Part I
Current and Emerging Issues in Transnational Higher Education
1 The Impact of Trade Liberalization on Transnational Education
Christopher Ziguras
RMIT University
Grant McBurnie
RMIT University
INTRODUCTION
International trade is simply the commercial exchange of goods and services across national borders, but including education within such a definition is by no means simple. Labour unions and student groups around the world are adamant that education is a social good which should not be treated as a commodity or be included in agreements governing international trade, yet it often is. In this chapter we explain how transnational education has come to constitute a traded service like any other in global, regional, and bilateral trade agreements.
The monetary value of education services has been estimated at US$30 billion (WTO 1998). Most of this value is generated by internationally mobile students, and the Organization for Economic Co-operation and Development (OECD 2005) estimates that by 2003 there were 2.12 million tertiary students studying outside their countries of origin, a rise of nearly 50 per cent since 1998. In calculating expenditure on international education, economists take into account the tuition fees paid by students, as well as their travel and living expenses. Even exchange students, who do not pay fees to their host institution, have an economic impact through their spending while in the host country, and as such they contribute to the host countryâs export earnings. Income to educational institutions from their overseas operations is also included in a countryâs export earnings figures. The largest exporter, the United States, estimates the economic value of international students at US$13.5 billion (IIE 2006). Australia and New Zealand have fewer students overall, but have much higher proportions of international students in their universities than the United States, and for them the income from international students constitutes a very significant export industry. In Australia, international students enrolled at Australian domestic or overseas operated campuses in 2002 spent a total of A$5.2 billion (US$2.8 billion at 2002 average exchange rate), around half of which was spent on tuition fees and half on goods and services purchased in Australia (Kenyon and Koshy 2003). In New Zealand, in 2004, fee-paying international students are estimated to have contributed NZ$2.2 billion (US$1.5 billion at 2004 average exchange rate) (International Enrolments In New Zealand, 2006).
While mobile students are well covered by official data, governments currently keep little consolidated information about mobile programs (transnational education courses) or mobile institutions (international branch campuses). It is clear from available sources that there are several hundred thousand students studying foreign education programs while remaining in their home country (McBurnie and Ziguras 2007). There is a strong concentration in the Asian region, where British and Australian universities are the most active providers. In the first half of this decade, the number of studentsâchiefly from Asiaâenrolled in Australian transnational higher education programs grew from 23,891 in 2000 to 63,906 in 2005, representing around a quarter of Australiaâs international university students across this period (DEST 2001, Table 77; 2006, Table 3.7.7).
The impact on some countries is enormous. For example, one quarter of Hong Kong tertiary students and a third of Singapore tertiary students are enrolled in transnational education programs (Garrett and Verbik 2003). At the same time, several traditional net importing countries (including Malaysia, Singapore, Dubai, Qatar and others) have declared their goal of becoming net exporters and regional education hubs by attracting international students to their shores. The presence of prestigious foreign providers (delivering transnational education) is a part of the drawcard. Clearly, the economic implications of transnational education are significant for all of these countries, and national trade policies are one way for governments to try to steer the direction of development of such markets.
Trade policy is the way in which states develop strategic approaches to governing trade, both to influence their domestic economies and also their nationâs position within the global political-economic system (Dicken 2003). Trade policy development, as Hart (2002) has observed, is âa matter of solving trade and investment problems within a framework of domestic and international rules as well as competing domestic and international political pressuresâ (2002: 5). Trade agreements are formal contracts between governments setting out the rules and conditions under which trade will be conducted between the signatory parties. Interestingly, the legalization, or codification, of trade in education through the General Agreement on Trade in Services (GATS) and other trade agreements has elicited much greater opposition than the growth of commercial international education ever did. These agreements can be multilateral, such as the GATS, which is administered by the World Trade Organization (WTO); regional, such as Mercosur in South America; or bilateral, such as the SingaporeâNew Zealand Free Trade Agreement. There are various types of arrangements, characterised by the level of economic integration they involve. The four key types, in ascending order of integration, are:
1. Free trade area: restrictions between members are removed, but each is free to pursue its own policies towards non-members.
2. Customs union: combines removal of restrictions between members with a common customs regime (tariffs and non-tariff barriers) towards non-members.
3. Common market: allows the free movement of the factors of production (labour, capital, goods and services) among members, in addition to having the qualities of a customs union.
4. Economic union: a common market in which broader economic policies are harmonised and subject to supranational control (Hart 2002: 523â7, Dicken 2003: 146â7).
While the differences between trade, trade policies and trade agreements appear clear, they are often confused in the education literature. To say, as many critics of trade liberalization do, that education is not a commodity, and therefore cannot be traded clearly, flies in the face of facts. Nothing is inherently a commodity, but rather a thing becomes a commodity when it is exchanged for money. While an objection to the treatment of education as a commodity is an understandable ideological position, it is incorrect to say that education cannot be treated as a commodity because it possesses some innate quality that cannot be the subject of commercial exchange. To say, in the context of GATS, that education is a complex service that should not be treated the same as cars and bananas, is another matter. Similarly, the absence of a trade agreement does not mean that trade is not taking place, nor will the signing of a trade agreement necessarily lead to an increase in the volume of international trade of any one service or good.
THE POLITICS OF LIBERALIZING TRADE IN EDUCATION
Proponents of trade liberalization argue that there are four key benefits: improved market access and conditions for suppliers; improved choice for consumers; improved quality of services due to increased local competition; reduction of risk due to operating under a predictable, rules-based, transparent international trade regime. We look at these in turn in relation to transnational education.
Improved market access and conditions for suppliers is a straightforward, self-interested argument from exporters. For some countries, as illustrated above, the exporting of education services is a major revenue generator, bringing in billions of dollars in foreign exchange. It is also a persuasive argument for net importers that harbour ambitions to become net exporters. The United States, Australia and New Zealand have been the most vocal advocates of trade liberalization in education, all having conducted significant studies into the barriers to free trade in education (GATE 1999, APEC 2001) and have called for countries to increase their openness to foreign education providers through the WTO negotiation rounds (WTO 1998, 2000, 2001a, b; see also McBurnie and Ziguras 2003, Ziguras et al 2003). These countriesâ interest in growing international education markets is clear; the United States is by far the largest exporter of education, while Australia and New Zealand have higher proportions of international students in their universities than any other country and education ranks among both countriesâ top export industries. Within the United States, it should be noted, most of the educational establishments are uninterested or opposed to trade liberalization, and the liberalization agenda is being driven by for-profit education providers, the testing industry, and the Department of Commerce (AUCC et al 2001, Altbach 2005). Britain, which is also a major exporter, is constrained in its advocacy for trade liberalization by its membership in the European Union. While flows of students and institutions have been liberalized extensively within the EU, externally the UK is represented by Brussels, which is ambivalent on educational trade matters due to the diversity of views among the EU membership.
Improved choice for consumers is an argument particularly stressed by major exporting nations. In its negotiating proposal to the WTO, Australia notes that trade liberalization will have the effect of âfacilitating access to education and training courses that in qualitative and quantitative terms are not otherwise available in the country of originâ and that âeducation services negotiations should aim to give consumers (students) in all countries access to the best education services wherever they are provided and through whatever mode of supply they are providedâ (WTO 2001a: 3). Similarly, when countries allow foreign providers to operate on their soil, the host government will declare that this is for the benefit of its citizens, in terms of widening choice and educational opportunity. New Zealandâs proposal to the WTO argues that âincreased access for Members to education where it has previously been limited is a vital component in the development of human capitalâ (WTO 2001b: 1).
The Australian statement refers to âproviding a competitive stimulus to institutions with flow-on benefits to all studentsâ (WTO 2001a: 1). These are âdemonstration effectsâ, which may result from foreign provision exposing the local system to other curriculum, pedagogical styles, administrative and managerial systems, and research approaches. In some countries the presence of transnational education has played a role in the development of quality assurance systems; these may be developed initially as a filter mechanism for dealing with foreigner providers and subsequently applied to monitor and improve the standards of local providers. Further, the licensing of foreign providers may spur the host government to offer degree-granting powers to hitherto sub-degree local private providers.
Supporters of trade liberalization stress the benefits of a predictable, rules-based, transparent international trade environment. Inter alia, this reduces risk for the exporter and should therefore enhance the stability of the service provision. In terms of transnational education, the argument would be that a liberal trade agreement would reduce various of the risksâlegal, financial and sovereignâinherent in offshore provision, thereby helping to prevent the collapse of programs or branch campuses, and reducing the risk to students of disruption to their education.
Critics of trade liberalization advance a number of concerns in relation to higher education. Domestic providers and trade unions express concern that their wages and conditions may be undermined by a liberalized trade regime. Education unions, and in particular their global umbrella group Education International, have been among the most active critics of freer trade in education, primarily concerned that the entry of for-profit providers would lead to competitive pressures that gradually erode working conditions and funding levels in existing institutions (Education International 2004). For the unions, the demonstration effects of the new, more commercial providers, may damage the domestic system as a whole. The Canadian Association of University Teachers declared its concerns that under a full GATS commitment:
Senates, collective agreements and academic freedom will fall victim to the drive for the sale of educational services. They are, after all, in the way of unimpeded trade. In the end, university autonomy will suffer, if not be totally jeopardized. Our profession will be casualized. Words and ideals like long term commitment, social responsibility and knowledge for the common good will be disastrously eroded â or extinguished (Booth 2000: 1).
A wider concern is the perceived potential for trade liberalization to erode the governmentâs prerogatives to regulate the size, level (undergraduate and postgraduate) and disciplinary mix of the local system if this interfered with the profit-driven goals of individual education exporters. Both economic liberals and protectionists agree that profound changes can result from opening a highly state-regulated national education system to new private providers that are able to move nimbly to target areas of demand where students are willing to pay tuition fees. The protagonists differ on whether such changes are beneficial or harmful. A related concern is the possibility that GATS commitments may interfere with the right of the government to target subsidies to domestic public providers, without being obliged to also subsidise private and/or foreign providers.
Trade liberalization raises fears about quality, not because the new entrants are of lower standard than existing providers, but because they are often of lower status. Education is a positional good, in that the worth of a qualification is judged by its position in relation to other qualifications; within each city and nation, prestige hierarchies have been apparent as long as the educational institutions themselves. More recently, the advent of formalized rankings of various kinds responds to a widespread interest in finding more objective rankings than prestige. Parents, employers and government officials have all been keen to have access to objective comparative data on educational outcomes that may either support or challenge historical status hierarchies. The shift from informal reputation to formal rankings is becoming increasingly obvious on a global scale with the advent of rankings such as those conducted by Londonâs Times newspaper and Shanghai Jiao Tong University. Within national systems, students seek to study in prestigious institutions and institutions seek the âbestâ students. While some new entrants into a national system may be foreign elite institutions that position themselves among the best local institutions, more commonly foreign providers are seeking to recruit those students who were not able to access prestigious local institutions. They are liable to be branded âbottom-feedersââthat is, institutions that cater to poor quality students. As Ruch (2001) has observed, of the reaction to US for-profit universities, many of the concerns about the quality of new tuition-funded providers are based on the status of the students these institutions seek to recruit rather than any informed judgement about the merits of the educational programs being delivered.
Developing countries are especially vulnerable to negative consequences of trade liberalization according to many international organizations and developing country governments. For example, the Association of African Universities expressed concern at âthe ambiguities, silences and lack of clarity in GATS provisions, the lack of transparency in GATS deliberations, and insufficient knowledge and understanding of the full implications of GATS for higher education, especially in developing country contexts.â It resolved to âcaution against the reduction of higher education, under the GATS regime, to a tradable commodity subject primarily to international trade rules and negotiations, and the loss of authority of national governments to regulate higher education according to ...