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Yes, of course. However, there is currently strong political inertia on both sides against such an interdependence.

In the 1970s and 1980s, numerous Palestinians commuted to work in Israel, serving as Israel's dominant force of low-paid and low-skilled labor. Additionally, Palestinians were able to attend Israeli Arab schools, they became trained in more skilled professions, especially as doctors. From 1967-1979, Israel and the Palestinian Territories were for the other the highest-volume international trade partner with which they shared borders.

Since the Intifadas in the late 1980s up to the current conflicts, Israeli and Palestinian leaders have chosen to isolate the two peoples. Most famously, Israel built the Security Fence to keep Palestinian Suicide Bombers out of mainland Israel. However, it also had the effect of making commuting between the Palestinian Territories and Israel nearly impossible, lessening connections between Palestinians and Israelis.

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Q: Is it possible for Israelis and Palestinians to create a system which forces them to become interdependent on each other?
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