Restrictions on trade in services drive a wedge between domestic and foreign prices of services, thereby creating an economic welfare loss. In addition, since many services are used as inputs into production, higher costs associated by trade restrictions act as a tax on production. Trade in services is often complementary to trade in goods and flows of foreign investment, and barriers to services can be expected to constrain trade and investment growth.
2. If developing country labour and labour-intensive services were to gain significant access to OECD markets, this could have significant economic and social impacts in EU countries. Estimates of the economic welfare gains from a 50 per cent reduction in the existing level of restraints of services trade, show an EU welfare gain of $73 billion per annum.