ABSTRACT
Before analyzing the negotiation of the US-Israel Free Trade Area, it is useful to examine the existing research on trade policy and trade negotiations. Although it has always been recognized that politics and economics are inextricably linked in the making of trade policy, only recently has a significant amount of attention been given to their linkage. Neoclassical trade theory states that protecting domestic industries from import competition generally lowers a country's real national income, unless the country's trade volume is large enough to have an effect on world prices. A nation might resort to the use of protection because of pressures from the political process. Variables used to reflect an industry's ability to organize are the number of firms in an industry, the degree of its concentration in the top four firms, and its geographic concentration. The current tariff structure in the US is the result of gradual multilateral tariff liberalization.
