The Association Agrement between Jordan and the EU entered into force in2002. It is part of the Euro-Mediterranean Partnership, a process of economicand political integration involving the EU and countries in the MENA region.This books analyses the impacts on the Jordanian economy of the free-tradeagreement with the EU, with emphasis on welfare and income distribution.The effects of trade liberalisation are assessed together with parallel andcomplementary economic reforms, aiming at countacting the fall in governmentrevenue due to the reduction in the import duty rates. In order tocapture the economic interactions and the intertemporal effects, the analyisis conducted by using a dynamic CGE model. The approach used in this workis the first one analysing income distribution in a CGE framework in whichheterogeneous households are assumed to have different discount rates.The simulation results show that, although the free-trade arrangement withthe EU affects positively aggregate welfare in Jordan, it also has differenteffects on Jordanian heterogenous households and it causes increasing incomedisparity.This work hopes therefore to provide both theoretical insights and usefulpolicy implications.