08 May 2017
L. Alan Winters CB, Professor of Economics and Director of UKTPO.
Signing a Free Trade Agreement is neither necessary nor sufficient for two countries (or groups of countries) to cooperate and enhance trade in research or higher education services. Doing so helps significantly, but needs to be followed up by detailed operational agreements at a lower level.
Higher Education is a major export earner for the UK: in 2011-2012 it accounted for £10.71 billion of export earnings, contributing about 10% of total UK export of services. In 2014-15, international students alone accounted for £10.8 billion of earnings, including £5.4 billion on top of their tuition and accommodation costs. When we take the sector’s demand for inputs from elsewhere in the UK economy, international students generated £13.8 billion of gross value added (income) in the UK in 2014-15. Hence, as well as students and staff in the sector having a strong interest in the UK’s post-Brexit trade policies, the UK has a strong interest in ensuring that higher education is able to continue to trade effectively. In order to help understand the impact of Brexit on the higher education services, Universities UK (UUK) asked UKTPO to consider what the sector might expect from future Free Trade Agreements (FTAs).
Research and higher education depend directly on the general provisions on trade in services in countries’ General Agreement on Trade in Services (GATS) schedules and FTAs. They are potentially impacted by all four modes of supply for services trade: (1) cross-border trade (e.g. streaming a lecture from abroad); (2) consumption abroad (e.g. moving for education); (3) commercial presence (e.g. investment in an overseas campus), and (4) the presence of natural persons providing services (e.g. the movement of staff).
But both activities are often also the subject of specific chapters in FTAs. Among the 279 FTAs contained in the World Bank dataset Content of Deep Trade Agreements, 20% of the agreements contain provisions on education, of which 7% are legally enforceable, while 21% of the agreements have clauses on research and technology collaboration (9% of which are legally enforceable). However, these provisions tend to be agreements in principle rather than precise commitments to action. The latter are typically defined in agreements at a lower level than the general trade treaty, such as treaties dealing specifically with the sector or, more likely, inter-departmental or administrative agreements.
This is not to say that FTAs are never useful, however. For example, although the Singapore – Australia FTA signed in 2003 was quite general and maintained restrictions on various sectors –particularly in Singapore – it did state an interest in collaborative activities. This had positive consequences in the third review of the FTA in 2016, which opened the doors to Australian law graduates from specific institutions and relaxed restrictions on Singapore’s recognition of Australian medical qualifications. Similarly, the EU – Korea agreement of 2011 did not include clauses on education and research, but the 2013 joint declaration of the European Commission and the Government of Korea, agreed to reinforce cooperation on higher education and specifically noted Korea’s interest in the so-called ‘Bologna Process’ of EU standard setting and cooperation, and in participation in EU education programmes
These examples suggest that reaping the rewards of free trade agreements is less a matter of inserting broad and liberal provisions on research and education than of working out detailed country-specific objectives and then engaging in detailed negotiations to make them achievable in the FTA or another agreement. Such negotiations require (a) very specific information that will often be available only from the sector itself, and (b) that sectoral bodies treat each negotiation as a separate exercise to identify not only what they wish for, but also what is feasible given a potential partner’s general and sector-specific policies and what concessions may be sought of the UK.
Prominent among partner demands are likely to be easy access to the UK for students and liberal post-qualification employment conditions. Similarly, cooperation in research and education will inevitably imply the movement of persons. Thus it is necessary to pay particular attention to the GATS mode 4 provisions of FTAs and related visa issues.
Finally, there is no need to wait for an FTA to be signed to start negotiating cooperation in research and higher education. Issues outside the trade brief, or which do not violate the non-discrimination requirements of the GATS (the so-called most favoured nation requirement) – for example, persuading a partner to relax its overseas ownership restrictions for universities – could proceed in advance of an FTA via other governmental routes.
As the UK prepares to negotiate its post-Brexit free trade agreements, it is important that higher education and research feature prominently in the discussions and that the sector and the government engage actively with each other in order to take the greatest advantage of the new opportunities.
UUK (2015), The Impact of Universities on the UK Economy, London, Universities UK.
UUK (2017) The Economic Impact of International Students, London, Universities UK.
Winters L A and N Tamberi (2017) Can Free Trade Agreements Enhance Research and Education after Brexit?, London, Universities UK
The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory.