The WTO and the University

Globalization, GATS, and American Higher Education

Roberta Malee Bassett

• Publisher: Routledge
• Year: 2006
• ISBN:
  9781135519315
• Edition: 1
• Topic: Education
• Subtopic: Education General

By and large, the debate about the merits of including higher education services within free trade policies has occurred outside of the United States, even though the U.S. Office of the Trade Representative has specifically included higher education services in its March 2003 negotiating offer to the General Agreement on Trade in Services (GATS). This book emerged from research and conversations on the potential implications of free trade on American higher education, implications which have yet to lead to any real conversation or debate within the broad higher education community in the United States. It fills a niche in the literature on trade and higher education services by providing context and analysis of the trade issue in the American higher education context, as well as the pros and cons of free trade in higher education services from the perspectives of the U.S.-based actors.

Chapter One

Introduction

Why should you—higher education researcher, policy maker, student, administrator, observer—care about trade policy? Are you aware that you are part of the fifth largest service ‘industry’ in the United States? Indeed, the sheer monetary value of the enormous higher education system in the United States has inspired many officials and investors to examine ways to expand and profit from the successes of the U.S. system in today’s global economy. How? Through trade: Trade policies have the potential to bring globalization to higher education in a way for which few, if any, campuses are prepared.

This book presents a much needed and timely examination of a key topic that lies at this intersection of globalization and higher education—international trade. Globalization is having a dramatic impact on higher education in the United States and around the world, affecting student populations, curricular decisions, funding sources, and, in reality, all levels of operation. International trade in higher education services is one mechanism through which globalization is beginning to infiltrate the relationship between American higher education and the federal government, an important shift that may have long-term ramifications for the higher education industry at all levels.

This book examines where American higher education falls within the General Agreement on Trade in Services (GATS), a World Trade Organization (WTO) initiative that seeks to diminish and ultimately eliminate all barriers to trade in service industries, including higher education. The Office of the United States Trade Representative (USTR) has elected to include higher education in its comprehensive offer to the GATS for trade liberalization in a broad array of service industries. If enacted, this agreement has the potential to dramatically change American higher education as it becomes subject to the requirements of international law. The purpose of this study, however, was not to evaluate the merit of the USTR’s position on higher education or the views of those potentially impacted by it. Instead, it was to present an unbiased analysis of the on-going process that informs and influences the policy developments around trade in higher education services in the U.S.

In addition, this study extracted concerns about the commodification of higher education from the research data and utilized commodification theory to further inform the analysis of the issues raised by the participants. Whether higher education is a commodity or commercial product to be exchanged for money on the open international market, a culturally significant enterprise developed for the public good, or something in between is the consideration that informs the ongoing debate over the GATS and trade in education services. By encouraging trade in education,—the expansion of financial opportunities in education across borders—the GATS appears to accept that higher education is a commodity of sorts.

The diverse elements of the American higher education industry, on the other hand, largely oppose this interpretation of their efforts as being that of selling a service product (education as commodity) to consumers in the education marketplace. The term ‘industry’ is purposefully used throughout this book to underscore the market tensions affecting higher education and refers here to the broad collective of institutions—public and private, for-profit and non-profit, large and small—that make up the whole of higher education in the United States. It must be noted, however, that using the term industry in reference to the diverse and decentralized system of American higher education is somewhat controversial and not without critics. Commodification theory underscores and helps explain a portion of the tensions that exist on both sides of this debate over trade in higher education services.

WHY THIS ISSUE IS IMPORTANT

The United States has a world-renowned and historically decentralized system of higher education that is defined largely by institutional autonomy and academic independence. Any external, international policies affecting system-wide operating standards in the United States higher education industry would result in a major paradigm shift in this system. Passage of major trade agreements involving American higher education will truly alter the very core of how institutions define themselves and how they relate to government actors. And, the negotiations that will determine whether higher education joins insurance or banking or construction as internationally traded services are occurring right now.

The momentum for free trade in higher education services is clearly forging ahead, particularly as the U.S. government appears committed to its inclusion in U.S. trade agreements and as many American higher education organizations seek expansion opportunities abroad. The only way to affect how this movement toward free trade occurs is to be an informed and engaged part of the dialogue. If the leadership of the traditional, non-profit sector of American higher education chooses—either through ignorance or informed neglect—to remain largely outside of the debate on whether higher education should be traded freely, it risks being caught unprepared when the implementation of trade liberalization arrives on their campuses.

WHY THIS STUDY IS IMPORTANT

This study provides a direct examination of these emerging issues of trade in higher education services in the context of American higher education. Currently, few working within U.S. higher education are even paying attention to this issue. Those that are either can commit only a meager amount of time and resources to the issue or are fully immersed in their own interests and do not engage the full range of concerns about trade. Being an outside researcher, and not an active and biased party, allowed for broad access to and candid discussions with actors on both sides of this issue. This study provides a big picture perspective into the intentions, goals, and concerns of both sides of this debate, informing in, ideally, a neutral way, the broad debate about trade in higher education services.

The goal of this book is to present a balanced picture of the implications of including higher education as a regulated trade issue in the GATS. Again, this study will not, nor is intended to, take a position on or provide policy recommendations regarding the merits of the GATS or, more broadly, international trade in higher education services. Instead, it provides an important and novel perspective on the process through which policy decisions regarding trade are being developed today in the United States. If the actors involved, particularly those wanting to exclude higher education from trade agreements, hope to influence the debate and resulting policy outcomes, they must engage the process immediately and in an informed way. For all of these reasons, this study is critical in filling a gap in the research on globalization, trade, and American higher education.

HIGHER EDUCATION AS A TRADABLE SERVICE

In December 2000, the USTR publicly released its initial negotiating proposal to the WTO to remove barriers to trade in international higher education services. These barriers create “a series of ‘obstacles’ to colleges operating in other countries. These (obstacles) include special taxes, outright bans on higher education services from foreign institutions, restrictions on online instructional material from abroad, long delays in government approval of foreign programs, and difficult requirements for foreign academics entering and leaving countries” (Foster, 2002). This 2000 proposal by the USTR provided the earliest indication that the United States was seriously considering including higher education in its extended negotiations with the WTO about the GATS.

The USTR formally adopted this initial proposal on higher education as a small but significant area within its March 31, 2003, comprehensive offer to the GATS for broad liberalization of trade in services across industries. The GATS proposes liberalization consideration across 12 service sectors, including “business, communication, construction and engineering, distribution, education (emphasis added), environment, financial health, tourism and travel, recreation (cultural and sporting), transportation, and other” (Sedgwick, 2002). Education alone is merely one out of the 12, and higher education is an even smaller sub-sector within education. The USTR’s offer also only lists higher education very briefly within the breadth of service industries being offered for trade liberalization, and includes traditional post-secondary education as well as adult education, technical training, and educational testing services. The decision to include higher education at all, however, indicates the USTR’s perspective that higher education is an important service industry with significant potential for growth across national borders and deserving of international attention and agreements (USTR, 2003). While reserving the option of a future reversal, the USTR is currently proposing broad reductions in international trade barriers on higher education services.

Following similar statements made over the past decade by the European Union, Australia, Japan, and New Zealand, this proposal by the USTR is yet another indication of the marked change in how national and international governing bodies perceive higher education. No longer is international higher education made up merely of national systems that educate citizens for local employment and national service. Instead, higher education is being redefined at many levels as an international service industry to be regulated through the marketplace and through international trade agreements. It is modern international market forces meet historic domestic educational interests that tensions arise over international trade in higher education.

Higher education, internationally, is experiencing changes on an unprecedented scale, driven by demand for access, staff mobility and cooperation, increased opportunities for the exchange and sale of services in teaching and research, and online technology. While the WTO has acknowledged the significance of an emerging global environment for higher education, … it is not evident that governments are collectively addressing the key issues. (Skilbeck, 2001, p. 14)

Higher education is undoubtedly being transformed by globalization, here defined as “the flow of technology, economy, knowledge, people, values, ideas … across borders” (Knight, 1997). In some countries, such as many of those in the European Union, the borderless, globalized nature of educational opportunities makes higher education inherently international. In others, such as the United States, individual institutions seem largely removed from any direct impact of globalization and, instead, respond to pressures from their own constituents in determining how extensive their international efforts and relevance will be. At both extremes, however, international issues are undoubtedly present. One particular area in which government and education intersect notably in the international arena is that of trade in educational services.

For developing and developed countries across the globe, trade in higher education has the potential to alter dramatically how and why their students seek and receive higher education. The global market worth of trade in education services is currently estimated at more than $2 trillion, including public and private spending on all forms of education (Patrinos, 2002). The United States earns over $13 billion from trade in higher education services in the form of foreign student enrollments alone (IIE, 2004), making higher education the United States’ fifth largest service export (ACE, 2003; NCITE, 2003; Ascher, 2003). Due to its size and scope, it is no surprise that market competition and the drive to capitalize on the economic potential of higher education exports would become significant for such a lucrative international service industry. As the world’s largest exporter of higher education services, the U.S. is in a powerful position to influence and benefit from international agreements removing barriers to expanding trade in higher education services.

“The liberalization of trade in educational services is high on the agenda of trade negotiators but is only just appearing on the radar screen of higher education managers and policy makers” (Knight, 2002). Examining this gap in interests and goals between U.S. trade representative officials and the American higher education establishment regarding trade in higher education services is the focus of this research. Such an examination also provides insights into the issues and concerns regarding the impact of free trade on American higher education.

A Worst-Case Scenario of the Impact of the GATS on Higher Education

To help the reader understand why there are such concerns over free trade in higher education services, it may be useful to present a worst-case scenario, to showcase some of the numerous ways in which trade liberalization could infiltrate American higher education. If one assumes that free trade has been applied unfettered across American higher education, then a basic fact in this scenario is that all WTO-member nation providers of higher education services, regardless of country of origin, are now subject to the legally binding terms of the GATS.

There are several levels at which absolute free trade, without any barriers protecting the industry, could force significant change onto American higher education. First, in examining the challenges to public higher education, it is possible to envision a case where another country would perceive having publicly funded higher education would constitute a monopoly, since the public financing helps hold down tuition prices at levels below what a private institution can offer. If challenged through an international dispute settlement process, it is possible that public higher education would be forced to privatize, in order to maintain a truly free market in which institutions compete for students.

Public institutions might also be challenged about their admission policies, through which they currently reserve a certain percentage of places for residents of their home state and other protective groups. Such a practice would illegally impact a foreign student’s ability to be admitted and might be deemed illegal. (It is outside the scope of this research, but in this worst case scenario, one can envision, too, a challenge to admission policies requiring that all admitted students pass a high school graduation exam as unfair to foreign students without access to the exam or the language skills to pass the exam, which would extend the impact of free trade in higher education services down into the K-12 realm.)

For private institutions, the influx of formerly public providers as well as foreign suppliers could make competing for students even more challenging. These institutions might also face protests over admission and financial aid policies, if they once maintained different admission and aid standards for domestic and foreign student admission. For example, if an institution maintained need-blind admission for domestic students but took foreign students’ financial status into consideration when evaluating their application, in a challenge this would be considered an unfair and illegal practice. In addition, if an institution provides full financial–need aid to its domestic students but does not offer the same aid structure to foreign students, this could be challenged as an illegal policy. Institution might lose their ability to admit students in any subjective way that might be deemed unfair to foreign students.

It is possible to imagine, too, a situation in which the traditional sector of higher education, in choosing to compete with the for-profit sector instead of fighting against the tide of trade liberalization, would focus on its financial interests. More market-susceptible institutions would have to consider eliminating departments that are not self-supporting, increasing activities that generate revenues, and outsourcing or eliminating altogether campus resources that might be provided by others at less cost. (This actually is already happening in higher education today, independent of the global imperatives discussed in this study.) These institutions would seek competitive advantages and eliminate all activities that affected the bottom-line.

The wealthier institutions would become the centers for studying all of those cash poor subjects (classics, perhaps, or comparative literature), resulting in elitism among academic fields. The liberal arts would become an educational luxury, where only those meeting the admission standards at the most elite institutions would have the privilege of studying these fields, and where only the privileged students would have the resources to commit to such studies.

To close out this worst case scenario, though there are numerous, perhaps limitless, additional examples of what might happen under uninhibited free trade conditions, it is possible to imagine entire fields of study becoming transformed due to international enrollments. Science and engineering are already facing intense enrollment pressures, as American students do not seek advanced degrees in the numbers needed to fill the classrooms and laboratories at institutions across the country. In many cases, domestic students with less impressive credentials are currently being admitted to programs over qualified international students to ensure some domestic presence in the program. Under an absolute free trade model, such protectionist admission policies would be illegal, and all applicants would have to be considered in the same way.

Under these conditions, one could predict, then, a rapid increase in East and South Asian students, for example, in graduate programs in computer science and engineering, programs that are vital for U.S. national security and economic development. It is not unimaginable that free trade could actually lead to diminished capacities to compete in business (in high tech, for example) and could pose a legitimate threat to national security—not because foreign students are studying here, which is already a current issue—but because there would be few, if any, domestic students qualified and eligible to for employment in classified areas and fields. Exporting this and other economically vital areas of expertise would, in fact, further disadvantage the U.S. economy, which is already suffering from extensive outsourcing of jobs to developing countries.

These examples within this worst-case scenario are extreme, of course, but they do offer insights into the nature of unfettered free trade in higher education services and why there is lingering skepticism over the value of free trade for American higher education. Perhaps protectionism is a necessary ‘evil’ for maintaining the quality higher education system that currently exists in the United States. This research will not, necessarily, provide mechanisms to refute or support the likelihood of any of these worst-case examples becoming a legitimate problem, but it does explain and elaborate on the environment in which they could.

Understanding the Global Forces Affecting H...