ABSTRACT
In order to assess the Free Trade Area (FTA) negotiation process it is important to understand the economic framework within which it took place. This chapter first examines the bilateral trading relationship between the US and Israel, including the barriers to trade that existed prior to the negotiation of the FTA. Israel has even more extensive nontariff barriers than the US The chapter then describes the provisions and limitations of the FTA agreement that both countries entered into on September 1, 1985. To analyze the potential effect of the FTA, the chapter finally reviews the economic theory of FTA, examines the projected economic impact of the US Israel FTA, and concludes with a discussion of the potential costs and benefits of the agreement to both countries. The US Department of Labor calculated preliminary estimates of the employment impact in the US as a result of the US-Israel FTA.
