This thesis is a study on the liberalization of trade in tourism services that has taken place between the European Union and Organisation of Eastern Caribbean States (OECS) under the Caribbean Forum (CARIFORUM) -European Union (EU) Economic Partnership Agreement (EPA). It focuses on Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines. They are all members of the OECS, the Caribbean Community and Common Market (CARICOM) and CARIFORUM and they are EPA signatories. Using Panel Auto Regressive Distributed Lag modelling, the study is the first to empirically test the effect of liberalizing trade in tourism services (proxied by the EPA) on inflows of tourism related foreign direct investment and European tourism demand regarding the aforementioned countries. It focuses on the period 1997 – 2013. The results indicate that Gross Domestic Product Per Capita (GDPPC) is a statistically significant determinant of tourism related foreign direct investment. This supports the established hypothesis that market size measured by GDP per capita is a key determinant of FDI. Inflation rate (IR) and trade openness (OPEN) are also significant determinants of tourism related foreign direct investment whilst the EPA is not. Regarding European tourism demand income, prices, prices in a substitute destination and room supply are statistically significant determinants in the long run. Barbados is viewed as a complementary destination to the OECS EPA signatories. However, in the short run the EPA is not a statistically significant determinant of European tourism demand which it negatively affects.