Trade in Education Services An Overview

Structure of Presentation

1. Forms of Trade in Education in the GATS framework

2. The Importance of Trade in Education – Recent Trends

3. Driving Forces4. Sectoral Issues and Concerns5. Bilateral or Multilateral

1. Forms of Trade in Education5 Educational Services

5.A Primary education services (921)

- which comprises Preschool Education Services (CPC 92110) and Other Primary Education Services (CPC 92190). These categories do not include child-care services (considered as social services in CPC 93321) and services related to literary programmes for adults, which are part of the sub-category Adult Education Services (CPC 92400).

5.B Secondary education services (922) - which comprises General Secondary Education Services (CPC 92210), Higher Secondary Education Services (CPC 92220), Technical and Vocational Secondary Education Services (CPC 92230), and Technical and Vocational Secondary Education Services for handicapped students (CPC 92240).

5.C Higher education services (923) - which comprises Post-Secondary Technical and Vocational Education Services (CPC 92310) and Other Higher Education Services (CPC 92390). The former refers to sub-degree technical and vocational education, while the latter refers to education leading to a university degree or equivalent.

5.D Adult education services (924) - which comprises education for adults outside the regular education system.

5.E Other education services (929) - which comprises 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. Excluding education services regarding recreation matters, for example, those provided by sport and game schools, which fall under sporting and other recreation services (CPC 964).

Source: WTO, 2010, S/W/313

1. Forms of Trade in Education

Presentation focuses on higher education, though trade in language training, vocational training etc are also increasing

Modes of Supply in Education Services

GATS mode of supply

Description Examples for higher education

Consumption abroad (Mode 2)

Movement of students from importing country B to exporting country A to obtain education services

Chinese students studying in US universities in the US

Commercial presence(Mode 3)

Establishment of local unit of institution from exporting country A to importing country B

Country A’s course offerings through branch campuses or subsidiaries of institutions, franchising etc.

Cross border delivery(Mode 1)

Delivery of education services from exporting country A to importing country B

Distance education, tele-education, education testing services, on-line education

Presence of natural persons (Mode 4)

Temporary movement of education personnel

Teacher exchange

2. Trends in Trade in Higher Education

Number of international students worldwide

2. Trends in Trade in Higher Education

2. Trends in Trade in Higher Education No Negative Effect of 2008-09 Financial Crisis

Students studying abroad, by host region

(in thousands)

North Amer-ica

EU 15 Central and Eastern Europe

East Asia and the Pacific

0

100

200

300

400

500

600

700

800

900

1000

2008

2009

2. Trends in Trade in Higher Education Asia is a Big Importer in Higher Education

Trade

Students studying abroad, by sending region

(in percent of total)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

2. Trends in Trade in Higher Education

2. The Dominant Exporters

37%

17%9%

13%

12%

3%4%

4% 1%

1999

USUKAustraliaGermanyFranceChinaJapanCanadaNew ZealandSingaporeMalaysiaKorea, Rep. of

24%

14%

13%10%

11%

8%

5%

5%2%

4%3% 2%

2007

USUKAustraliaGermanyFranceChinaJapanCanadaNew ZealandSingaporeMalaysiaKorea, Rep. of

Trends in Commercial Presence

Top 10 source economies of international branch campuses, 2009

Host economies for international branch campuses, 2009

Source Number

United States 78

Australia 14

United Kingdom 13

France 11

India 11

Mexico 7

Netherlands 5

Malaysia 4

Canada 3

Ireland 3

Host economy Number

United Arab Emirates 40

China 15

Singapore 12

Qatar 9

Canada 6

Malaysia 5

United Kingdom 5

Ecuador 4

Germany 4

Mexico 4

Australia 3

Bahrain 3

Puerto Rico 3

Switzerland 3

Source: WTO, 2010, S/W/313

3. Driving Forces

Demand Side Factors Supply Side Factors Government Policies in exporting and

importing countries

Demand Side Factors - StudentsCommon factors Specific to study

abroadSpecific to partnerships

Limited domestic tertiary capacity

Low quality in disciplines in high demand

Higher rate of return on internationally recognized qualifications

Access to highly skilled labor market of industrialized countries and global market (emigration)

Access to postgraduate and research opportunities

Access to highly paid sectors in domestic labor markets

Entry into postgraduate studies in partner institutions abroad

Supply Side Factors - InstitutionsCommon factors Specific to study

abroadSpecific to partnerships

Foreign students are an important source of revenue (domestic funding is scarce)

Global talent seen as important for raising standards

(included in international rankings of universities)

Students in partner institutions provide a pipeline of graduate students

Opportunities to build international profile of faculty through teaching and research in different environments

4. Sectoral Issues and Concerns Equity The concern is that you will establish a “two-

tier” higher education system Higher quality, foreign provided, education will be

just for rich Many countries have two tier domestic

systems, but there is some provision for enabling poor

students to enter (scholarships, loans, entrance exams etc)

How do you ensure equitable access to foreign programs?

Negative Effects on Domestic Institutions Public universities are chronically under-

funded Cannot withstand competition from well-

established public and private universities from OECD countries These institutions receive public funding, including

government sponsored marketing Is this a “trade-distorting” subsidy?

Domestic universities have many roles, not just training for immediate job market If they cannot offer the “profitable” courses,

because of competition, they will require more subsidies

Competition for highly qualified university teachers

Concerns of the academic community Institutional autonomy Tenure of faculty and impacts on academic

freedom Intellectual property rights

Who do the courses / materials belong to? Role of education as an essential public

service is undermined. Appreciate and promote “internationalization”

, but in general are skeptical of exclusively commercial reasons

Quality and Scope Developing countries may attract low quality

foreign providers, who rely on “foreign” name Limited range of programs offered by

exporters Examples:

Many UK polytechnics (renamed as universities) started advertising in India to get students. Low quality at relatively high cost.

Only 8 percent of US universities offered programs abroad, and most were in China, Western Europe and in business/ management

Many students cheated by “fly by night” operators

Barriers to trade in education Mode 1: Cross-border supply

• Restriction on import of educational material• Restriction on electronic transmission of course material• Non-recognition of degrees obtained through distance mode

Mode 2: Consumption abroad• Restriction on travel abroad based on discipline or area of study• Restriction on export of currency and exchange• Quota on the number of students proceeding to a county or institution• Prescription of minimum standards or attainments

Mode 3: Commercial presence• Insistence on a local partner• Insistence that the provider be accredited in the home country• Insistence on partner/collaborator being from the formal academicstream• Insistence on equal academic participation by foreign and local partner• Disapproval of franchise operations• Restrictions on certain disciplines/areas/programs that are deemed to beagainst national interests• Limitations on foreign direct investment by education providers• Difficulty in approval of joint ventures

Mode 4: Presence of natural persons• Visa and entry restrictions• Restriction on basis of quota for countries and disciplines• Nationality or residence requirements• Restriction on repatriation of earnings

Barriers to trade in education

5. Exploiting the potential of trade Trade is here to stay and will grow –

underlying dynamics of regional and global integration are very powerful

Two sets of negotiations are required Internal to country

Between Ministry of Education and Ministry of Trade

Provide opportunities for other stakeholders to participate

Between countries Will be conducted by Ministry of Trade, but

include Ministry of Education, for transparency

A strong external negotiating stand requires… Understanding of domestic education context What are the current drivers of domestic

demand? Secondary enrolment ratio and tertiary enrolment

ratio (excess demand) Is demand for domestic labor market or foreign

labor market? For general degrees or technician/ technical

degrees? How important is price, quality, and other factors?

What external providers already exist / might be interested? In what forms of provision?

… Understanding the Domestic Context What domestic regulatory mechanisms exist?

How strong are quality assurance mechanisms? Procedure for recognition of degrees? Rules governing foreign education providers?

What are the country’s goals for higher education? Expanding access? Equity? Improving quality? (in private sector? In public sector

through competition)? Building capacity in specific areas? (science and

technology; teacher training; vocational training)

External negotiations Your negotiating stand, strategy and tactics

can be improved Assess your “situational power”

How critical is the need to have external providers? How interested are they in your country? (what

advantages does it offer to them) How far have you got your act together?

Increase your “knowledge power” What do you know of your negotiating partner ?

(what do they want? How badly do they want it? ) Craft persuasive arguments (appeal to the other

side, but do not compromise your core interests)

The MAIN problem: Lack of communication between Education

Ministry and Trade Ministry Example:

Jamaican trade policymakers wished to position higher education sector as an export industry (1994)

Education stakeholders were ignorant of debate They saw proposed liberalization as threat to equity and

quality

Another Problem Lack of coherent education sector strategy

Some instruments are available… Strengthen domestic quality assurance

agencies But these may be non-existent or weak Requires specialized human resources Difficult for small countries due to lack of human

resources For large countries, due to large number of

programs Alternative is to use quality assurance

mechanisms of exporting countries But make sure the specific programs offered are

accredited or meet standards Or ensure that program is accepted by

employers in exporting country