Israel Industry, Trade and Labor Minister Binyamin Ben-Eliezer and his Palestinian counterpart, Economic Minister Dr. Hassan Abu-Libdeh, sought to tackle a host of economic issues in a private meeting in Jerusalem on Wednesday, but the two agreed that economic cooperation couldn’t substitute for a peace agreement.

Speaking at a briefing organized by The Media Line’s Mideast Press Club, the two ministers traded blame for stalled negotiations. Ben-Eliezer urged Palestinians to drop their demands for a settlement freeze and resume talks immediately, saying Prime Minister Binyamin Netanyahu was sincerely interested in reaching a pact. Abu Libdeh cast doubt on the Israeli prime minster’s intentions.

“Mr. Netanyahu isn’t a man of peace. He was elected by right-wing Israelis. He wants everything, including a quasi-Palestinian state with no content at all,” Abu Libdeh told reporters at the briefing. “Sixty percent of the West Bank is reserved for settlements and other security activities.”

Ben-Eliezer, who belongs to the Labor Party, the most dovish of the parties in Netanyahu’s coalition government, defended the prime minister’s intentions. He warned that Israel and the Arab world had to resolve the Palestinian issue in order to face up to the threat to region posed by Iran.

“If I were [Palestinian Authority President Mahmoud Abbas], I would call Netanyahu tomorrow morning to come to Ramallah and address all the critical issues for the sake of all of our children,” Ben Eliezer said. “The question of a settlement freeze right now is marginal.”

The two sides resumed talks briefly in September under U.S. auspices, but the negotiations broke off after a temporary Israeli freeze on building in areas acquired in the 1967 war expired. Palestinians have conditioned further talks on a renewed freeze, but U.S. President Barack Obama has so far failed to find term satisfactory to Israel.

But even as the two sides have so far failed to find a formula for reviving peace talks, the economies of Israel and the Palestinian areas have enjoyed strong growth. The International Monetary Fund forecasts Palestinian gross domestic product will expand 8% this year, boosted by large infusions of foreign assistance, while it expects Israeli GDP will grow 4%, led by exports.

Nevertheless, Palestinian economic prospects have been stymied by Israeli restrictions on the movement of goods and people. The two ministers met Wednesday to try and resolve some of these issues, including allowing Palestinian products to enter Israel more freely and removing obstacles to development of the Jenin industrial zone in the West Bank.

Ben-Eliezer said Israel would back the Palestinian Authority’s bid to get observer status at the World Trade Organization, the main global body dealing with the rules of trade between nations. The two, who last met in August, agreed to discuss economic and commercial matters on a regular basis.

Israel has imposed a blockade on the Gaza Strip since the Muslim fundamentalists group Hamas seized control of the enclave. Since June, Israel has eased some of its restrictions, allowing more goods to arrive and this week allowed the first of fresh produce to leave Gaza for markets in Europe in a program that will allow Gaza farmers export 700 tons of strawberries and 30 million carnations this season.

In the West Bank -- where the Palestinian Authority with whom Israel is holding peace talks governs – Israel maintains hundreds of security checkpoints along the area’s roads, slowing the movement of people and goods.

But Ben-Eliezer told the briefing, which was attended by dozens of Israeli, Palestinian and foreign journalists, Israel had reduced its security presence in the West Bank. He said there were only 14 permanent roadblocks and that the number of other security measures, such as flying checkpoints, Israel imposes had fallen to about 300.

“What was two or three years ago and what is now, you can’t compare,” he said, noting that most of the work in suppressing terrorism is now being handled by PA security forces.

Felice Friedson, president and chief executive officer of The Media Line, told the briefing that Israelis and Palestinians must decide whether co-existence means economic cooperation or a parallel but separate economic life.

“There are glimpses of cooperation,” she said. “This week for instance, the story broke of Israel green- lighting the export of Gaza strawberries to the world markets. On the other hand, Bashar Al-Masri, the developer of Rawabi, the first Palestinian planned city, told me that he is still awaiting approval from Israel defense minister for the city’s access road.”

Abu-Libdeh defended a PA campaign to boycott Israeli communities in the West Bank. Palestinians violating the ban, including buying products made in the settlements and working in construction jobs, face up to five years in jail and fines of up to $14,000.

“We believe what we are doing is the right thing and we will continue to do the right thing,” he said about the boycott, in which he has taken a leading role. “We very much want to cooperate with Israel in terms of the economy and other spheres, but first we have to create the proper conditions for the two peoples to make pace.”

An estimated 22,000 Palestinians work in the settlements in factories, farms and in construction. Ben-Eliezer said he was “not pleased” with the boycott campaign, saying economic issues should be kept apart from politics, but didn’t say what steps Israel might take to counter it.

Commercial ties between the two sides have remained limited as Palestinian unrest during two Intifadas caused Israel to prevent Palestinians from working in Israel and blocked trade to prevent terror attacks.

Even though Palestinian constitute a market of four million people right next door, Israeli companies sell very little to the West Bank and Gaza, according to a Bank of Israel study released last month.

Tax figures show Israeli businesses sold $3.2 billion worth of goods to the Palestinians in 2008, which would make the West Bank and Gaza a bigger market for Israel than any single European country. In fact, about 60% of that $3.2 billion is imported goods trucked into Palestinian areas by Israeli companies, the Central Bank said. The Palestinian market accounts for just 0.15% of Israeli GDP and for 3,000 jobs, it estimated.

The West Bank and Gaza had exports of $500 million to Israel in 2008, the last year figures are available from the Palestine Central Bureau of Statistics.

The Mideast Press Club seeks to advance professional and personal relationships between Israeli and Palestinian journalists through programs, master classes and incentives for the study of journalism and the enhancement of coverage of the Middle East. Heading into its sixth year, the Mideast Press Club is an initiative of The Media Line (TML), a non-profit American news agency specializing in coverage of the Middle East and journalistic education