ACE | GATS | 2004 Update

I. Background
Since 2000, the American Council on Education (ACE) has monitored the progress of the General Agreement on Trade in Services (GATS) negotiations on higher education and has participated in the global dialogue on the potential impact of GATS on higher education institutions worldwide. These efforts have been conducted in collaboration with the Council for Higher Education Accreditation (CHEA). We also have engaged in ongoing dialogue with the Office of the U.S. Trade Representative (USTR) in an effort to help trade negotiators better understand the complexities of higher education and to convey the views and concerns of the U.S. higher education community about GATS.

Because the impact of GATS on U.S. colleges and universities is neither clear nor immediate, U.S. institutional leaders have not been overly concerned with this issue. By contrast, higher education leaders in other countries—both developed and developing—have expressed strong objections to including higher education in trade negotiations. They assert that liberalization of trade in education risks weakening governments' commitment to and investment in public higher education, promoting privatization of higher education, and putting countries with weak quality assurance mechanisms at a disadvantage in their efforts to oversee education programs in their countries delivered by foreign providers.

Convinced that GATS may have a significant impact on U.S. higher education as the negotiations proceed, ACE and CHEA have taken positions on behalf of their members and periodically provided updates and briefings to them. In September 2001, ACE joined with CHEA, the Association of Universities and Colleges of Canada (AUCC), and the European University Association (EUA) to issue a Joint Declaration (www.eua.be). The declaration stated the organizations' commitment to increasing cross-border education, but expressed serious doubt about the appropriateness of a trade regime to address educational issues. The declaration catalyzed a worldwide discussion among higher education institutions about the implications of GATS. It is important to note that GATS negotiations are in an early stage, and that the impact may not be felt for several years. Because GATS negotiations are ongoing, with successive rounds, members can continue to request progressive lowering of trade barriers in the future.

In August 2002, ACE published a background paper that provided general information on GATS, outlined the status of negotiations, and described higher education's concerns about GATS (http://www.acenet.edu/programs/international/gats). This document updates that 2002 publication, reviewing the timetable and process for negotiations, outlining requests made by other nations of the United States, as well as the U.S. offer (see Section IV, below), and concluding with a discussion of the issues that GATS raises for U.S. colleges and universities.¹

II. A Review of the GATS Timetable and Process
January 1, 2000: Negotiations launched. Negotiations formally began January 1, 2000, as was mandated in the GATS agreement Article XIX, which required negotiations to begin no later than five years from the establishment of the WTO (January 1, 1995).

March 2001: Agreement reached on guidelines for negotiations. In March 2001, WTO members reached agreement on guidelines for the current negotiations, including the affirmation of governments' right to regulate, expressed in the preamble to GATS; reaffirmation of the principle of flexibility for developing and least-developed countries; and establishment of the request-offer process as the main method of negotiation.

The request-offer process: Negotiations are conducted as a series of requests and offers. Each WTO member submits requests to its trading partners—either individual or groups of members. (As described below, the U.S. request covers 145 members.) A request can ask for a commitment in a new sector, specify a barrier to be removed, or ask for the removal of a Most Favored Nation (MFN) exemption.² Members may then choose to submit offers in response to the requests. While requests are usually bilateral, offers are made to all WTO members, which is consistent with the MFN rule. Some countries, such as Canada, have indicated that they will not make requests or offers on education services. As described below, the United States has done both. Offers may trigger further requests, thus creating an ongoing process of requests and offers.

December 2002: WTO Ministerial Conference held in Doha. Among the outcomes of the Doha meeting was the establishment of a timetable for negotiations, including deadlines for initial³ requests for specific commitments (June 30, 2002); submission of initial offers for specific commitments (March 31, 2003); stock-taking on all GATS-related matters (September 2003, at the Cancun meeting); and a final deadline for negotiations (January 1, 2005).

September 2003: Cancun Ministerial Meeting held. This meeting essentially collapsed over agricultural and negotiations concerning "the Singapore issues," that is, procedures for investment, competition, and transparency in government procurement. GATS observers have speculated that the failure of the Cancun meeting to bring about progress on negotiations will make it difficult, if not impossible, to meet the January 2005 deadline for the conclusion of this round. It is possible that the final deadline will be extended.

IV. U.S. Engagement in the GATS Negotiations in Higher Education
Higher education is one of five areas of educational services; the others are primary, secondary, adult (covering education for adults outside the regular education system), and other (covering all other education services not covered in the other categories, but excluding those related to recreation matters). These categories are based on the United Nations Provisional Central Product Classification (CPC). Although the United States has put forth a negotiating proposal and an offer, thus far it has made no commitments in higher education.

U.S. Negotiating Proposal: December 2000. The United States was one of four nations to put forth a negotiating proposal in the first phase (January 1, 2000-December 31, 2002).⁴ The others were Australia, Japan, and New Zealand.

The U.S. negotiating proposal affirms the rights of governments to regulate in order to meet domestic policy objectives, and acknowledges that governments will continue to play important roles as service suppliers. It states that "education to a large extent is a government function and it does not seek to displace public education systems." The principle rationale for trade liberalization, according to the proposal, is to help countries upgrade their knowledge and skills through training and education, supplementing the public education system and contributing to the global spread of the modern "knowledge economy." Thus, the U.S. proposal emphasizes benefits to the receiving country—help in upgrading its workforce and improving its competitiveness.

U.S. Requests of Other WTO Members
The United States has released a summary of its July 2002 request, seeking increased access for higher education, training services, and testing services provided either within or outside traditional institutional settings.⁵ The request asked that all 145 WTO members undertake full commitments for market access and national treatment in Modes 1, 2, and 3.⁶ It stipulated the rights of countries, by governmental or non-governmental means, to cooperate in ensuring high-quality education. The United States indicated that it was not requesting commitments in primary or secondary education, nor commitments with respect to public education or subsidies. The request reiterated the assertion of the negotiating proposal that the United States does not seek to displace public education, but rather to upgrade skills and knowledge through privately provided education and training programs.

In addition to this general request, leaked information indicates that the United States has made requests of a number of countries—including Taiwan, Egypt, India, Mexico, Philippines, Thailand, El Salvador, Turkey, China, Israel, Japan, South Africa, Greece, Italy, Ireland, Spain, and Sweden—to remove specific barriers.

Requests by Other WTO Members of the United States
It is important to note that members choose whether to make public their requests and offers. Because requests are usually bilateral and do not go through any central mechanism, no central list of requests exists. Some requests have been leaked, but they cannot be verified. Unverified sources indicate that Mexico, Brazil, Norway, New Zealand, and Japan have made requests in education services; Canada and Switzerland are not making requests in education, and the European Union has made requests of the United States in higher education services.⁷

U.S. Offer
In March 2003, the United States publicly indicated that it is considering making an offer that would include commitments on higher education services (including training services and educational testing services, and excluding flying instruction). The text, which is available on the USTR web site, outlines a number of limitations on potential commitments.⁸ These limitations address the concerns of the higher education community as voiced by ACE and CHEA to the USTR. Observers have noted the contrast between the ambitious nature of the U.S. request (a "go for the moon" approach, as Knight put it) and the very explicit limitations to the U.S. offer. The text outlines the following limitations to a possible U.S. commitment on higher education:

These limitations address many of the concerns that ACE and CHEA expressed to the USTR in meetings in early 2003.

V. What Are the Continuing Concerns for U.S. Higher Education?
The topic of GATS negotiations in higher education has generated more heated discussion and speculation than it has analysis and forecasting. This is not surprising, given that GATS is an untested instrument and the outcomes are difficult to project. The WTO and GATS have become symbols of global inequities that risk being exacerbated by an uneven playing field. Economists disagree on the potential impact of the WTO. Each country can envision different risks and downsides, as well as new opportunities, for higher education under GATS. For the United States, a number of concerns significantly vary from those of developing nations or of nations with higher education systems that are entirely publicly funded.

Implications for U.S. Higher Education
The March 2003 U.S. offer addresses important issues of concern to U.S. higher education, such as institutional autonomy in matters of admissions, curriculum, and tuition policy; government subsidies to U.S. institutions; and accreditation (among others), as noted earlier. However, there are no guarantees that any limitations will be preserved indefinitely. As the following sections indicate, a number of intangible factors will shape the course of cross-border education and the GATS negotiations in profound ways, affecting all countries engaged in the process.

"Tradespeak." Not surprisingly, the world of trade uses a different conceptual framework and is underpinned by a different set of values from those of higher education. The vocabulary of trade applied to higher education suggests that education is but another service to be traded, not an investment in a nation's social, cultural, and economic development, and that the market is the dominant force in policy. Thus, in trade language, nations are "importers" or "exporters" and education is delivered through "modes." Many in higher education are uneasy with this trade language, but that discomfort does not signify opposition to cross-border education, rather, it indicates anxiety about whether the future of cross-border education will be dominated by a trade model or a model that emphasizes higher education's enduring contribution to the public good of all nations.

Representation of higher education in trade negotiations. Trade negotiations are by nature not a transparent process. Governments negotiate on behalf of the services represented in GATS. While ACE and CHEA have had positive dialogues with the USTR, our influence is not guaranteed.

Unintended consequences. Because GATS is an untested process, it may bring adverse, unintended consequences, which by definition are difficult to foresee. Higher education leaders are in the difficult position of being unable to anticipate the variety of scenarios that could unfold. Higher education groups in several countries (e.g., Canada, the United States, and Switzerland) have commissioned analyses by trade and legal experts, but they have provided few definitive answers at this point.

Ambiguity about what is covered by GATS. Article 1.3 of the GATS agreement indicates that "services supplied in the exercise of governmental authority," supplied on a "non-commercial basis," and those "not in competition with other suppliers" are excluded from GATS. In a mixed public-private system, such as that of the United States, how would GATS deal with the distinctions among public, private nonprofit, and for-profit institutions? What precisely does it mean to be "not in competition with other suppliers"? Given the mix of private and public funding for many public universities, would they be included or excluded? If measures affecting public colleges and universities were to be excluded, would those affecting private nonprofit institutions be included, and thus treated differently under GATS? The ambiguity surrounding article 1.3 has been noted in much of the literature about GATS, with no clear resolution.

Trade-offs in continuing negotiations. The U.S. offer indicates a range of limitations that the United States might include in its commitments. However, limitations are not cast in stone. As the negotiations proceed, members request progressive trade-offs, either within a sector such as education, or across service sectors. For example, the United States could make concessions in education in order to gain concessions from another country in express delivery. The principle of progressive liberalization suggests steadily removing limitations that act as barriers.

Consequences for Higher Education in Other Countries
For the most part, traditional U.S. colleges and universities have operated abroad through partnerships with local institutions. Most nonprofit institutions invest their own funds in international activities; some raise external funds to support their programs and a small number seek to generate additional revenues from international activity. However, a number of U.S. organizations and enterprises seeking to sell their services or products in other countries have a stake in opening markets.

Many developing countries do not have sufficiently robust quality assurance systems to regulate foreign providers adequately. Thus, they are concerned that they will be unable to protect consumers. As the chief source of diploma mills, the United States needs to do a far better job in exposing and putting those entities out of business. A key factor in dealing with the quality assurance issues will be increased international cooperation among the higher education community to monitor and regulate cross-border education.

Additionally, many developing countries see liberalization of trade as a threat to their public higher education systems. If foreign providers establish programs in areas requiring relatively little capital investment, such as business or information technology, the local public institutions will be left with the more expensive programs, such as engineering and the sciences, without the lower-cost programs to subsidize the higher-cost ones.

In short, while the U.S. negotiation proposal indicates a commitment to strengthening education and workforce preparation in other countries, some governments welcome foreign providers and oversee them carefully (e.g., Hong Kong and Malaysia). Others, such as South Africa, see foreign providers as a threat to the development of a strong national system.

VI. Conclusion
The concerns outlined above by no means constitute an exhaustive list. Debate about higher education and GATS has elicited a wide range of opinions, some based on analysis, others on general mistrust of the World Trade Organization's purpose and methods. One thing is certain: Higher education will continue to be negotiated under GATS. Thus, it will be important for higher education leaders to be cognizant of the issues and to sustain ongoing communication with the Office of the U.S. Trade Representative through their associations. This national communication process will be coordinated with a global conversation among higher education leaders and associations to ensure that the interests of colleges and universities around the world are articulated and represented to their respective governments as they proceed with GATS negotiations.

Notes
¹Much of the information in this paper draws from these two documents: Julia Nielson. (2003, November 3-4). A quick guide to the state of play in the GATS negotiations. Paper prepared for the OECD/Norway Forum on Trade in Educational Services: Managing the Internationalization of Post-secondary Education; Jane Knight. (2003, May). GATS, trade, and higher education. Perspective 2003: Where are we? Observatory on Borderless Higher Education.

²MFN requires equal and consistent treatment of all parties to the agreement.

³As Neilson notes (op. cit.), "initial" reflects the ongoing nature of the negotiating process and that both requests and offers can be modified as the negotiations continue.

⁴WTO. (2000). Communication from the United States. Higher (tertiary) education, adult education, and training. Council for Trade in Services. Document S/CSS/W/23. See http://www.wto.org/english/tratop_e/serv_e/s_propnewnegs_e.htm.

⁵Office of the U.S. Trade Representative. (2002, July 1). U.S. proposals for liberalizing trade in services: Executive summary. See http://ustr.gov/sectors/services/2002-07-01-proposal-execsumm.PDF.

⁶The four modes of supply are: Mode 1: Cross-border supply (in which the service crosses the border, such as distance learning); Mode 2: Consumption abroad (in which the consumer moves to the country of the supplier, as in study abroad); Mode 3: Commercial presence (in which the service provider establishes facilities in another country, as in branch campuses or arrangements with local institutions); and Mode 4: Presence of natural persons (in which people temporarily travel to another country to provide service, as when professors or researchers work abroad).

⁷There are a number of active list-servs and web sites that provide unofficial or leaked information on GATS negotiations. See http://www.citizen.org/trade/wto/gats/articles.cfm?ID=9078 and http://www.gatswatch.org/requests-offers.html.

⁸See http://www.ustr.gov/sectors/services/2003-03-31-consolidated_offer.pdf.

GATS-General Agreement on Trade in Services

U.S. Update on GATS: January 2004