Updated and Revised August 2026

This report warns that despite Canada’s recognition of Palestinian statehood, the Canada-Israel Free Trade Agreement (CIFTA) economically subsumes the Occupied Palestinian Territories (OPT) and illegal Israeli settlements under trade with the State of Israel, running counter to international law and official Canadian foreign policy opposing settlements. Titled "Annexing Palestine Through Trade: The Canada-Israel Free Trade Agreement and the Occupied Palestinian Territories," the report provides an updated analysis of Canada’s trade policy with Israel and Palestine in light of the international law context of the last three years.

Click here to download the report as a PDF, or read the Executive Summary and Summary of Recommendations below.

Executive Summary 

When the Canada-Israel Free Trade Agreement (CIFTA) came into force in 1997, Canadian officials had decided that its trade benefits would be applied to the occupied Palestinian territories (OPT) of the West Bank, East Jerusalem, and Gaza, as well as the occupied Syrian Golan Heights. This was accomplished by defining Israel in the text of the agreement as “the territory where its customs laws are applied.” This inclusion made CIFTA unique among Canada’s trade deals: although it is a deal negotiated and signed between Israel and Canada, its provisions have been transferred onto a third party – the Palestinians – without their involvement or meaningful consent. In doing so, CIFTA expands far beyond Israel’s internationally recognized borders, extending into occupied territory over which Israel does not have sovereignty but is unlawfully attempting to annex, thereby breaching Palestinians’ right of self-determination. 

Extending CIFTA to the occupied territories was officially pitched by Canadian officials as a way to support the peace process and kickstart Palestinian economic development. However, this report demonstrates that CIFTA ultimately leaves Palestinians worse off. Any nominal benefits from CIFTA are far outweighed by the damage that it causes by supporting Israel’s illegal settlements and permanent military occupation, the very structures that are most responsible for harming the Palestinian economy. 

The report outlines three major thematic issues with Canada’s application of CIFTA to the OPT: 

1. For the purposes of trade, Canada does not make any distinction between trade with Israel, Palestine, or illegal Israeli settlements, but categorizes all trade in the territories under Israeli control as if it was simply “Israeli.” This contradicts Canadian foreign policy and international law, erases the Palestinian identity of OPT trade, and provides a material incentive and economic reward to Israel’s ongoing settlement activity. The overall effect is that through CIFTA, Canada treats Palestine as if it were annexed by Israel. 

2. Palestinians were never a partner or signatory to CIFTA, and the extension of CIFTA to the OPT was done without their meaningful consent. On the contrary, the State of Palestine explicitly rejects the “core” of CIFTA and takes issue with the extension of trade benefits to illegal settlements. Similarly, Palestinian civil society do not support CIFTA and are urging the international community to cancel their free trade agreements with Israel as a form of economic pressure. 

3. As a whole, Palestinians do not benefit economically from CIFTA. Canada-Palestine trade represents only an estimated 0.68% of the total merchandise trade under CIFTA, while Canada’s trade with Israel makes up over 99%. Any benefit that Palestinians receive from CIFTA is a pittance, and this is vastly outweighed by the harm that CIFTA causes by upholding the status quo. Israel’s occupation is the number-one obstacle to Palestinian economic development, while Israeli settlement expansion has more than tripled since CIFTA was signed in 1996, growing at the same pace as Canada-Israel trade. 

In recent years, three important legal and political developments have made this unjust trade structure even less tenable: 1) Canada recognized the State of Palestine in 2025, and in doing so, has affirmed that Palestine holds core rights under international law, including to sovereignty over its territory; 2) The International Court of Justice (ICJ)’s 2024 advisory opinion found that states are obliged to ensure that their treaties and trade dealings do not support Israel’s illegal presence in the OPT; 3) and most importantly, Israel’s genocide against the Palestinian people in Gaza has raised the obligation for states to put pressure on Israel to prevent genocide, along the lines of the provisional measures ordered by the ICJ. CIFTA violates each of Canada’s obligations named above, by upholding Israel’s illegal control of Palestinian territory and economically rewarding the status quo of annexation and genocide. 

This report argues that Canada should support Palestinian trade without reinforcing the oppressive structures of military occupation, annexation, and apartheid. Therefore, CJPME recommends that the Canadian government should: 

1.  Cancel the Canada-Israel Free Trade Agreement (CIFTA) until Israel completely ends its unlawful military occupation of the Palestinian territory (the West Bank, including East Jerusalem, and Gaza), dismantles its apartheid policies, and complies with international law; 

2. Cease the practice of subsuming Palestinian trade under ‘Israel,’ and start properly identifying, tracking, and reporting imports from the OPT. These goods (excluding those originating in Israeli settlements) should be labelled and reported as originating from ‘Palestine’ through a unique customs code. 

3. Ban all trade with Israel’s illegal settlements in the OPT by prohibiting the trade of goods, services, and investment using the Special Economic Measures Act. 

4. Negotiate directly with the State of Palestine regarding measures to promote trade in the OPT, including East Jerusalem. 

5. Protect Palestinian economic development by imposing consequences against Israel for any closures and restrictions on the movement of people and goods in the OPT, including the brutal and illegal blockade of the Gaza Strip.