Goods International Trade in Education Programs and Services

Historically, education has provided the medium for transferring knowledge and skills to a global society. Research by the World Bank has demonstrated that education is "essential for civic order and citizenship and for sustained economic growth and the reduction of poverty" (1996, p. 1). As the Independent Commission on Population and the Quality of Life states, "education is one of the keys to social development, and virtually every aspect of the quality of life" (p. 170).

As Stanley Katz explains, the commercialization of education took a large leap forward with the development of the personal computer. From the 1950s through the 1970s, computers were expensive and were therefore used mainly for research, instructional, and administrative purposes. But the computer revolution of the 1980s and 1990s saw the development of cheaper computers, better software programs, and the Internet. This resulted in institutions of higher learning expanding their computer capabilities in order to remain competitive. The technology revolution produced many opportunities for the commercialization of education.

Unfortunately, education is facing difficult times in many countries. There are problems with budget shortfalls, increasing enrollment demands, escalating educational costs, and a reduction in foreign aid. Coupled with this has been the protectionism policies practiced by governments to restrict international trade in education.

General Agreement on Trade and Services

In 1986 a series of trade negotiations was initiated in order to find solutions for these problems. These negotiations, called the Uruguay Round, lasted for seven and a half years with 125 countries, including the United States, as participants. It concluded in 1994 with the formation of the World Trade Organization and the creation of the General Agreement on Trade and Services (GATS).

This pact has been called the most significant agreement ever negotiated by the World Trade Organization. It took effect on January 1, 1995, and is considered to be the first and only collection of multilateral rules governing international trade. Its major goal is to remove or reduce barriers that obstruct international trade. The agreement covers goods, services, and intellectual property. Other major features include procedures for dispute resolution and special treatment guidelines for developing countries. As signatories, governments have made commitments to lower tariffs and other trade barriers, and to open their markets for trade in services to all World Trade Organization members. This is known as most-favored-nation treatment.

The trade sectors covered under the agreement include services related to business, communications, construction and related engineering, distribution, environmental, financial, health and social, tourism and travel, recreational, culture and sports, transport, and education. Until the creation of the GATS, such a wide variety of activity had never been recognized in global trade policy.

The trade in services area is important because it is the fastest growing segment of the global economy. According to the World Trade Organization, the trade in services area increased from 17 percent in 1980 to 22 percent in 1995, and service exports expanded by 8.4 percent between 1980 and 1995.

Trade in Education Services

Education services are defined as primary education services, secondary education services, higher or tertiary education services, adult education services, and other education services. The higher education services sector has been subdivided into advanced/theoretical/professional and practical/occupational categories to allow for more accurate statistical reporting. Other education services are related activities that support the educational process, such as educational testing services and student exchange program services.

The implementation of this arrangement for education services and goods is presently limited to member nations whose governments decided in 1994 to incorporate this section into their agreement. This amounts to forty countries out of the 143 World Trade Organization members. The forty countries that have committed to this section may limit the extent of their use of the concepts of most favored nation and national treatment. They can partially control access to their markets from foreign investors and restrict the movement of persons who cross their territorial borders. In addition, these countries are prohibited from creating new restrictions on foreign service providers without compensating those countries affected by the restrictions. At this time, none of the nations have agreed to open their education markets without restrictions.

The benefits of education services liberalization under the compact are numerous. By opening domestic markets to foreign education service providers, countries create competition with their domestic education service providers, which results in greater efficiency, lower prices, improved service, more consumer choices, reduced inequality, and increased employment. A 1994 study by the World Bank found that employment in the telecommunications industry in Asia and Latin America rose by 20 percent in markets in which competition was permitted, but by only 3 percent in monopolized markets.

Martin Rudner points out that international trade in postsecondary education services is rising. He attributes this to a number of factors, including an increasing number of students studying abroad, more international marketing of academic programs, enhanced educational cooperation between institutions, and the development of foreign institution branch campuses. The United States is the largest exporter of education services in the world followed by France, Germany, the United Kingdom, and the Russian Federation. The United Nations Educational, Scientific and Cultural Organization (UNESCO) estimated that in 1996 the United States exported $7 billion in higher education services–its fifth largest service-area export.

As these statistics indicate, the major avenue of trade in educational services is through student exchange. In an effort to reduce this student migration, some governments are partnering with foreign educational institutions to establish local branch campuses. Another commercial educational strategy gaining popularity is the "twinning arrangement." This consists of an educational institution in one country linking up with an educational institution in a foreign county to offer courses leading to a degree from the foreign institution. Sometimes local campus facilities are used in this arrangement. In other instances, the educational programs are "franchised" from the foreign institution so there is little participation at the local level. This approach is particularly popular for distance-education programs.

Trade Barriers to Education Services

The major emphasis of the ongoing trade negotiations for General Agreement on Trade and Services is the reduction of protectionism. Lowering or eliminating barriers to trade will accomplish this goal. But several existing trade barriers continue to provide grist for continuing negotiations. One major hurdle that faces negotiators is governmental use of its immigration laws to restrict not only students from leaving the country to study at foreign institutions and but also the number of foreign teachers employed. These restrictions usually take the form of quotas, nationality requirements, restricted visas, and limitations on financial aid eligibility. To assist in compliance monitoring, all countries are required to publish and make easily accessible all laws and regulations related to trade. Another barrier to trade involves the local recognition of degrees from foreign institutions. This is an important issue for distance-education service providers because students enrolled in distance-education programs from a foreign country need to have their credentials approved in the country where they intend to work.

Educational credentials from unauthorized institutions cannot be used to acquire governmental certifications or licenses needed to secure employment in the professions. Continued negotiations are needed in this area to develop common standards and quality assurance measurements for professional education. Foreign education service providers often have difficulties acquiring governmental authorization or national operating licenses. For example, governments sometimes permit foreign education service providers to enter their markets but will not recognize them as legitimate degree granting institutions. Future negotiations should include the formulation of acceptable global accreditation standards for institutions and programs in order to eliminate this problem.

Trade in Electronic Education Services

Transformation in communication and information technology is changing the institution of education. Technological breakthroughs of the late 1990s provided a world communications network with global capability. Education providers have the potential to offer their programs throughout the world. In 1997, the Clinton administration published a paper promoting the Internet as a "duty-free zone," and calling for keeping trade on the Internet free of all tariffs. If governments decide to impose tariffs on electronic transmissions in the future, it would be difficult to enforce because many online transactions are services and require the creation of a mutually acceptable classification system for the content of the transmission. Therefore, negotiations on the tariff treatment of electronic transmissions should be an integral part of any trade barrier reduction effort.

Trade in Intellectual Property

In addition to the GATS, another significant agreement, the Trade Related Aspects of Intellectual Property Rights (TRIPS), was created during the Uruguay Round. It has major implications for education service providers since the programs that they sell are copyrighted or contain copyrighted material. This agreement requires governments to guarantee enforcement of their intellectual property rights laws and to assure the World Trade Organization that their penalties for violations are severe enough to effectively deter potential offenders.

Objections to the Liberalization of Trade Policies in Education

Philip Altbach maintained that higher education regulated by the World Trade Organization would result in a loss of academic autonomy. According to his theory, individual nations would find it difficult to enforce copyright laws, patent and licensing regulations, and trade regulations on academic institutions, programs, and credentials from foreign education service providers. By providing hard-to-regulate educational programs to less developed nations without regard to the local educational culture, educational service providers may inadvertently supplant that country's educational ideas and practices.