This paper considers regional and unilateral trade policy options for the West Bank and Gaza (WBG). It examines the welfare implications of a free trade agreement (FTA) with Israel, a customs union (CU) with Israel, and a non-discriminatory trade poli...
This paper considers regional and unilateral trade policy options for the West Bank and Gaza (WBG). It examines the welfare implications of a free trade agreement (FTA) with Israel, a customs union (CU) with Israel, and a non-discriminatory trade policy (NDTP). The analysis captures the fact that the WBG is landlocked, that it has a large trade deficit with Israel, and that smuggling takes place between them. The paper concludes that i) a NDTP is unambiguously superior to a FTA with Israel; but ii) the WBG should only pourse a NDTP if the policy is open, transparent, and enforced by a credible lock-in mechanism; other-wise, a CU with Israel may be preferable, especially if trade and other taxces are shared more equiutably.