The potential of utilizing the liberalization of services for a number of Southern Mediterranean countries is great in a large number of sectors. Nevertheless, the importance of this potential is still not realized by those countries. The liberalization of trade in services has often been relatively neglected by the Southern Mediterranean countries in their trade liberalization efforts whether on unilateral, regional or multilateral levels. This paper aims to identify the comparative advantage of Egypt, as an example of a Southern Mediterranean country liberalizing its trade in services. This is undertaken by emphasizing two aspects: the comparative advantage that Egypt acquires in a number of services and the reduction in the transaction costs that liberalization of services can bring to many sectors of the economy. The paper then goes on to analyze whether Egypt should seek the regional or the multilateral mode. Finally, the paper provides some policy recommendations on which services sectors should be liberalized and whether to build on the comparative advantage or to reduce transaction costs and which mode of liberalization should be adopted.
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