| Summary: | Schiff considers the policy options of the West Bank and Gaza with respect to trade and the export of labor services. He concludes that: • Nondiscriminatory trade policy is unambiguously superior to a free trade agreement with Israel. • The West Bank and Gaza should pursue a nondiscriminatory trade policy with all its neighbors, but only on the condition that the trade policy be open, transparent, and enforced by a credible lock-in mechanism. Otherwise, a customs union with Israel may be preferable. • The Palestinian Authority should establish a system of fee-based permits for Palestinians working in Israel. • The Palestinian Authority should consider allowing Jordanians access to the West Bank and Gaza labor market. This paper—a product of Trade, Development Research Group—is part of a larger effort in the group to analyze trade and regional integration policies in the Middle East. The author may be contacted at mschiff@worldbank.org
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