The Trade Debate in International Higher Education

GATS in a Nutshell

The General Agreement on Trade in Services (GATS) is the first international trade agreement to cover trade in services as opposed to products. It was formulated in 1995 during the Uruguay Round of trade talks and is currently being negotiated under the auspices of the World Trade Organization.

GATS covers the following 12 service sectors:

  1. Business
  2. Communication
  3. Construction and Engineering
  4. Distribution
  5. Education
  6. Environment
  7. Financial
  8. Health
  9. Tourism and Travel
  10. Recreation, Cultural and Sporting
  11. Transport
  12. Other

The purpose of GATS is to establish a multilateral framework of principles and rules, aimed at progressively opening up trade in services worldwide. Over the last 50 years, tariffs have been reduced 75 percent through eight rounds of trade negotiations. However, it wasn’t until the mid-1990s that education and other services became subject to trade negotiations, when the Uruguay Round went into effect.

Some GATS education proposals are calling for the implementation of universal educational standards, mutual recognition of academic credentials and liberalization of professional accreditation.

Trade in educational services, along with audiovisual and energy services, has attracted the lowest level of commitment from WTO member countries compared to other sectors. The focus of the GATS is mainly on financial and telecommunication services. To date only 42 members (out of 144) have made commitments for liberalizing education.

Twenty-five out of the 30 OECD countries have made commitments within the educational sector. The five OECD countries that have not made commitments are Canada, Finland, Iceland, Korea and Sweden. Most developing nations have not committed themselves to liberalization in higher education. Among the major education importing nations (e.g. the countries that send the most students abroad) only China, Taiwan and Thailand have made commitments.

So far only four countries — the United States, New Zealand, Australia and Japan — have actually submitted their negotiating proposals for liberalizing trade in educational services.

Those countries that have scheduled liberalization commitments are expected to reach an agreement on how to facilitate trade in education services by 2005.

For more information on GATS, please visit the following Web sites:

In most countries around the world, education has traditionally been viewed as a public good provided and guaranteed by the state. To consider it a moneymaking enterprise or a tradable commodity was nothing short of blasphemous. But in recent years, this attitude has been changing. As governments find themselves unable or unwilling to cope with the skyrocketing demand for education and training, foreign education providers have burst onto the scene to take up some of the slack and make some hard-earned cash at the same time.

Last year for instance, Sylvan Learning Systems [6], a for-profit education company based in Baltimore, announced plans to open an international institution of higher learning in India that will offer courses in information technology, hotel management, engineering, business and health sciences. It is Sylvan’s sixth international venture and its first outside of Europe and Latin America. Both Sylvan and Apollo Group, Inc. [7], the two biggest education companies in the United States, are quoted on the New York Stock Exchange.

General Motors currently offers courses and training programs in classrooms all over the world and also electronically, via distance-learning satellite. The company recently teamed up with Unext’s Cardean University [8] to provide online-learning opportunities to GM employees.

The first pan-Arab open university is scheduled to open in Kuwait in 2003. A Saudi development firm is funding the project, and British Open University [9] will provide technical assistance and accreditation of degrees. With the click of a mouse, students from all over the Middle East will be able to download course materials and earn qualifications online. The new university is expected to enroll at least 5,000 students from all over the Middle East during the first year.

Not only is for-profit and online learning a growing international trend but competition between all education providers (traditional and non-traditional) has become more intense as well. Education, like other service sectors affected by globalization, is being incorporated into the market economy. Today many courses and degree programs are packaged and marketed just like other consumer goods, and students are increasingly seen as customers who have more choices than ever before.

Amid these developments the General Agreement on Trade in Services [10] (GATS) has stepped in to establish some guidelines while actively encouraging countries to open up their public systems of higher education to foreign competition. Some people are applauding these efforts. Others bemoan what they see as the encroaching “McDonaldization” of higher education.

Education for Sale

In the past ten years or so there has been a noticeable surge in the export of educational services around the globe. Online-learning courses, corporate-based education, branch campuses and franchises are all manifestations of the current trend. Although traditional, not-for-profit colleges and universities still provide the lion’s share of higher education worldwide a new, market-oriented sector of education has been steadily gaining ground.

The technology revolution in the early 1990s greatly accelerated this trend, allowing education providers to beam their courses and programs to every corner of the world via the Internet. A student in Indonesia, for example, can now log on to the University of Phoenix Online [11], plug in a credit card number and be instantly enrolled in a computer science course. Today there are hundreds of cyber universities in operation, all trying to grab a piece of a potentially lucrative international education market.

Despite all the hype, however, online-learning still accounts for only a very small portion of cross-border trade in educational services. But experts are confident that the market will expand with increased international demand for higher education, greater online-learning possibilities and improved economic conditions among students.

The higher education market in the OECD countries is currently estimated at $30 billion annually. In 1999, there were 1.47 million foreign higher education students in these countries, an increase of more than 100,000 from the year before. The United States is the world’s leading provider of educational and training services, followed by the United Kingdom and Australia. Germany and France, with their low fees, also attract large numbers of international students.

In the United States alone, education ranks among the top-five export services, generating an estimated $10 billion a year. However, this figure only includes revenues spent by foreign students studying on U.S. soil and does not account for all those enrolled outside the country with U.S.-based education providers.

The provision of U.S. training and educational services on foreign soil and in cyberspace is rapidly expanding. According to U.S. government sources, the global online-learning market — just for corporate training — is expected to grow at 50 percent annually to reach $23 billion by 2004. Hence, revenues from nontraditional modes of higher education for overseas students will soon exceed total revenues from foreigners studying on U.S. soil.

Moreover, experts predict that the online-learning trend will flourish in the post Sept. 11 era. Fears of a possible slowdown in the number of foreign students coming to the United States due to the current security crackdown have made distance-education initiatives especially attractive to education providers and international students alike. Currently 55 percent of higher education institutions in the U.S. offer one or more full college courses online.

At the same time, many problems and challenges have arisen as a result of increased commercialization and internationalization in higher education, particularly via the online-learning trend. Some countries have systematically inhibited the inflow of educational materials for political or cultural reasons, while others refuse to recognize degrees earned from foreign and private providers of higher education. Laws that restrict or prohibit foreign ownership of property make it difficult for education providers to set up branch campuses and franchise arrangements in certain countries.

Enter GATS

The rapidly expanding international education market, and the wave of protectionism it has spawned, impelled the World Trade Organization, through the General Agreement on Trade in Services, to include education in its list of services to be liberalized. Specifically, GATS is calling for the mutual recognition of credentials, the creation of common educational standards, the liberalization of professional accreditation and the eradication of barriers that inhibit or prevent cross-border exchanges in educational services.

GATS does not cover educational funding, admissions policies, scholarships, tuition or curriculum content. It is expected that governments will continue to play a dominant role in education.

According to U.S. trade negotiators, barriers that inhibit the flow of educational trade include the following: laws that recognize the state as the sole provider of education; restrictions on foreign ownership of higher education institutions; measures that prevent or severely curtail the accreditation of foreign education providers; non-recognition of degrees or credits earned through foreign education providers; restrictions on electronic transmission of courses.

Bernard Ascher, director of service industry affairs at the Office of the U.S. Trade Representative, made clear his country’s position on GATS at a conference held in Washington, D.C. last May.

“The U.S. proposal is intended to provide assurance of market access and national treatment for providers of education and training on a commercial basis, as well as for cooperative ventures, which meet regulatory requirements of the host country,” he said at the OECD/US Forum on Trade in Educational Services [12].

In addition to the barriers that inhibit the flow of educational materials, students and working professionals have also experienced difficulty in entering certain countries due to restrictions and even prejudices.

Barbara Nichols, chief executive officer of the Commission on Graduates of Foreign Nursing Schools [13] feels that health professionals have a particularly hard time in this respect. “Many countries tend to have biases when granting licensure to foreign nursing professionals,” she said. “These provisions [that restrict the licensure of professionals] should not be more burdensome than necessary.”

For Nichols and others, the GATS agreement offers the best hope in guaranteeing the free cross-border flow of students and educated professionals. “What we need are fair and equitable standards that don’t necessarily infringe on a country’s right to regulate, but will prevent them from being arbitrary and capricious,” she said.

Some institutions, however, say they have been conducting cross-border student exchanges and offering online courses overseas with few problems. For them GATS isn’t much of an issue.

“It [GATS] really hasn’t come up on my radar screen,” said Scott Bass, dean of the graduate school and vice provost for research at the University of Maryland [14].

“We haven’t experienced any restrictions in terms of student exchanges and enrolling students overseas in online learning programs. For us, distance education has no borders. Students are free to register and go online,” Bass said.


The debate revolving around GATS and higher education is a divisive one, largely pitting students and universities against big business interests. Supporters of GATS argue that trade in educational services can create more providers and delivery modes, increase access and facilitate socio-economic growth through higher education. They further advocate that opening up markets to foreign education providers will bring people more choices and greater freedom. Ultimately, they envision a future in which coursework, lectures and academic resources are freely available and exchanged on the Web the way the Massachusetts Institute of Technology has recently done with its entire curriculum.

Critics of GATS say the “commoditization” of higher education would place profits above the public good and jeopardize student access and quality. There is also some concern that GATS could erode university autonomy and drastically reduce government subsidies for higher education. Students and teachers unions have done much to vilify the GATS agreement, saying it would force countries to dismantle their national education systems and adopt a homogenized system based largely on U.S. education.

Students in particular are concerned that the GATS measures aimed at privatization could jack up tuition costs, placing higher education beyond the reach of most students, particularly in the developing world.

“Whenever financial interests are involved, the groups that have no money are left out,” said Jacob Henricson, former president of the National Unions of Students in Europe [15]. “This not only relates to persons, but also to poorer countries that may see their whole HE [higher education] sectors being out-competed by international for-profit education providers.”

In a free market environment, foreign and domestic providers would have to be treated the same, which could mean severe cutbacks in state funding for public universities.

“Education is a basic human right, and in order to create peaceful democratic societies, education — including higher education — is a tool that must be of disposal for all individuals, not only those with money,” Henricson said.

Some of the bigger higher education organizations have remained cautiously critical. In response to GATS, several university associations in Canada, Europe and the United States recently issued a Joint Declaration on Higher Education and the General Agreement on Trade in Services [16]. The declaration states, “Higher education exists to serve the public interest and is not a ‘commodity,'” and that the “authority to regulate higher education must remain in the hands of competent bodies as designated by any given country.”

“GATS is based on free competition, which excludes public and government services,” said André Oosterlinck, vice-chancellor at the Catholic University of Leuven [17] in Belgium. “The protesters fear that GATS will open the door to the commercialization of education and governments would lose their authority to guarantee education for all.”

But proponents of for-profit learning insist that the new providers will not compete with public education and do not pose a threat to traditional universities.

“Private education and training will continue to supplement, not displace, public education systems,” U.S. trade negotiator Bernard Ascher stressed. “This is not a proposal to privatize education!”

Others agree and largely attribute the success of non-traditional providers of higher education to the worldwide boom in life-long learning. The market for most distance education providers, they say, is not the cohort of traditional 18-22 year-old college students.

“Our primary target audience is working adults,” Thomas Schumann of Michigan Virtual University [18] told delegates at the OECD/US conference. “The statistics we have collected indicate that about 73 percent are women who because of job-related responsibilities they have…just simply do not have the time to go back in the evenings or weekends for courses.”

Why has education suddenly been targeted by international trade agreements, and why all the fuss? The expansion of international trade in education has been taking place for many years now outside the framework of GATS and would probably continue to do so with or without a WTO brokered agreement. Moreover, commercialization in higher education is nothing radically new. American colleges and universities have been actively engaged in the international education business ever since career-oriented programs first began attracting foreign students following the Second World War.

“It would probably surprise most college admissions officials to learn that when accepting a foreign student for study in the U.S., she or he is committing an export,” Robert Vastine, president of the U.S. Coalition of Service Industries, pointed out at the OECD/US Forum on Trade in Educational Services.

In the 1980s, American institutions of higher education began aggressively recruiting foreign students, marketing their degree programs overseas and setting up international student departments. Other countries quickly followed suit. In the United Kingdom, tuition fees for foreigners were introduced under the Thatcher government, and in more recent years Canada and Australia have become major contenders in their own right.

So packaging and marketing courses and degree programs to student “consumers” is hardly a groundbreaking concept. What has changed is the way education is delivered to the student. The Internet and email have made it possible for providers to reach greater numbers of students than ever before. As a result, there are more players in the field now and students have many more choices than they used to. Competition has become fierce. Globalization, shifting demographics and international agreements calling for greater educational exchanges have also been important factors. But fueling this trend more than anything else is demand, especially from some of the developing nations where education is seen as the key to achieving socio-economic progress.

The Educational Groundswell

Over the last quarter-century or so, the worldwide demand for education and training has mushroomed above and beyond state capacity and shows no sign of letting up. The tertiary student population in Asia alone is expected to grow from 17 million today to 87 million in 2025. Many countries are now actively encouraging private institutions, both foreign and domestic, to help absorb some of this demand.

In Malaysia, for instance, the government is equipped to educate a mere 6 percent of its population through public universities. The situation became so critical that a few years ago the education ministry began inviting foreign institutions of higher education into the country to help enroll students.

China only educates around 4 percent of its population and has similarly decided to allow foreign providers to offer joint degrees with local universities. Today, 36 percent of all tertiary students in China are enrolled in private institutions.

Thailand has a tertiary enrollment of 20 percent. “[I]n order to keep up with its need for higher education, [Thailand] would need to open a university of 20,000 every year,” said Marjorie Peace Lenn executive director of the Center for Quality Assurance in International Education [19]. As a result, she said, the country has had no choice but to invite foreign institutions into the country to provide educational services.

A similar trend is emerging in other countries. Recent UNESCO [20] figures show that private education providers account for 55 percent of all new universities in Jordan, Sudan, Tunisia and Yemen. According to the same study, 70 percent of all universities in Kazakhstan are privately owned.

Supporters of the GATS agreement believe the influx of foreign education providers into low-income countries can do more good than harm. According to World Bank statistics, the richest 20 percent of the population in the developing nations capture more than 30 percent of total education subsidies while the poorest 20 percent receive only 8 percent to 15 percent.

“Low-income countries are falling behind in the knowledge economy and are in need of higher-level skills,” said Harry Patrinos, senior educational economist with the World Bank. “Having more providers involved can only benefit those countries furthest behind. By expanding educational opportunities, you increase access. The GATS agreement will undoubtedly help, although it probably won’t solve the problem entirely.”

Quality and Transparency Issues

Another concern among GATS critics is the maintenance of quality in international educational services. Does a degree from one of the new for-profit/online education providers equal a degree from a more traditional, state-funded institution? How does one guarantee that imported courses and degree programs are quality products and that trans-border and virtual universities aren’t just serving up educational fast food? Some education providers setting up franchises overseas have drawn criticism for selling their names to local institutions that don’t provide quality education. In the U.K., guidelines have recently been set up to better monitor the franchising of educational services abroad.

There has also been a deluge of diploma mills offering bogus credentials since the Internet first allowed education providers to deliver courses and degrees online. Hong Kong has already established a system to track and approve educational providers, designed to root out all rogue schools and con artists. Greece has dealt with this problem by recently announcing it will no longer recognize foreign degrees, even from institutions that operate on Greek soil.

“There are some very valid concerns about quality assurance that are not recognized by proponents of free trade,” said John Yopp, vice president of graduate and professional education at Educational Testing Service [21]. “Universities don’t like to think of education as just one more service to be traded. What will be the means for assuring quality of transnational education? This should be common ground for both sides.”

Per Nyborg, chairman of the Committee for Higher Education and Research [22], Council of Europe, cautioned that GATS should build on already-ratified international educational agreements that guarantee quality assurances.

“Trade in educational services has been going on for a long time,” he said. “Given the fact that several countries, including my own home country Norway, have already inscribed ‘no limitations’ on marked access to tertiary education under GATS, my argument is that GATS must respect the international conventions in [the] educational sector, such as the Lisbon Recognition Convention [23].”

In addition, many members of the higher education community feel they have largely been shut out of the GATS talks and are not being given a chance to voice their grievances and concerns with respect to trade in educational services.

“I don’t think there has been enough communication and active solicitation of input from educational associations such as ACE (American Council on Education [24]) and NAFSA (Association of International Educators [25]),” Yopp said. “There should be more engagement between the two sides, which actually have some common goals.”

According to Yopp, the OECD/US Forum on Trade in Educational Services held in Washington last May was the first attempt to bring together all stakeholders. “If they had done that earlier, you wouldn’t have this appearance of polarization,” he said.

David Ward, president of the American Council on Education told WENR his organization is fully committed to free trade in services, people and goods but cautioned that all aspects of the agreement need to be clearly understood by all those who stand to be affected by it.

Like many others, Ward feels that ACE has not been adequately consulted on the issues being discussed in the GATS sessions dealing with education. “All may well work out in the end, but as representatives of higher education, we felt on the edge of negotiations that could have a profound effect on our member institutions,” he said.