TTIP and higher education policy

The Transatlantic Trade and Investment Partnership Agreement (or TTIP) is a comprehensive trade treaty between the between the European Union and the United States. TTIP covers all industrial sectors and ways of supplying goods and services across borders.

The principal aims of TTIP are:

• to reduce or eliminate trade barriers in relation to goods and services;
• to promote regulatory cooperation; and
• to legally guarantee investor’s rights.

This latter aim, the protection of investor’s rights through an investor-to-state dispute settlement (ISDS) through an arbitral tribunal, is enormously controversial. In an EU-wide consultation exercise earlier in the year, the European Commission received something in the region 150,000 objections (of which almost a third came from the UK) to the ISDS mechanism. The Commissioner for Trade, Cecilia Malmström, commented:

“The consultation clearly shows that there is a huge scepticism against the ISDS instrument. We need to have an open and frank discussion about investment protection and ISDS in TTIP with EU governments, with the European Parliament and civil society before launching any policy recommendations in this area.”

Translated from the bureaucratese, this means that the ISDS mechanism has been firmly kicked into the long grass. It is clear that in order to reach an agreement the European Commission’s focus is on opening trade by reducing or eliminating trade barriers.

TTIP requires, in principle, that the governments of each side should provide the economic operators of the other with certain protections:

• access to its market on the basis of the agreed commitments. The market access rules prohibit the parties from adopting measures that restrict the ability of economic operators to enter the marketplace.
• national treatment. National treatment means that a government must extend the same privileges and benefits enjoyed by domestic providers to foreign providers.

The last leaked draft of TTIP is expressed as applying to services which are performed commercially. In an education market which is characterised by a mixed economy of both privately and publicly funded, profit-making and non-profit making institutions, education services are likely to be treated as within the scope of the TTIP treaty.

The European University Association, a Europe-wide association of over 850 universities expressed a concern that higher education was likely to be subject to the TTIP regime. TTIP contains a tightly drafted exemption for “services supplied in the exercise of governmental authority”. While it is possible to specifically carve out the public services to which the TTIP does not apply, under the latest leaked draft, there is no specific carve-out for education services. The EUA points out that unlike services administered by the exercise of government authority, such as defence, justice and police, HE is not automatically excluded from trade negotiations.

Earlier this year the EUA’s fears were confirmed when the BBC obtained and published a leaked document entitled “Trade in Services and Investment Schedule of Specific Comments and Reservations”. This draft document contained the list of minimum commitments regarding TTIP as part of the negotiations. The potential for the market mechanism to undermine the education system has led to several European countries introducing specific carve-outs for their education sector from TTIP. This detailed list provides an insight to the “red-line” negotiating positions of the EU member states:

France, Greece, Italy, Denmark and the Czech and Slovak Republics still wish to retain nationality conditions for education service providers and, in some cases, for school teachers;

Spain and Italy have an “economic needs” test which makes access to the market such to economic criteria relating to the population and density of existing institutions;

Austria, Bulgaria, Cyprus, Finland, Malta, Romania and Sweden reserve the right to restrict privately funded higher education services.

The UK, well, the UK makes no reservations to the application of TTIP in the education sector at all. The absence of any reservation by the UK is entirely consistent with the competitive model of higher education in the UK.

The wide-spread abolition of the HEFCE teaching grant and concomitant shift to a market based model of student funding where tuition fees follow the student (and are paid back on generous repayment terms) has created a competitive market in the sector. The UK has opened up the higher education sector to for-profit education providers, including those backed by US corporations and funders. It is becoming increasingly clear that the financing of higher education is under pressure from the perspective both of students and taxpayers. A future government may consider that increasing student debt is potentially damaging to social mobility and that the student loan book is unsustainable because it will not be repaid in accordance with its terms.

TTIP would effectively prohibit any attempt to reverse the market-led allocation of student funding. This is because doing away with student-led funding and its replacement by funding through central planning could be treated as an unfair public subsidy. Reduction or replacement of the tuition funding could be challenged as it will impact disproportionately on the foreign investors in the higher education sector who are not eligible for a block teaching grant. So the experiment in the market operation of the higher education sector could potentially be irreversible.