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CAUT Bulletin Archives

January 2005

GATS Threatens Education Sector

Committing a service sector to GATS closes down the policy space needed by countries seeking to manage foreign investment in services to their advantage.

Sofian Effendi doesn't easily identify himself as part of the anti-globalization movement. But as Rector of Gadjah Mada University in Indonesia, he is leading a campaign against plans to liberalize the country's education sector in the current round of negotiations taking place within the World Trade Organization.

"Universities are not a business commodity that can be liberalized in such a way," he said recently. "Apart from their task of transferring and developing knowledge and sciences, they also have the task of maintaining and developing the nation. How can they carry these tasks if they are regulated under free trade frameworks within the WTO?"

Effendi is not alone. Around the world, educators and students are sounding the alarm bell over the potential impact of the expansion of the WTO's General Agreement on Trade in Services.

The agreement, adopted in 1995, is an extremely broad treaty that applies legally binding restrictions to a vast range of government actions affecting the delivery of services. The agreement now covers more than 160 service sectors, including health care, social services, postal services and education.

"Services are much more than flipping hamburgers and waiting on tables," says Scott Sinclair, a trade policy analyst with the Canadian Centre for Policy Alternatives. "Heart surgery is a service. So is teaching and research. Services are associated with everything we need and everything we elect governments to do."

It's precisely the encroachment of trade rules into public services that has critics concerned about GATS. Many worry the agreement will promote and lock-in the privatization and commercialization of services in the public interest like education.

"The GATS is hostile to public services, treating them as, at best, missed business opportunities and, at worst, unfair competition or barriers to foreign services and suppliers," says Sinclair.

GATS reaches into areas that have long been considered purely domestic matters, he says. In fact, the WTO says the agreement "encompasses not only measures designed to regulate trade in services, but also any other measure that might be designed to regulate other matters but which incidentally affect the trade in services."

Given this scope of the agreement and the restrictions it places on government authority, why are so many countries willing to broaden their GATS commitments?

"The theory is that if you get rid of all barriers to trade it will lead to lower cost services and faster economic growth that will benefit everyone," says David Robinson, an associate executive director of CAUT. "But that theory is now widely contested."

He points to a WTO decision last April that declared illegal Mexico's policy of requiring foreign telephone companies to pay regulated fees on long-distance calls to Mexico. The revenues collected ensured that foreign phone companies were required to contribute to building networks for poor rural communities in exchange for having access to the more lucrative urban markets.

"But at the behest of its telecom companies, the United States used the GATS to successfully challenge the policy and now foreign companies are free to ignore the needs of poorer communities in Mexico," Robinson says.

In another recent decision, a WTO panel ruled that U.S. state and federal regulations outlawing Internet gambling were GATS-illegal. "It's hard to find better examples of what's wrong with the GATS," adds Robinson.

Troubled Talks

The current round of negotiations aimed at expanding the range of services covered by GATS began in 2000, and was originally scheduled to conclude by the beginning of 2005. But intense disagreements over agricultural subsidies stalled talks until last summer when a new framework agreement for restarting negotiations was reached. Under this agreement, countries have a deadline of May this year to resubmit offers on which service sectors they are willing to commit to liberalization.

While education remains one of the least committed sectors in GATS, pressure is mounting to change this. The U.S. has identified the liberalization of higher and adult education services as one of its top four priorities in the current round and has called for the removal of obstacles to international trade that American officials say prevent foreign institutions from operating in other countries. Australia, New Zealand and Japan have made similar proposals.

U.S.-based distance education providers and institutions looking to expand overseas have been the key proponents of GATS, saying the agreement would help eliminate policies that restrict international education. They point out that some countries prohibit foreign education providers from establishing branch campuses while others require that a local institution must be a partner to any foreign educational venture.

But opponents argue that "obstacles" are in most cases legitimate public policy tools that countries employ to ensure national education meets domestic needs.

"Committing a service sector to GATS closes down the policy space needed by countries seeking to manage foreign investment in services to their advantage," says John Hilary, a trade policy analyst with ActionAid.

Hilary also says GATS exposes virtually any government action affecting services to WTO oversight and potential challenge. "It's designed to enable transnational corporations, in cooperation with foreign governments, to challenge public services and public regulations."

"GATS potentially strikes at the heart of academic autonomy, institutional decision-making and national higher education policy," warns Philip Altbach, director of the Center for International Higher Education at Boston College. "GATS agreements can, once individual countries have agreed, enforce open higher education markets and enable institutions and companies from other countries to engage freely in higher education activities - setting up branch campuses, offering degrees and so on. Local authorities, perhaps including accreditations and quality control agencies, might have little control."

If Canada were to make full GATS commitments on higher education, a broad range of policies and regulations would be at risk, from rules requiring preferential hiring of Canadians and landed immigrants to government subsidies for domestic or public institutions only.

"One of the most powerful obligations in the agreement is national treatment," says CAUT's Robinson. "This requires governments to treat foreign service providers no less favourably than domestic ones. At its extreme, if Canada were to agree to this, it would mean that public operating grants would also have to be provided to foreign institutions, whether nonprofit or for-profit, or be eliminated altogether. Otherwise, these grants would be seen as a subsidy that effectively discriminated against foreign educational institutions operating in Canada."

He adds that countries retain the greatest policy flexibility in areas where they've made no specific commitments. While Canada has not committed to opening up its education sector, Robinson warns that GATS disputes could still arise under the most-favoured-nation treatment in the agreement.

"Whatever rights Alberta, for example, has extended to DeVry must also be extended to every foreign provider," Robinson says. "That means treating all foreign institutions wanting to set up shop in Alberta the same way as DeVry is treated. In this way, you can end up turning what is right now a crack in the public post-secondary education system into a gaping hole."

For their part, Canadian trade officials say they intend to make no commitments on public education services, in addition to protecting health care and culture in the current round of talks. However, some observers say the government has carefully chosen its words by saying only "public" education is off the table.

"Does public education include post-secondary education?" asks Sinclair. "Canadian negotiators are deliberately leaving the door open to commitments on private education."

The danger, he points out, is that education at all levels in Canada - but especially at the post-secondary level - is increasingly a mixed public and private system. Universities and colleges are more reliant on tuition fees and private sources of funding and are increasingly engaged in commercial activities that could be viewed as "competing" with the private sector.

He warns that if Canada makes commitments on private education services, then foreign, for-profit providers could argue GATS entitles them to the same range of government supports given to publicly-funded universities and colleges.

"Canada needs to clarify that it will make no commitments on the education sector as a whole," Sinclair says.

Renewed Pressure

One of the biggest frustrations expressed by for-profit cross-border providers is that foreign countries fail to accredit or recognize them. The result is that degrees earned from these institutions are worthless.

But some countries, like South Africa, say it's necessary to keep out for-profit providers at a time when nations are working to build a public system that can meet the needs of their citizens.

"We must avoid at all costs a GATS in education that puts our education, our culture and our future in peril," says Kader Asmal, South Africa's Minister of Education. "Trade considerations cannot be allowed to erode the public good agenda for higher education."

Other countries are worried that an open door policy to commercial education providers will unleash a flood of fly-by-night institutions across their borders. In response to these concerns, advocates of free trade in education say international rules and standards for assessing the quality of education are needed to discourage diploma mills and to assure more transparency in accrediting processes.

The OECD and UNESCO have taken up this call and last year produced the first draft on guidelines for quality assurance and accreditation in cross-border higher education.

Bill Rosenberg, president of the Association of University Staff in New Zealand, says the guidelines are really a complementary process to GATS.

"Private education providers desperately need recognized stamps of quality because of the difficulties students have in telling the rogues from those providing a good standard of education," Rosenberg explains."The main outcome in practice of the guidelines will be to validate the position of private providers. In this way, the guidelines sanctify the international trade in education and its commodification."

Robinson agrees, saying, "The main stumbling block to the growth in private and for-profit higher education internationally is concern about quality. With the guidelines in place, countries that have resisted GATS commitments on education will be under renewed pressure."

And Robinson says it will be important to monitor other elements of GATS and related WTO agreements that will also affect educators in Canada and around the world.

"For our colleagues in developing countries, parallel negotiations taking place over industrial tariffs are also critical," Robinson warns. "While duties make up a small portion of revenue for countries like Canada, in the developing world they can represent up to a quarter of all government revenues. Reducing these revenues means there's less money available for things like public education."

In addition, he points out that WTO talks on intellectual property rights could limit the availability of affordable drugs in many African nations where one in seven teachers is infected with HIV/AIDS.

Final Countdown

After being pushed to the back burner for the past year, WTO negotiations will once again take centre stage this year.

Until recently, the education community worldwide had little awareness of GATS and other WTO agreements. But all this has changed. Student organizations, faculty unions and even many public university associations have been critical of the notion that education is simply a commodity to be traded as any other.

"GATS critics see the role of higher education differently," Altbach says. "Higher education is seen as more than a commodity - it is part of the cultural patrimony and the research infrastructure of a society, and is therefore a public good and at least to some extent, a public responsibility. It is seen as a means of access and social mobility to disenfranchised segments of the population. And for developing countries, it is seen as a central element for nation building. GATS opponents see higher education as much more than a tradable commodity to be determined by the vagaries of an international marketplace."