Abstract

The main objective of this paper is to simulate removal of barriers to trade in services in Tunisia by focusing on two modes; cross-border delivery (Mode 1) and commercial presence (Mode 3). For the first mode, we model restrictions as tariff equivalent-price wedge. Thus, the simulation of services liberalization consists of removing totally or partially these estimated tariff equivalents. We assume for the second mode, that restrictions are comprised of both monopoly-rent distortions and inefficiency costs. Results show that the liberalization of cross border services trade leads to a small gain in welfare, while combination of rent generating and cost inefficiencies distortions has higher effects. Welfare has been found to increase by more than 4% when we consider the two modes of service delivery with most of this gain attributed to foreign direct investment (FDI) liberalization. This result confirms the idea that the liberalization of services has a large impact on welfare.

Key words: Tunisia, liberalization, services, cross border, commercial presence.

Abbreviation

JEL Classification: F13, F14, F23, L8.