"I made a request to the Israeli government through the defence ministry … that the Palestinian Authority officially requests the reopening of the Paris Protocol which is not compatible with the current economic situation," said Civil Affairs Minister Hussein al-Sheikh.
Sheikh said he had been advised by Palestinian President Mahmud Abbas to push through the request, which comes as the Palestinian Authority is struggling to handle a growing wave of social unrest over the spiralling cost of living.
"The president told me … to give the Israelis an official request to reopen the Paris Protocol – to re-examine it, to adjust it and to change it as soon as possible," he explained.
"We are waiting for the Israeli response," he said.
There was no immediate comment from the Israeli defence ministry.
The Paris Protocol was a framework set up in 1994 which laid out the terms for the economic relations between Israel and the Palestinian Authority.
"The goal of this is to provide for the Palestinian people within this difficult economic situation," Sheikh said.
The move came after a week of angry demonstrations across the West Bank, where thousands of people took to the streets to protest against the soaring cost of living, rising petrol prices and unemployment, many demanding the resignation of prime minister Salam Fayyad.
On Sunday, some 60 trucks and lorries blocked roads in the centre of Ramallah for more than an hour in protest at rising petrol prices, an AFP correspondent said.
Transport union officials said they were considering a general strike on Monday, depending on the outcome of a ministerial meeting later on Sunday to discuss the crisis with business leaders, the private sector and representatives of civil society.
Further north, around 200 people gathered in Nablus calling for Fayyad's resignation, shouting slogans like: "The [Israeli] invasion didn't leave us hungry, but Fayyad has!" an AFP correspondent said.
In scenes reminiscent of the Arab Spring protests which swept the Middle East last year, protesters have taken to the streets in their thousands to demand lower prices, with many demanding Fayyad's government tear up the Paris Protocol.
In September 2011, Abbas said he wanted to amend the Paris Protocol which "contains restrictions that affect the Palestinian economy and hinder its development," describing it as "unfair."
The Paris Protocol, which was signed in April 1994 and is still in force, governs economic ties between the two sides in four areas: trade relations, fiscal issues, monetary arrangements and labour.
In terms of bilateral trade, it provides for duty- and tariff-free access for goods traded between the two sides, while for all external trade, Israel's policy serves for the Palestinians, meaning they cannot set tariffs lower than in Israel.
Although they have some flexibility in terms of sales tax, the margin for deviation from the Israeli rate is very slight. The price of petrol is also pegged and cannot fall short by more 15 per cent of the maximum price in Israel.
The Palestinian Authority is going through its worst-ever financial crisis due to continued Israeli restrictions and declining international aid, especially from Arab countries.
Despite the growing protests, analysts say the government has very little room for manoeuvre, largely as a result of its commitments under the Protocol. – AFP