Trade Options for the Palestinian Economy: Some Orders of Magnitude

Abstract

The paper quantitatively assess different options for the future Palestinian trade regime. While acknowledging that restrictions on movements of goods and people have had a negative impact on Palestinian trade performance, the analysis suggests that the current Customs Union has been costly as well. Moving toward a more autonomous trade regime may present advantages if used to reduce import taxes thereby lowering the domestic price of imports. Creating a Free Trade Area with Israel, necessitating a potentially costly implementation of rules of origin, is weighted against implementing a non-discriminatory regime in which West Bank and Gaza renounce to its preferential access to the Israeli market. The analysis is based on simulations of a Computable General Equilibrium model of the Palestinian economy using the Social Accounting Matrix for 1998 as base.

Keywords: West Bank and Gaza, Trade policy, General Equilibrium Models

JEL Classification: D58, F13