Higher Education: Public Good or Global Service Industry?

While higher education was considered a public good and an essential instrument of democratization, upward mobility, and equal opportunity for much of the last century, today it is considered by many to be a lucrative business − indeed, the core business of the “new” service economy.

Major corporations see global “trade in educational services” – “transnational” or “borderless” education – as a lucrative business opportunity. While currently estimated to be a $40-$50 billion industry, the potential for increased profitability in a “global market” of higher education services is significant. For-profit educational providers and investors see the World Trade Organization (WTO) as an essential tool to dismantle “barriers to trade” in educational services and maximize their profit-making opportunities on a global scale.

However, what one party might consider to be a “barrier to trade,” another might consider a treasured educational policy. For instance, state licensing procedures that attempt to weed out fly-by-night operations might be considered sound policy domestically, but might be considered overly burdensome “trade barriers” by foreign educational providers attempting to enter the U.S. market. To create an effective “global market” in higher education services requires the dismantling of many such domestic educational policies.

Thus, at the behest of U.S. for-profit higher education providers, the Bush administration has proposed signing up the U.S. higher education sector to the free trade rules contained in the WTO’s General Agreement on Trade in Services (GATS), a global pact geared towards deregulating service sectors to the advantage of multinational firms. The GATS contains many rules which would jeopardize the following: educational subsidies for public institutions; state licensing practices for higher education institutions; U.S. accreditation practices; wages and working conditions for U.S. educators; and more.

For the most part, public and nonprofit institutions of higher education have been unaware that this march is afoot and are dangerously disengaged. They must weigh in on these matters before global trade rules are finalized in any potential new rounds of negotiations, and their profession is transformed from a “public good” to a commodity in a “global services market.”

What Higher Education Policies are at Risk?

Domestic educational subsidies: The GATS “nondiscrimination” obligation means that public sector funding would have to be shared on an equal basis between foreign institutions and domestic institutions unless public funds are specifically exempted from the terms of the agreement. The United States has attempted to safeguard certain domestic subsidies in broadly worded exemption to its higher education proposal. It is unclear if this language is sufficient to protect subsidies for public and nonprofit institutions.

U.S. accreditation policies: Unlike many other countries interested in the higher education sector, the United States is making virtually unlimited commitments in cross-border educational services. This means U.S. accrediting bodies could be inundated with requests to accredit overseas distance-learning operations. Refusals to accredit or delays in accreditation could give rise to a trade complaint, as language purporting to protect accreditation jurisdiction is only included in a footnote, of dubious legal consequence, to the U.S. schedule.

State licensing requirements: State licensing of higher education institutions is based on a large number of factors including standards to ensure financial stability and quality of educational providers; appropriate curricula; faculty qualifications; appropriate library resources and physical plant; needs tests to weed out duplicative programming; and other matters. Under new “disciplines on domestic regulation” being proposed as part of these talks, individual policies pursued by states as well as state-by-state variation in policies could be challenged in WTO tribunals as “more burdensome than necessary to ensure the quality of a service.”

Efforts to police fraudulent operations: While “borderless higher education” presents new profit-making opportunities for for-profit providers, the challenges presented to regulators are extreme. At the top of the list are concerns about fraud. While policing fraudulent institutions is difficult enough domestically, it is even more difficult across borders or in the online world. Many of the policies that U.S. states maintain or may want to pursue to protect students from scam artists could be considered violations of GATS rules.

Wages and working conditions for educators: The implications of the GATS for educators are also worrisome. New technology combined with unfettered cross-border supply of educational services is likely to generate further downward pressure on wages for educators. GATS negotiations also include proposals to increase the number of educators allowed into the United States on a temporary basis to provide teaching services and proposals to harmonize qualification requirements across borders.

What happens if higher education is subject to WTO jurisdiction?

• Other nations that are party to the GATS are empowered to challenge a nonconforming federal and state policy as a violation of the agreement in a binding dispute resolution system.
• State government officials have no standing before these tribunals and thus must rely on the federal government to defend a policy.
• The tribunals are staffed by trade officials who are empowered to judge, behind closed doors, if the policy is a violation.
• Policies judged to violate the rules must be changed, or trade sanctions can be imposed.
• The federal government is obliged to use all constitutionally available powers – for instance, preemptive legislation, lawsuits and cutting off funding – to force state and local government compliance with trade tribunal rulings.