political mistake. Strangely for a foreign minister, he assigns economic cooperation the central role as a means to achieve peace. But that’s too much for it to carry. Consider the most extensive form of economic cooperation between Israelis and Arabs to date, the 120,000 Palestinians from the territories who worked in Israel until recently. Precious little evidence indicates that their presence contributed to peace; quite the contrary, one prime motivation for the Israeli-PLO Declaration of Principles lay in the fact that Israelis had had enough of violent attacks by Arabs working inside the pre-1967 borders.

If anything, economic separation of the Palestinians from Israel may be more useful for building peace than cooperation between the two, at least during the initial period when suspicions remain high. Because Palestinians so very much want the economic symbols of statehood, it may make sense for industrial nation aid agencies to provide financing for economic symbols like a Palestinian electricity company, even though it would be at best marginally profitable and cooperation with Israel would make much more financial sense.

If Shimon Peres fails to provide a blueprint for the new Middle East, he does achieve one thing, which may be as important. He performs a valuable service by projecting a vision of cooperation between Israel and its Arab neighbors. This is especially helpful at a time when some Israeli politicians, seemingly full of rancor and suspicion towards Arabs, show little interest in developing a broad range of ties with their neighbors. Rather than the negative goal of being left alone, Peres projects a far more attractive goal of Israel truly becoming part of the Middle East.

¹ Interview in World Monitor, December 1992, p. 21.
² Theodore Herzl, Old New Land (Haifa: Haifa Publishing Co., 1960), p. 178.
³ Speech of Crown Prince Hasan at the Middle East Economic Digest conference on “The Economics of Middle East Peace.”