Background Paper on the

General Agreement on Trade in Services (GATS) and

Post-Secondary Education in Canada

Prepared by Robert Clift, Executive Director

Confederation of University Faculty Associations of British Columbia (CUFA/BC)

November 29, 1999

 

 

Introduction

 

The General Agreement on Trade in Services (GATS) is a multilateral agreement concluded in 1994 designed to govern international trade in services, as the General Agreement on Tariffs and Trade (GATT) has done for international trade in goods. To date, The GATS has only been enforceable to the extent that signatory countries have been willing to make commitments to place sectors of their economies under the GATS regime. The November 1999 meeting of international trade ministers in Seattle will seek to expand the range of services to be governed by GATS and move towards the so-called “horizontal” approach, where some GATS rules would be applied across-the-board to all 160 service sectors covered by the agreement, including education.[1] This sea change is facilitated by the rhetorical imperative that national economies will wither and die unless they open themselves up fully to trade and investment opportunities; a stance taken primarily by the industrialized nations who want to compete in each other’s economies, and who want access to markets in developing nations.

 

If GATS were applied to the Canadian education sector, the effects would be profound. Education would no longer be considered a public service; instead it would be categorized as merely another commercial enterprise. The Canadian government then would be required under GATS to give access to the Canadian “education market” to companies from any of the GATS signatory countries. Foreign companies would be treated at least as favourably as Canadian companies, but in certain circumstances would be treated more favourably. For example, the Canadian government could not require that foreign companies place Canadians on the governing boards of their operations located in Canada, or even that the company hire Canadian teachers. Also, foreign companies would be protected from those regulations that could be viewed as peripheral to the delivery of the service, such as licensing requirements.[2] Furthermore, public funds currently provided to public institutions would also have to be provided to private institutions or potentially be subject to action as an unfair subsidy.[3]

 

The specific danger facing the Canadian post-secondary education sector is that officials in the federal Ministry of Foreign Affairs and International Trade, and the federal politicians themselves have been captured by the rhetoric of expanding trade opportunities and appear to be ready to make commitments to put most service sectors on the table during the new round of GATS negotiations which will begin with the November meeting in Seattle. Although the officials and politicians claim that health care and public education will be protected in the GATS negotiations, the have not proposed any specific protection for these sectors and instead seem to be relying on interpretations of existing GATS provisions.  The major questions for Canada’s post-secondary sector are: Is the post-secondary sector subject to the GATS under existing provisions? If so, what can be done to protect the sector from the full effects of GATS?

 

Is Canadian Public Post-Secondary Education Subject to GATS?

 

Article I, Paragraph 3 of the GATS defines the scope of the agreement as follows:

 

(b)      “services” includes any service in any sector except services supplied in the exercise of governmental authority;

 

(c)  “a service supplied in the exercise of governmental authority” means any service which is supplied neither on a commercial basis, nor in competition with one or more service suppliers. [4]

 

The ambiguity as to whether the public post-secondary sector in Canada would be subject to GATS is found in subsection (c).  If the public post-secondary sector were found to be providing education “on a commercial basis”, or if were found to be providing education “in competition with one or more service suppliers,” then it is not a “service supplied in the exercise of governmental authority” and would be subject to the full provisions of the GATS.

 

The phrase “commercial basis” is not further defined in the GATS and would thus be subject to interpretation by a GATS dispute panel. The argument has been made that by charging more than token tuition fees, that public university and college education is provided “on a commercial basis.”

 

On the question of public institutions operating “in competition with one or more service suppliers,” it is clear that there are a great many private providers of post-secondary education and training across the country, and thus public institutions would be subject to the GATS provisions.

 

The argument has been made, however, that the granting of Canadian degrees (as opposed to a granting of a degree from foreign jurisdiction in Canada) is a distinct market in the post-secondary sector that might be isolated from GATS treatment. Only a GATS dispute panel could make a definitive interpretation of this matter. The coding scheme used by the WTO to describe services, however, anticipates only “sub-degree technical and vocational education” and “education leading to a university degree or equivalent” within higher education designation.[5] Thus, in absence of a decision from a dispute panel, a reasonable interpretation is that degree-granting institutions would be treated as equivalent for trade purposes regardless of where their authority to grant degrees is derived. Under those circumstances, Canadian degree-granting institutions are operating in competition with the likes of City University and University of Phoenix, who do not have Canadian charter to grant degrees, but nonetheless operate in Canada.

 

In any event, even it were possible to segment the sector to carve out those institutions with Canadian charters to grant degrees, there exists Canadian-chartered, free-standing, non-public, degree-granting institutions in B.C., Alberta, Ontario and New Brunswick, and Canadian-chartered, university-affiliated, non-public, degree-granting colleges in B.C., Saskatchewan, Manitoba and Ontario. Therefore, regardless of how the degree-granting sector is defined, there is competition with the private sector, and thus the degree-granting sector is subject to the GATS provisions.

 

In summary, the Canadian public post-secondary education sector is probably subject to full treatment of GATS. If this were disputed, the decision would be left up to a GATS dispute panel whose job is to interpret the agreement in the context of opening up national economies to greater competition; a situation not particularly favourable to protecting public post-secondary education.

 

What are the Options to Protect Public Post-Secondary Education from GATS?

 

There are two options to protect public post-secondary education from the full provisions of the GATS.  The first can be found Article VII of the GATS, which anticipates that governments will continue to have and may establish new monopolies. It could be argued that the existing public and private degree-granting institutions chartered in Canada constitute a government-designated monopoly (or at least could be declared a monopoly).[6] The pitfall here is that because private institutions have been given degree-granting authority, to arbitrarily close the door to new private institutions after a certain date may not be defensible in international trade law. In any event, monopolies are generally defined as single providers or consumers, so a consortium monopoly anticipated by this approach may be inoperative.

 

The only sure means to protect public post-secondary education from GATS treatment is to withdraw it from consideration entirely. That is, the federal government would have to indicate in trade discussions that the higher education sector was subject to an “unbound exemption” from the GATS in Canada.  Alternately, as has been the case in the United States, individual provinces could press the federal government for an “unbound exemption” from the GATS provisions for all or part of their education sectors. An “unbound exemption” exemption means that no commitments have been made to include a particular sector in the GATS provisions, and that the government has maintained its ability to regulate the sector as it sees fit, despite the general principles of the GATS. The danger in this approach is that provincial governments will be under pressure from various interests not to exempt the higher education sector from GATS, potentially leading to a patchwork of approaches across the country.[7]

 

The Federal Government’s Position

 

On November 15, 1999, Pierre Pettigrew, Minister of Foreign Affairs and International Trade released the list of objectives the Government of Canada will try to achieve during the upcoming WTO meeting. Although health care and public education were not specifically indicated as candidates for inclusion in the GATS, general comments about the need to open up Canada’s service sectors to international trade, coupled with comments about Canada retaining the ability to regulate the health care and education sectors exacerbated fears that the federal government was about to sell out health care and public education. Minister Pettigrew backtracked on his comments on November 16^th, however he has not yet indicated specifically how the health care and public education sectors will be protected, and subsequent news reports leave his intentions in doubt.[8] Given past comments by Government of Canada trade officials, there remains a fear that health care and education yet may be “put on the table” and that Canada will rely upon favourable interpretations of Article I section 3(c) of GATS to protect health care and public education.  Given the analysis above, such favourable interpretations in the post-secondary sector seem unlikely.

 

What Should the Public Post-Secondary Education Sector Do?

 

To ensure that public post-secondary education is not inadvertently swept in to the GATS, the Government of Canada needs to make an unambiguous statement that it will specifically exclude the sector from the GATS. To pressure the federal government take such a position, it is imperative that post-secondary groups across the country write immediately to Pierre Pettigrew calling for such a statement.  Furthermore, provincially-based post-secondary organizations need to write to their provincial ministers responsible for post-secondary education and to their inter-governmental affairs ministers asking them to call on the federal government for an exemption for post-secondary education from the GATS, and, alternately, indicating that the provincial government wants an unbounded exemption for the education sectors in their provinces should the federal government put the education sector “on the table” in the GATS negotiations.

 

 

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