Towards A Trade Policy for Palestine

International trade plays a pivotal role in the context of the Palestinian economy that goes beyond defining a prospective framework for export and import flows. This study in particular, sets out to outline pros and cons of two types of trade connections and trade cooperation that could exist among Palestine and both Jordan and Israel; viz., the special arrangements related to establishing a customs union ,or those related to the formulation of a free trade area. In brief, our analysis suggests that a trade policy responsive to Palestine’s economic interests would gain by changing the nature of existing trading relationships with Jordan and Israel. If the present trends persists the absence of tariff protection from Israeli and Jordanian competition, and other forms of government support will mean that Palestinian industry would only likely to develop when it plays a role complementary to those prevailing in these two countries. Therefore, we see that the objective of trade policy should address, above all, the issue of regaining balance to the Palestinian economy through the use of incentives and tariffs. In this way local industry can grow protected from the existing biased entry of Israeli produce.