This paper examines two issues: 1) the welfare impact of preferential trade agreements (PTAs), and 2) the effect of structural and policy changes on the welfare impact of PTAs. It is shown that, on the import side, the home country loses from a PTA between small countries (and the PTA as a whole...

Adherents to the “natural trading partner” hypothesis argue that forming a PTA is more likely to raise welfare if member countries already trade disproportionately with each other. Opponents of the hypothesis claim that the opposite is true: welfare is likely to be higher if member countries...

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 nondiscriminatory trade policy (NDTP). The analysis captures the fact that...