Luciano Galán Universidad Autónoma de Madrid UNICA U. Complutense, 2005 1 London - Londres 7 --...

Luciano Galán Universidad Autónoma de Madrid UNICA U. Complutense, 2005

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London - Londres

• 7 -- VII -- 2005


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International Trade of Higher Education

The GATS


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Three main focuses

The globalization of higher education

International trade of higher education

The GATS


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Globalization

Social phenomena. (Inevitable and unstoppable)

Information and communication technologies

Global information Global economy Global trade


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How the Globalization affects universities?

“Globalization effects on the universities will be more drastic than industrialization, urbanization and secularization combined. It is the biggest challenge the University has faced for more than a century and a half.” (Castells)

Luciano Galán UniversiLuciano Galán Universidad Autónoma de Madrid UNICA Udad Autónoma de Madrid UNICA U. Complutense, 2005. Complutense, 2005

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What is Higher Education?What is Higher Education?

MerchandiseMerchandise CommodityCommodity Public servicePublic service Public goodPublic good ServiceService National valueNational value


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Branches

Students OCDE (2000) 1.6 M students

Internet E-learning (2002) $2500 MM US$

Modes of supply and emerging modelsModes of supply and emerging models

Professors Mobility

Internacional University

Transnational University

VirtualUniversity


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What is GATS?

The General Agreement on Trade in Services is the first ever set of multilateral rules covering international trade in services.

Agreement (WTO status equivalent UN) General (140 members) Trade Services


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When the GATS was created and why?

At the end of the 2nd. world war and with the objective of promoting the international trade GATT (General Agreement on Tariffs and Trade) was created in 1947. After the famous “Uruguay Round” from 1986 to 1994 it was decided the transformation of GATT to WTO (World Trade Organization) and an agreement for the liberalization of services (GATS) was adopted. Negotiations began 5 year later (2000).


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Main categories of trade in education

Cross border supply. Includes any type of course provided through distance education or internet, testing services or education material which can cross national boundaries (does not require the physical movement of the consumer)

Consumption abroad . Mainly involve the education of foreign students (require movement of the consumer to the country of the supplier)

Commercial presence. Foreign universities, institutions or investors in another country (provider establishes facilities in another country)

Presence of natural persons. Ability of people to move between countries to provide educational services.


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Where are European Universities today?

International relations

Trade

Internet

Trends

Students


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Internationalization of higher education

European “joint programs”

Technical and Administrative Staff

Professors

Students


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Differences between internationalization and globalization of HE

Economic Geographic Information and Knowledge


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Key difference

Internationalisation: Can be shaped and influenced by Higher

Education Institutions (e.g. mobility, joint curricula, consortia)

Globalisation: An external macro socio-economic

process, hardly to be influenced by Higher Education Institutions


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Previous references of trade in Higher Education

Languages

B A Schools

Internet “Materials”


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Teaching in Internet

Graduate and Postgraduate courses

Continuous education (Long life learning)

Specific training courses


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USA references

Internet Trends Colleges and universties are the most wired

community on the Web – 83% of all higher education institutions and 100% of universities are online.

College students represent the single largest nongender-based online demographic, constituting 24% of the total number of adult Internet users.

College students spend approximately $105 billion annually, online $1.5 billion, it’s expected to almost triple to $3.9 billion by 2002.


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Other references

African Virtual University2001, 24.000 students since 1997, from 17 countries2003 restructured – shared site by 34 universitiesRMIT Melbourne latest program provider

Tengtu China – 12.000 schools connected early 2003 networking 6 million students

2002, 19% of corporate training in US was on-lineGlobally $150 billion industry by 2025


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Other references

Tertiary distance education – world’s fastest growing sub-sector

Canada – 500.000 students – many on-line Asia has 3.5 million students (2000) – China

Central Radio and TV University has 1.5 million – enrolls over 100.000 each year

30% of all tertiary courses in Russia are distance – 26% in Turkey – 37% in Thailand –Europe approx 900.000


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Trends in HE

Use of ICT for domestic and cross border HE activities.

Rapid increase of for-profit entities providing HE domestically and

internationally.

Increasing cost and tuition fees paid by students of public and

private institutions.

Need of public institutions to seek alternative sources of funding.


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Trends in HE

Ability or inability of governments to fund the increasing demand for HE

The fact that the business of transnational HE was alive and active before the GATS.

The increasing of private providers is questioning the quality of the programs.


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How will students influence the demand?

Dramatically According to the information reported

by Merrill Lynch (USA investment house) the number of students in 2025 will be around 160 millions which is the double of students in 2002.


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Students in USA(2003)

Total in HE 15.756.000

Postgraduate students (14%) 2.219.400

Foreign students (PG) (17%) 377.300


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Percentage of tertiary foreign students

Switzerland 17%

Australia 13% Austria/U.K/Belgium 11% Germany 9% Demark/France/Sweden 6% USA 3% Spain 1%


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Students in European Union

EU (15) 12.563.000

EU (15 + 10) 15.207.000

Students mobility (15) 290.000

within EU(2.3 %) (15+10) 350.000


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Other references

Over 1.6 million international tertiary students abroad in OECD countries in 2001

Over 580.000 in USA – approx 35% of world total (6,4% inc from 2000) – 6740 in top 20 US business schools

Other significant share of global market include – UK (14%) – Germany (12%) – Australia (9%) – France (8%)

UK in 2001, students from China increased by 67% from previous year – 31% increase from India

New Zealand 300% growth between 1999 and 2002


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Is there a relation between globalization and international trade?

Yes How will this affect the higher

education? Positive view Negative view


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Positives values

Innovation New providers Greater student access Increased economic gain New hybridization and fusion

of cultures through mobility of people


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Negative aspects

The threat to the role of government

Public service / Public good Quality of education Homogenization of culture


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Supports to the trade

Business of transnational education was alive and active before the advent of GATS.

Education is in a large extent a government function and the agreement do not seek to displace the educational system and the right of governments to regulate and meet domestic policy objectives


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Critics to the trade

GATS is a very new instrument and it is too soon to predict …..

The whole question of the protection of public service is very uncertain and potentially at risk by the narrow interpretation of what means…..

Any subsides given to domestic providers must also be given to foreign providers.

If a foreign provider establishes a branch in a country this must permit to all WTO members the same opportunity and treatment.


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Structure of GATS

First part. Framework containing the general principles and rules.

Second part. National schedules with the list of countries’ specific commitments on access to their markets by foreign providers.

Third part. Annex that detail specific limitations for each sector.


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Subsectors in Education Services

Primary pre-school and other primary education services

Secondary

Higher

Adult

Other

general secondary, higher secondary, technical and vocational secondary, and technical and vocational secondary education services for handicapped students

post-secondary technical and vocational and other higher education services

education services for adults who are not in the regular school and university system and includes education services through radio or television broadcasting or by correspondence

education services at the first and second levels in specific subject matters not elsewhere classified and all other education services that are not definable by level


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World Bank. Trends in Lending

01020304050607080

63-69 70-79 80-89 90-99 00-02

Years

Percent

Primary & Secondary Education

Vocational post-secondary education / Tertiary education


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Enrollment in Private Higher Education (% of total)

32

34

38

56

58

60

64

69

71

71

75

76

76

84

0 10 20 30 40 50 60 70 80 90

United States

Peru

Portugal

Mexico

Chile

Indonesia

Colombia

El Salvador

Brazil

Dominican Republic

India

Japan

Philippines

Korea


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What “other” services related to higher education are included?

Language testing Student recruitment Quality assessment of

programmes.


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What we think about this related services?

Technological services. Quality assessment of

programmes.

These are areas where international trade may grow very quickly under consulting formulas.


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Typology of Barriers to Trade as identified by USA, New Zealand, Australia and Japan

Prohibition for foreign providers

Administrative burden and lack of transparency

•No possibility for foreign supplier to offer its services (all modes of supply)

•Domestic laws and regulations unclear and administered in unfair manner (all modes of supply)

•When governmental approval required for foreign suppliers, extremely long delays encountered; when approval denied, no explication given, no information about necessary improvements to obtain it in the future (all modes of supply)

•Denial of permission for private sector suppliers to enter into and exit from joint ventures with local or non-local partners on a voluntary basis (modes 1 and 3)

Barriers to trade Examples and modes of supply concerned


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Fiscal discrimination

Accreditation / recognition discrimination

•Subsidies for education are not made known in a clear and transparent manner (all modes of supply)

•Repatriation of earnings is subject to excessively costly fees and / or taxes for currency conversion (all modes of supply)

•Excessive fees / taxes imposed on licensing or royalty payments (modes 1 and 3)

•No recognition of titles delivered by foreign providers (all modes of supply)

•No recognition of foreign diplomes (mode 2)

•No accreditation delivered nationally for foreign providers (modes 1 and 3)

Barriers to trade Examples and modes of supply concerned

Typology of Barriers to Trade as identified by USA, New Zealand, Australia and Japan

Technical discrimination

•Restrictive use of national satellites or receiving platforms

•Restrictive use of satellites dishes


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How the GATS affects the Bologna process?

If we want a European HE area that is characterised by the fluid mobility of students in terms of geographical, economic and social equity it looks very difficult to follow the GATS model

The debate between competitiveness and cooperation is crucial in the EU area.

Employers should be deeply involved in the HE space construction according to the Bologna process.


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What universities and universities associations said?

The 2002 Porto Alegre Declaration, which was signed by Iberian and Latin American associations and public universities is radically opposed to international trade in education.

The Joint Declaration on Higher Education and the GATS, signed by four associations representing 5.500 American, Canadian and European universities, rather than coming out against international trade, call for a freeze on WTO negotiations on educational services.


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How much money are we talking about?

Global expenditures on education services exceed 2.3 trillion €.

The OCDE in 2001 estimate the value of the international trade in HE in 1999 en 34 billions € in 1995 was estimated in 30 billion €. USA with 33% was clearly the first supplier followed by Australia and UK. In 1995 HE was on fifth place of most exported services in USA.


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How much money are we talking about?

Public expenditure on education continues to grow faster than total government spending, but not as fast as GDP. OECD countries spent an average of 5,5% of their GDP. (Source: Education at a Glance 2002)

Investment house like Merrill Lynch predict that public education will be globally privatized over the next decade and say there is an untold amount of profit to be made when this happens.


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Five Mayor Exporters ES$US million 2000

2000United States 10.280United Kingdom 3.758Australia 2.155Canada 796New Zealand 199

Prevalence of English speaking countries


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What countries have shown interest?

USA. Education to a large extent is a government function, but most countries

permit private education. The proposal envisions that private education will continue to supplement, not to displace, public education

New Zeeland HE sector is vitally important to all countries. Reduction of barriers to trade

in HE does not equate to erosion of core public education systems and standards.

Australia Governments must retain their sovereign right to determine their own

domestic founding. Japan It has become extremely important for each country to improve the quality

of education and research. Primary interest should be improving quality


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Where are we?

The last negotiation round was open in Doha in December 2001

Participants shall submit initial requests for specific commitments by 30 June 2002

Participants shall submit initial offers by 31 May 2003

March 2003. Possible trading partners meetings and discussions

“Improved offers” before spring of 2004 2005. GATS negotiations conclude


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Experiences in other countries

Malaysia (Invitation to foreign universities to establish under a clear regulatory framework)

South Africa (Branch of Australian Universities) Canada (42% of the universities are actively

involved in the export of HE services) Belgium (HE must be out of GATS) Rumania (In 10 years, 1/3 of the students are in

private universities) Cameroon (1/3 of the students from secondary

have no place at state universities)


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Quality and Accreditation

Free trade is not trade in the absence of quality standards

Increasing transnational education and new legal trade rules require more attention to quality assurance and accreditation of cross border education programs and providers.

Authority for QA, regulation and accreditation for cross border education must be guided by stakeholders of education and not left to trade officials or market.


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Quality and Accreditation

Recognition of academic titles and certificates across countries is directly related to the issues of quality and accreditation

Accreditation and quality services labelled as “Other” in GATS may be the key of the international trade


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Some key features

a. Students mobility b. Freedom for mobility and recruitment of

professors. c. Capitals mobility. Investments and benefits

expatriation. d. Technological compatibility for transmission and

reception through the satellites and national informatics networks.

e. Difficulties in “translating” degrees into national equivalents and corresponding legal consequences

f. Quality assurance


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Potencial Donors

Others

Investment inCompanies

Non Profit InstitutionsDO

MEST

IC

DOM

ESTIC

MARK

ET

MARK

ET

Tuition &

Research

Public UniversityPublic UniversityPublic Funds

Private Funds

INTERNATIO

NAL

INTERNATIO

NAL

TRADE

TRADE

For Profit For Profit EntityEntity

Private Investment

Strategic Alliances

Tuition

BranchesVirtualFranchiseCorporateAcademic brokers

Others

Research?


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Conclusions At present, the idea that there is a global

concept of education in the world, is something that in a way or another everybody accepts; with nuances or sustantial discrepancies but at the same time with the recognition of the fact.

It would be a mistake to expect that the Doha negotiation Round would either stop the trend towards internationalisation, nor would an agreement dramatically accelerate the trend.


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Conclusions The Bologna's process could be affected by

the evolution of the international trade in HE that is taking place at these moments and by the interpretation and development of GATS.


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Conclusions Some universities and governments have

the idea that the rules of international trade are not applicable to the sector of education. The low cost of tuition fees for HE is incompatible whit the principles of commercial services.

Education is a multi-faceted undertaking characterised by a multitude of convergent and divergent interest of multiple stakeholders. It cannot be limited only to consideration of free choice and price efficiency criteria.


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Conclusions The higher education’s world market will

affect and increase the mobility of the main agents that would have the opportunity to establish and develop their activities in different countries in a more easy way than until now


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Conclusions The advantages of a free HE market may

fall in an unbalance way on the side of “globalizators”.

Even if there are some positive effects for less developed countries, the benefits will mainly go to the agent that provides the service.

A balance has to be achieved between legitimate requests for consumer protection and sovereignty rights by governments.


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Conclusions The national authorities for Trade and

Economy are the only official representatives at the GATS negotiations. Sectors concerns (as HE) are not directly represented. It is of the utmost importance that Ministers of Education have full information about the process; analyze the specific national needs and agree with the official representatives the proposals and political actions for HE within the GATS.


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Conclusions Quality must be among the main objectives

for future trade in HE. Higher Education authorities, agencies,

students, professors and the university community as a global, should demand the quality improvement of the overall system. Not just from the point of view of the mobility and the fees but mainly the quality of teaching and research.

Luciano Galán Universidad Autónoma de Madrid UNICA U. Complutense, 2005 1 London - Londres 7 --...

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