economic well-being from services trade liberalization were about 4 percent. By contrast, when they assumed the barriers to be entirely rent-creating, their projected gains in economic well-being fell to 0.33 percent, close to that projected here (see their table 4). In the current study, the treatment of barriers is based on available empirical evidence, where available, rather than assumption.

Another reason for the gains in the Konan and Maskus (2006) to be slightly bigger is that they implicitly assumed that the services of domestic and foreign-owned firms in Tunisia were perfect substitutes (they did not explicitly identify the proportion of each industry that was foreign-owned, but assumed that the reduction in barriers to foreign investment would affect the prices of all firms in Tunisia, not just the foreign-owned firms). By contrast, the FTAP model assumes that the services of domestic and foreign-owned firms are close but imperfect substitutes. This also reduces the gains from reform slightly, but this is of second order importance, compared to the different treatment of the barriers themselves (as the Konan and Maskus sensitivity analysis shows).

If Tunisia were to also contemplate domestic regulatory reform initiatives aimed at the non-discriminatory restrictions in sectors such as ports, electricity generation and wholesale and retail trade, where the empirical evidence suggests that restrictions raise real resource costs, this could provide much larger gains to the economy as a whole.

This can be demonstrated in a small way by considering the gains to the Tunisian economy from full rather than partial reform in the four chosen sectors. Here, full reform is defined to mean that all the discriminatory _and_ non-discriminatory restrictions in telecommunications, banking and professional services are eliminated entirely, while air passenger transport is liberalized on a bilateral basis with the EU. So importantly, full reform would include reform of the non-discriminatory restrictions in the professions that appear to raise real resource costs (see the last column of table 8). The welfare gains to the Tunisian economy from full reform are projected to be US $175 million per year after ten years (last row of table 11), compared to US $77 million per year from partial reform. And fully 80 percent of the difference is accounted for by lower resource costs in the professions.

The point is also demonstrated by studies that have looked at the impact of more widespread reforms in services, including reform of the non-discriminatory restrictions in wholesale and retail trade, electricity generation and ports, where costs have been raised. These studies suggest that reform of the non-discriminatory restrictions can yield between 75 and 90 percent of the total gains from reform (eg OECD 2004). These results suggest that if Tunisia were to contemplate broader domestic regulatory reform initiatives aimed at non-discriminatory restrictions in these other sectors, the gains could be several orders of magnitude greater than those projected here.

There are still some useful insights from the narrower set of reforms. Because the Tunisian reforms are mostly behind the border (with the main exception of the open skies agreement in air passenger transport, which is in any event bilateral), the gains to other regions from so-called ‘free-riding’ are minimal. This has been observed in other studies of services trade reform. In the current case, the EU is in fact projected to lose slightly in 12