A summary of this committee meeting is not yet available.
TRADE AND INDUSTRY PORTFOLIO COMMITTEE
4 March 2003
IMPLICATIONS OF GENERAL AGREEMENT ON TRADE IN SERVICES (GATS) ON HIGHER EDUCATION; STATUS UPDATE ON WTO NEGOTIATIONS
Chairperson: Mr R Davies (ANC)
Documents Handed Out:
Briefing Note on WTO Negotiations (Appendix 1)
Implications of General Agreement on Trade in Services (GATS) on Higher Education (Appendix 2)
The Minister of Education argued that South Africa should not make a commitment to the WTO for education in the General Agreement on Trade in Services (GATS). DTI's Chief Director, on Multilateral Trade Negotiations updated the Committee on the status of the scheduled WTO negotiations. He informed the Committee that the interim deadlines for the six negotiating issues agreed to at Doha had all been missed and that the 5th WTO Ministerial Conference scheduled in September 2003 was approaching quickly without a proper negotiating framework in place.
Implications of the General Agreement on Trade in Services on higher education
The Minister of Education, Prof Kader Asmal, addressed the Committee on the implications of the General Agreement on Trade in Services (GATS) on higher education.
Professor Asmal explained that the World Trade Organisation defines education as a service. This designation is problematic. Education must not be viewed as a commodity to be bought and sold. South Africa cannot sacrifice the ‘public good’ for the vagaries of the market.
International ‘trade’ in education services, particularly higher education, has risen in recent years due to increased international marketing, the establishment of ‘branch’ campuses, and the introduction of virtual education. Private foreign providers have negatively affected higher education in South Africa because the elite are sending their children to these institutions.
Professor Asmal outlined the four methods GATS defined for the provision of services internationally: cross border supply, consumption abroad, commercial presence, and presence of natural persons. The WTO expects South Africa, as a WTO member, to identify those services for which it will provide access to foreign providers, including the extent of commitment and the conditions for such access. Due to the “Most Favoured Nation” clause, South Africa could not provide access to services for a nation of its choosing. Every WTO member would have equal access due to the rules of GATS.
South Africa has not made any commitments in education. Four countries (Kenya, New Zealand, Norway and the United States) have requested that South Africa commit to education and place no limits on service providers from their countries.
Within this complex international system, South Africa should focus on a commitment to genuine international collaborations and partnerships in education, which is critically important to the health of any higher education system. South Africa’s policies should not be informed by parochialism and narrow chauvinism.
South African universities have scores of agreements with foreign universities that are mutually beneficial. These partnerships are not for commercial purposes.
Private foreign institutions have been harmful to South Africa’s higher education landscape. In the 1990’s these institutions attracted many high-income whites who left South Africa’s public higher education facilities. This has hampered the Department of Education’s efforts to build non-racial higher education institutions in South Africa.
Professor Asmal clarified that South Africa should not attempt to exclude foreign institutions, but must ensure that those who operate in South Africa do so with due regard to South Africa’s policy goals and priorities and in ways that meet national transformation agenda and quality assurance requirements. Increased trade in educational services must not undermine national efforts to transform higher education.
The Department of Education is not alone in its reservations about GATS. There is a ‘Joint Declaration on Higher Education and the General Agreement on Trade in Services’, adopted by the Association of Universities and Colleges of Canada, American Council on Education, European University Association, and the Council for Higher Education Accreditation. The declaration supports the notion of reducing obstacles to international trade in higher education using conventions and agreements outside of a trade policy regime.
At this point, there is more to be lost than gained from making any commitments in education within the GATS. The Department of Education favours the strengthening of South Africa’s current activities designed to promote South Africa’s role in the global environment.
Prof B Turok (ANC) asked how South Africa could make its universities more relevant to the needs of South Africa.
Prof Asmal responded that a National Curriculum Conference would be held within the year to address that problem. In France, the curriculum for the entire country is decided by one man with input from his advisors. Prof Asmal did not believe this was a proper solution for South Africa. South Africa follows the British system and allows universities to form their own curriculum.
The Chair commented about the “leviathan-like” character of the World Trade Organisation. It is involved in every aspect of international trade. The powerful countries within the WTO seem to get all of the benefits of international trade.
Prof Asmal replied that the WTO was more like an octopus than a leviathan. GATS affects several other services besides education. Accountancy, law, and the medical profession are also ‘under attack’. The WTO works in the best interests of those who have power. South Africa must ensure that education does not become a trade matter, for the market will only hurt South Africa’s educational system.
Mr Xavier Carim from the Department of Trade and Industry asked about the notion of flexibility in GATS. Supposedly GATS is development friendly. No country is obligated to commit to GATS. Committing to GATS, however, may help South Africa gain negotiating leverage, reciprocity of services, and policy certainty. Further, GATS contains exemptions from the Most Favoured Nation clause. The value of committing in education could return in the form of another service procured due to the increased negotiating leverage.
Prof Asmal answered that the law of power was at work in the WTO. Mr Carim was being too optimistic by believing that the most powerful nations would devise a system to help developing countries.
Status of World Trade Organisation (WTO) negotiations
Mr Xavier Carim, Chief Director, Multilateral Trade Negotiations International Trade and Economic Development, of the Department of Trade and Industry addressed the Committee regarding the state of World Trade Organisation (WTO) negotiations.
WTO agreements usually contain imbalances that undermine the interests of developing countries. Developing countries have a clear interest in strengthening their ability to promote their own development. To this end, developing countries had agreed to launch negotiations at the 4th WTO Ministerial Conference in Doha, Qatar in 2001. The agreement reached at Doha was more balanced and provided scope to accommodate the trade objectives of developing countries.
At Doha the WTO launched a round of multilateral trade negotiations that are scheduled to conclude in January 2005. The six agreed negotiating issues are Agriculture, Services, Intellectual Property Rights, Industrial Tariffs, Rules, and Trade and Environment. The Doha Ministerial Conference agreed to a series of interim deadlines on the road to the mid-term review at the 5th WTO Ministerial Conference, scheduled for September 2003 in Mexico:
Key issues of great importance to developing countries (including public health and intellectual property rights) had interim deadlines in December 2002 and were missed. Moreover, developing countries’ problems with the existing WTO agreement were supposed to have been resolved but were not. Additionally, the EU’s negotiating proposal on agriculture, which it submitted in December 2002, was very disappointing as it was devoid of any real content.
These problems have combined to severely setback South Africa and other developing countries in WTO negotiations. The meeting in September 2003 in Mexico has the potential to be a “Seattle II”. There are a few events that could create momentum for the meeting, yet this scenario is unlikely. The entire process is fragile. There is no real movement in any area.
Ms C September (ANC) asked how Parliament can participate more directly in the WTO negotiations. What was the Department of Trade and Industry’s position on parliamentary participation? She did not think it would be wise to disturb the manufacturing industry with more tariffs.
Mr Carim responded that the Department does not devise its own policy for the WTO negotiations. DTI’s view is a composite of many organisations within South Africa, including Parliament. DTI welcomes the input of Parliament.
The Chair pointed out the inequities between developing countries, which only charged tariffs, and developed countries, which have tariffs, subsidies, rules, and technical barriers to trade. He stated that what had happened in the Doha round was typical of the WTO. Developing countries won the declaratory battle, yet in the implementation nothing has been carried out. That often happens in the WTO because the developed nations are responsible for the details of agreements. Developing countries always lose out.
The Chair stated that he was in the process of organising a workshop for Parliamentarians who are involved in international trade matters. This workshop would deal with WTO issues.
The meeting was adjourned.
Briefing Note on WTO Negotiations
Pretoria, 14 February 2003
WTO disciplines can enhance certainty and security for market access. The WTO reduces the scope for unilateral trade measures and aims to ensure that economic interactions, including resolution of disputes, are subject to rules, and not solely the outcome of economic power. Notwithstanding these advances, the outcome of previous multilateral negotiations responded mainly to the interests of developed countries.
For developing countries, WTO agreements contain imbalances that undermine their development interests. Further, the agreements, designed in the main by industrialised countries, reflect the concerns of sophisticated economies and presuppose an institutional, human and financial base that is often lacking in developing countries. Developing countries, thus, have a clear interest in strengthening the system to promote their development.
Sustained global economic growth requires unlocking the growth and development potential of developing countries. To achieve this, developing countries must pursue industrialization by processing their natural resources where they possess comparative advantage. The strategic objective in the new negotiations is, therefore, for developed countries to undergo far reaching structural adjustment in their economies.
It is on this basis that developing countries, including African countries, agreed to launch negotiations in Doha. Moreover, developing countries were successful in ensuring that that the Ministerial Declaration agreed in Doha was balanced and that it provided scope to accommodate their trade objectives. Nevertheless, given the wide disparities in the distribution of political, economic and institutional power among WTO members, it is clear that these negotiations will be difficult and developing countries will be hard pressed to ensure that negotiation outcomes promote their development in a meaningful way.
Scope of Negotiations
The 4th WTO Ministerial Conference in Doha, in November 2001, launched a broad based round of multilateral trade negotiations. These negotiations are scheduled to conclude in January 2005 under the principle of the "single undertaking" (i.e. nothing is agreed until everything is agreed). There are six agreed negotiating issues with a deadline of January 2005 under the principle of a single undertaking: Agriculture; Services; Intellectual Property Rights (TRIPs); Industrial Tariffs; Rules (Anti-Dumping, Subsidies, Regional Arrangements, Fisheries); and Trade and Environment. In addition, four additional areas may be included in the negotiations, if WTO Members agree at the 5th Ministerial Conference (10–14 Sept 2003) to do so: Trade and Investment; Trade & Competition; Transparency in Government Procurement; Trade Facilitation.
State of Play in the Doha negotiations - February 2003
The Doha Ministerial Conference agreed to a series of interim deadlines or milestones on the road to the Mid-term review at the 5th WTO Ministerial Conference, scheduled for September 2003 in Mexico:
· December 2002 (to resolve outstanding issues on public health and TRIPs, and to improving special and differential treatment provisions that favour of developing countries);
· March/May 2003 (“modalities” in agriculture and industrial tariffs, offers in services negotiations);
· 5th Ministerial Conference (draft offers in agriculture, conclude negotiations on a register for geographic indications, decision on Singapore issues for possible inclusion in the agenda).
For the first half of last year, 2002, a great deal of effort was expended on establishing procedures and timetables for the negotiations. Aside from negotiations in agriculture and services which had begun in 2000, other issues (industrial tariffs, intellectual property, anti-dumping, subsidies, special and differential treatment, environment) required a proper scheduling of meetings and decision on which issues where to be tackled and when.
Substantive discussions on these issues began in earnest, across the whole range of negotiating subjects, in the second half of 2002. As we enter the phase of negotiations leading to the mid-term Review at the Ministerial meeting in Mexico in September, our assessment is that prospects for overall progress in the negotiations are not good.
Three key issues, of great interest to developing countries, (public health and TRIPs, special and differential treatment, and other problems with existing agreements – so-called ‘implementation issues), had interim deadlines in December 2002. These have been missed, thus undermining developing country confidence that this, indeed, would be a Development Round.
First, the US (with Japan, and Korea) held out against agreement the entire WTO membership on establishing a mechanism that would allow countries with no or insufficient manufacturing capacity to import medicines for public health reasons under compulsory licenses. Second, there was agreement in Doha that a range of provision of special and differential treatment in favour of developing countries would need to be made operational and effective by December 2002. This deadline, too, passed, without agreement on how to meet the Minister’s instruction. Third, developing countries confront a range of problems with existing WTO agreement, and these were to be resolved by December 2002. Again, no progress was made on these issues.
To further compound the difficulties, the EU, after refusing to engage meaningfully in the agriculture negotiations (an area of great interest to developing countries), finally submitted its negotiating proposal in December. The submission was a great disappointment (including to the Cairns Group and Africa). Its level of ambition is below that of the Uruguay Round, and is empty of real content. The submission also suggests the EU’s intent to introduce new trade restricting measures (precaution, labeling, geographic indications) into the negotiations. Clearly, the EU is constrained by its own internal reform of the Common Agriculture Policy reform programme.
The result of the failure to meet the December 2002 deadlines, the disappointment of the EU proposal, is likely to spill over into other areas. Developing countries that required progress in areas of interest to them, are unlikely to be willing to move in other areas of interest to the EU and the US, and where interim deadlines exist (services, industrial tariffs – in March 2003). A deadlock is looming. The meeting in Mexico promises to be a difficult one. Ministers will have to deal with each of the deadlines that have been missed. They may also need to make a decision on whether to launch negotiations in other areas (investment, competition, transparency in government procurement, trade facilitation) which are of great interest to the EU. It is unlikely that that decision will be taken in the absence of movement in other areas.
TRIPs and Public Health
The Doha Declaration on TRIPS and Public Health reaffirmed that the Agreement can and should be interpreted and implemented in a manner supportive of WTO Members’ right to protect public health and, in particular, to promote access to medicines for all. It reaffirmed existing "flexibility" and "safeguard" provisions as regards parallel imports and compulsory licenses (CL).
The Declaration also recognized that CL provisions are meaningless for countries with no or insufficient domestic manufacturing capacity. Paragraph 6 of Declaration thus instructed Members to pursue negotiations in the TRIPs Council to find an “expeditious solution” to the problem (by end 2002). A Member with insufficient or no manufacturing capacity in pharmaceutical products would need to secure supplies (import) from another Member. Potential exporters in the jurisdiction of another Member will, however, be constrained if the product for export is patented in its jurisdiction, as TRIPs stipulates (Article 31 (f)) CL products must be predominantly for the domestic market.
To the extent that US, at the behest of the pharmaceutical industry, has continually sought to narrow the scope of the solution, developing countries have engaged fully in seeking a solution that is long term, legally sound, and predictable.
After almost a year of negotiation in the WTO, on 16 December 2002, the Chairman of the TRIPs Council presented a finely balanced text to establish such a mechanism. This text had the support of the overwhelming majority of WTO members but was rejected by the US with support from Japan and Korea. The EU’s, in January 2003, has attempted to bridge the differences by proposing a role of the World Health Organisation but this has raised more questions than answers, and is unlikely to advance the issue.
South Africa is convinced that the Text submitted by the Chairman of the TRIPs Council in December 2002 was a finely balanced one that remained faithful to the Doha mandate. Importantly, too, it provided sufficient safeguards to avoid any abuse of the mechanism. We are convinced that the mechanism envisaged in the Text would have integrity that Governments would fully respect in order to preserve their ability to address public health concerns in a decisive manner. The Text met our expectations for a multilateral, legally-secure, and permanent solution. We will continue to engage on the issue and be open to proposals but these must not undermine or restrict the Doha Declaration.
Minister Erwin exchanged views with the pharmaceutical CEOs in Davos and this may have some impact on their approach. He argued that by holding their line, pharmaceutical companies are doing more damage to the patent system in the eyes of international civil society, and that will loose on this issue. We believe developing countries, Africa Group, India and Brazil need not make any further concessions. Our view is the US must now make a proposal to break the impasse.
There are two significant developments in the agricultural negotiations: I) the EU’s proposal; ii) the Chairman’s text on modalities. Before discussing these, it is useful to recall South Africa’s position on the negotiations:
· To maintain an equitable level of protection against price lowering effects of subsidised exports and unfair competition to the South African market. For example, our current high import tariffs for sugar 60%, dairy 38% and beef 40% coincide with highest levels of subsidies paid by OECD members. This is an area where we have important defensive interests.
· To be able to fully support the development of emerging farmers, rural and farming communities in South Africa through different kinds of subsidies. So far the most ambitious negotiating proposal is from the US. Even if this proposal would be accepted, a highly unlikely proposition, it would in our assessment not constrain our rights to support the development of our emerging farmers. From a strategic negotiating perspective our defensive interests are safe and also covered by the desires of the majors to continue the right to subsidise.
· Further substantial reform in subsidies paid by and tariffs of our trading partners would influence South Africa’s ability to increase trade and foreign income. The extent and discretionary nature of subsidies paid by developed countries disturbs and displaces South Africa’s exports in third markets. For example our lucrative canned peach exports to Japan and egg exports to Hong Kong have been all but replaced by EU subsidised products. It is therefore in our strategic interest to put pressure on the majors to eliminate, reduce and sharpen the disciplines on the use of distorting forms of subsidy.
· While approximately 60% of our exports are now subject to preferential import duties, high levels, especially on value added products, remain on key products and in key markets and restrict our trade. For example high import duties on sugar exports in the EU 82%, Japan 450%, USA 33%, China 76%, Nigeria 150%. Often high duties are linked to products that are subject to high levels of subsidy. It is in our strategic interest to utilise the multilateral negotiations to address these high value added tariffs we face to increase our income from exports and gain more markets. It should be noted that even small reductions in tariffs could lead to major growth in exports as in the case of AGOA preferences extended to South Africa.
· Within NEPAD agriculture is a main vehicle for Africa’s development. Increased diversification, value adding as well as increased exports of agricultural products to foreign continents and between African countries can be a fundamental contributor to growth in the continent. Tariffs between African countries are high and African products face technical barriers to trade and so-called escalation that encourages Kenya for example to export cocoa beans, but not manufactured chocolate. From a strategic perspective South Africa should seek greater alliance with and enthusiasm by African countries for well- defined own interest outcomes. These outcomes mostly do not diverge from our core objectives.
Turning to the EU proposal in agriculture, although Members welcomed the long awaited proposal which was circulated on 16th December 2002, there was disappointment in that it demonstrated how little the EC is prepared to accept changes in the WTO rules on agriculture with regard commitments on tariffs, domestic support or export subsidies. Also worrying is the strong attempt to incorporate the new policy direction of the Common Agricultural Policy (CAP), i.e. decoupling farm subsidies, strengthening the protection of geographical indications, the concept of animal welfare and food safety, etc.
By calling for an average cut in tariffs of 36% and minimum 15% cut per tariff line from the UR final bound tariffs (with possible lower reduction targets for developing countries), the EU proposal would maintain tariff peaks and tariff escalation in areas of export interest to developing countries.
On export subsidies, the EC proposes an "average" 45% cut. This gives the EC flexibility to select products for reduction/elimination of export subsidies. Targeting at the average reduction rate may be ineffective in curving down the actual amount of subsidies. Also, the proposal would give the EC an easy target to achieve because it generally spends less than the bound levels under the UR commitment. The reduction rate of 45% could be accommodated without any effective changes in spending.
The EC proposal gives nothing new in terms of the S&D provision. The proposal is simply a reconfirmation of the current S&D, including “best endeavour” clauses, while the market access provisions amount to an empty offer. With regard to the latter, the EC proposes that developed countries "shall use appropriate means" to ensure that at least 50% of agricultural imports from developing countries and all imports from LDCs enter duty free. Over 50% of agricultural exports from developing countries to developed country markets already enter duty-free, except in the cases of Japan and Switzerland. Granting duty-free access becomes meaningful only when developing countries themselves specify the products which are of export interest, and which face a significant tariff barrier in the importing developed country market. The EC does not propose any expansion of TRQ volume.
The most crucial to the EC is to increase the flexibility in implementing the reduction commitments on domestic support and export subsidies and to maintain (and improve) the criteria given in the Annex II (Green Box) of domestic support measures that are exempt of the reduction commitments. The EC hopes to make the new WTO agricultural rules beyond 2006 compatible to the CAP for the period up to 2006, such that it will have a free hand in formulating new policy measures under the CAP for the next budgetary period (2007-2013), with new EU members in sight.
As a result of the Mid-Term Review of the CAP (July 2002), the EU farm subsidies will be increasingly "decoupled" from agricultural production and will take a form of a "single decoupled income payment per farm", which will be conditional upon a farm's compliance with standards on food safety, environmental protection, animal health and welfare, and occupational safety. All these (action) to comply standards are classified as measures for "rural development".
The EC's interest to provide a stronger legal ground within the WTO to non-tariff measures, particularly those concerning the precautionary principle and mandatory labelling (linked to protection for geographic indications, environmental protection, animal welfare, GMO, etc) poses a serious threat to market entry for developing countries.
Geographical Indications (GIs): The EC proposal puts a very strong emphasis on incorporating the protection of GIs (not only for wine and spirits as under Article 23 of the TRIPS Agreement but also to other agricultural and foodstuff) into the WTO AoA framework
Precautionary principle: In relation to food safety, the EC proposes that its interpretation of Article 5.7 of the SPS Agreement (concerning cases where scientific evidence on food safety is insufficient – e.g. the case of hormone beef) be adopted at the Ministerial Conference or General Council. In brief, the EC proposes that any possibility of food scare is "guilty, until proven innocent", and a precautionary measure, such as an import ban on products concerned should be WTO-consistent.
Mandatory labeling: By proposing to clarify regulations and guideline concerning mandatory labeling on agricultural products, the EC wishes to allow a country to make a use of mandatory labeling on product characteristics as well as the production and processing methods, including the "… manner in which animals or plants are reared or grown, the organic or non-organic nature of the production process, the modified properties of agricultural products". A requirement for labeling of such a nature may adversely impact DCs' exports both directly (when a DC lacks necessary technology or production technique to meet the EC standards) or indirectly (through an increase in production costs to meet the labelling requirement).
On 12 February 2003, a first draft of the so-called “modalities” paper was released by the Chairman of the WTO agriculture negotiations, Stuart Harbinson. The paper proposes the framework for new commitments and rules for the WTO agriculture negotiations.
Although the text moves in a positive direction, it does not the Cairns Group expectations. For the first time it sets a date for the elimination of export subsidies but that is still much too far away. Export subsidies undermine world markets and developing country farmers and should be removed as quickly as possible. The paper fails to meet Cairns Group ambitions for tariff reductions and domestic subsidy cuts. The flexibility it gives would allow countries to pick and choose products and could leave some highly distorted products largely excluded. The paper sets out a formula for tariff reductions which would deliver bigger reductions for higher tariffs, but which would also leave scope for countries to apply minimum reductions in politically-sensitive products. The paper calls for some tariff quotas to be expanded, although to a lower level than the Cairns Group was seeking.
Export subsidies are to be phased out over a 6 to 10 year period, but the proposal would allow countries to choose sensitive sectors for the later elimination date. Trade-distorting domestic support would be reduced by 50 to 60 percent of existing bound levels, which could leave actual applied subsidy rates largely unchanged in many countries. Domestic support has recently been highlighted by the OECD as the source of many of the worst problems in agricultural trade, yet the paper would leave much support in place even after 5 years. There is disappointed at the low level of tariff quota expansion.
We should, however, recall that this is a first draft, and we have a further six weeks to negotiate on it before the modalities must be established.
WTO members are bound to negotiate a multilateral register in GIs. However, a multilateral system of notification and registration for wines and spirits, as proposed by the EC, would bind all Members whether they choose to participate or not, and it would shift the burden of enforcing the protection of GIs to Governments away from producers. This will impose massive financial, institutional and human capacity burdens on resource-poor developing countries, as they would be required to set up administrations for the registration and enforcement of an expanding list of GIs. A binding legal register will nullify the rights Members currently enjoy and will oblige all Members to protect wines and spirits notified and registered in the WTO, unless a satisfactory opposition procedure has been carried out, thereby overriding national laws.
South Africa would support a voluntary register system for wine and spirits that consists of a procedure for the notification and registration of GIs for wines and spirits protected under the national law of the notifying Member. The objective would be to enhance transparency and to provide Members that agree to participate in the system with relevant information for registration under their national laws.
Our view is that the EC position is based on narrow commercial interest, without due acknowledgement of costs to other producers, and it represents an attempt to transpose the EU’s overly complex and essentially protectionist practices onto the world economy. We have gained an experience in our bilateral negotiations (wines and spirits) that we would not want to see multilateralised in the WTO, nor see it extended to other products.
We have serious concerns about proposals (EC and others) that seek to extend the additional protection now granted to wine and spirits, under TRIPs, to other products. The implications of the extension for an open international trade regime have not been properly assessed or precisely quantified, but are likely to be costly for many of us.
The benefit of additional protection for other GIs would extend only to those Members that have, over a long period, developed highly sophisticated and extensive national systems for protecting GIs. While some developing countries may find specific niche commercial advantages, the overall balance of benefits, as a result of stronger protection, would be distributed unfairly. Indeed, many of the products that have been proposed by developing countries for such protection would not qualify as GIs and, certainly, the commercial interests of producers forced to give up certain names would be harmed. There has been no balanced assessment that takes into account these factors.
As there are differing jurisdictional definitions of GIs, we could also open the way for protecting other names that go beyond what we may now understand to be a GI. Extreme caution is thus required to avoid a proliferation of “GI” protected names that could undermine a fair international trading system that we seek to construct.
We are particularly concerned by the attempt to link additional protection of GIs to the agricultural negotiations. This, in our view, would blunt efforts to eliminate distortions in international agricultural trade. We are convinced that the Africa’s development prospects could be undermined by allowing a new generation of protectionist measures into the system. Our concerns are heightened in light of the approach and content of the EC’s recent proposal in the agricultural negotiations.
South Africa’s Domestic Preparations
DTI has lead the domestic preparations for the WTO negotiations. At the strategic level, have had consultations with parliament portfolio committee, and several interactions with business, labour and other stakeholders, including through NEDLAC. We have also issued a Government Gazette inviting public comment on the negotiating issues.
At a technical level, we initiated intense consultations with other government departments on the specific negotiating issues. Through this process we have identified negotiating approaches and positions in the areas of: agriculture, TRIPs (GIs and public health), services, rules (anti-dumping and subsidies) and “modalities” for industrial tariff negotiations. We are close to finalising these.
Before submitting these approaches and positions into the WTO negotiating process, a further round of detailed consultations is envisaged that will include the parliamentary portfolio committee and NEDLAC. A consolidated mandate will be sought from Cabinet before submitting the negotiating proposals to the WTO.
Presentation by the Minister of Education, Professor Kader Asmal, MP, to the Portfolio Committee on Trade and Industry: Implications of the General Agreement on Trade in Services (GATS) on Higher Education
Parliament, Cape Town, 4 March 2003
1. I am pleased to have the unique opportunity to engage you on this important topic. This must surely be the first occasion on which the Minister of Education addresses the Portfolio Committee on Trade and Industry. This discussion comes at an important point in the history of higher education in our country, as we are poised to implement our agenda for the transformation and reconstruction of the system. This process of renewal is designed to ensure that the higher education system is able to respond to the country’s high level human resource and research needs for the 21st century in an equitable, effective and efficient manner. The size, configuration and priorities of the system will be shaped by the key policy imperatives of the Government. However, there is the real possibility that external pressure on the system, in particular the impact of GATS, could have a negative impact on our transformation agenda, especially if its influence on education is not carefully regulated.
2. The World Trade Organisation (WTO) defines education services by reference to Primary Education Services; Secondary Education Services; Higher (Tertiary) Education Services; Adult Education; and Other Education Services. Although there are implications for all four categories, I will largely confine today’s input to higher education.
3. However, let me say at the outset that the designation of education as a service is in itself a problem. Education is surely not a commodity to be bought and sold. A reductionist view of education as merely an instrument for the transfer of skills should have no place in our world-view. Education must embrace the intellectual, cultural, political and social development of individuals, institutions and the nation more broadly. We cannot sacrifice this ‘public good’ agenda to the vagaries of the market.
4. International ‘trade’ in education services, particularly at the higher education level, has grown significantly in the past period, with increasing numbers of students studying outside their home countries, increased international marketing of academic programmes, the establishment of overseas ‘branch campuses’ etc. Terms such as ‘transnational’ and ‘borderless’ education have gained currency to describe “real or virtual movement of students, teachers, knowledge and academic programs from one country to another” (Knight, 2002). By 1995, the global market for international higher education was estimated at US$ 27 billion. The United States (US) is the leading exporter of education services, with higher education being the country’s fifth largest service sector export. The main export markets are in Asia, accounting for 58% of all US exports, followed by countries in Europe and Latin America. (WTO Council for Trade in Services Background Notes, September 1998).
5. In the main, the movement of students and staff is from the south to the north, while export of educational services in the form, amongst others, of educational information, provision and facilities, such as branch campuses etc., is in the reverse direction.
6. The impact of private foreign providers on African higher education over the past period has been particularly devastating. This has been especially so because higher education in much of Africa was already weakened by the effects of World Bank driven policy that developing countries should largely concentrate on building up basic and secondary education provision, since these were considered to offer greater individual and social returns. Although I am glad to say that the World Bank has subsequently revised its views in this regard, this change has come too late for many countries in Africa.
7. The GATS identifies four ‘modes of supply’, i.e. ways in which services can be traded. I am sure you will be familiar with these modes since they are applicable to all services. However, it is useful to summarise these with examples of their potential reach in higher education. These are:
- cross border supply where the service crosses the border. This would include distance education, e-learning and virtual universities.
- consumption abroad where the service involves the movement of the consumer to the country of the supplier. This includes students who go to another country to study.
- commercial presence where the service provider has facilities in another country to render service. This includes branch campuses and franchising arrangements.
- presence of natural persons where persons travel to another country on a temporary basis to provide a service. This includes academics working outside their own borders.
8. As you know, within the WTO, each county is expected to identify those services for which it wishes to provide access to foreign providers, including the extent of commitment and the conditions for such access. Notwithstanding this, there are a number of general obligations, such as the ‘Most Favoured Nation’ (MFN) element, applicable to all trade in services, which, as some have argued, may apply even when a country has made no specific commitments to provide foreign access to their markets. This provision requires equal and consistent treatment of foreign trading partners, although exemptions for a period of 10 years are permissible. This may have particular implications for countries that already provide access to foreign providers. For example, it is possible that the provision of government subsidies to public institutions could be challenged as unfair treatment. It could be argued that subsidies should be provided to all institutions, public and private.
It is also important to note that, once a commitment is scheduled, it cannot be changed, even in the light of subsequent changes to local regulatory frameworks/contexts, unless such amendments are re-negotiated.
9. In terms of coverage, the GATS applies to all services with two exceptions, one being services provided in the exercise of governmental authority and the other to air traffic rights. “In the exercise of governmental authority” is said to mean that the service is provided on a ‘non-commercial basis’ and ‘not in competition’ with other service suppliers. However, these terms are subject to interpretation. Some contend that education provided and funded by governments is exempted while others argue that public sector service providers are not exempt, especially in countries where there is both public and private provision of education.
10. GATS is also premised on so-called progressive liberalisation of trade in service. This means that with each round of negotiations, countries are expected to add sectors to their schedules of commitments. Thus, the pressure to allow market access to foreign providers is likely to increase.
11. In addition to the national schedules of commitments, there are bilateral negotiations (“request-offer” negotiations) on market access and national treatment commitments, which requires equal treatment for foreign and domestic providers. Knight (2002) highlights that “sectors for which access is sought do not have to correspond to those for which requests made. So Country A may request of Country B greater access to transportation services. Country B can respond by requesting access to educational services”. This is particularly of concern to countries that have not made commitments in education, because it does make education vulnerable to deals across sectors.
12. South Africa has not made any commitments in education. However, to date, four countries have made requests of South Africa. These are Kenya, New Zealand, Norway and the US. In all four cases, the request is that South Africa ensures that there are no limits whatsoever on service providers from these countries that wish to operate in South Africa and that they be treated no less favourably than their South African counterparts. The US request further requests that South Africa removes “burdensome requirements, including non-transparent needs tests, applicable to foreign universities operating, or seeking to operate, in South Africa”.
13. Some 44 of the 144 WTO members have made commitments to education, with 21 including higher education. Congo, Lesotho, Jamaica and Sierra Leone have made full unconditional commitments in higher education, presumably with the intention of encouraging foreign providers to help develop their systems. (Knight). The European Union has included higher education in their schedules with limitations on all modes of trade except ‘consumption abroad’, which as you will remember refers to services involving the movement of the consumer to the country of the supplier. Four countries – USA, New Zealand, Australia and Japan have submitted negotiating proposals outlining their interests and issues.
14. How then should we act, given this complex terrain? Our response should be firmly located within a commitment to genuine international collaborations and partnerships in education, which is critically important to the health of any higher education system. It should not be informed by parochialism and narrow chauvinism.
15. Each and every one of our public universities and technikons has a rich history of partnerships with sister institutions across the globe. These relationships include staff and student exchanges, support for capacity building, research linkages etc. They are partnerships between peers, shaped for mutual benefit and not for commercial purposes. We are also deeply committed to our responsibilities in the SADC. In this regard, all SADC students studying at South African universities and technikons are treated as home students for purpose of Government subsidy. This translates into a significant annual financial commitment to the SADC protocol.
We have also been at the forefront of ensuring that unnecessary barriers (such as costly and onerous procedures/requirements for obtaining study and work permits) to international academic interchange are removed.
16. Regrettably, trade liberalisation is impacting on these efforts to internationalise higher education. Of particular concern is whether limited financial resources might increasingly be used for trade driven activities rather than those that emphasise intellectual and social gains.
17. My views are also shaped by our experience, over the past years, with the regulation of the private higher education sector, including foreign providers. Prior to 1997 and the promulgation of the Higher Education Act, which provides the statutory basis for the regulation of private higher education, there was a legal and policy vacuum with respect to this sector. This vacuum was exploited and resulted in the proliferation of both local and foreign private providers of varying and sometimes dubious quality.
18. With specific reference to the foreign providers, South Africa was seen as a fertile market for growth and furthermore, a spring board to the rest of the sub-Continent. In particular, institutions from the United Kingdom, Australia and the US either began operations in South Africa or surveyed the field. In most instances, their focus was on areas of study, such as the MBA and other commerce and management programmes, where we already have significant capacity in the country, but which would be financially lucrative markets. The unbridled growth of these providers would have had a profound effect on the public higher education system, which was in the process of transformation and renewal. Let me illustrate this by just one example. A foreign institution, which I shall not name, unashamedly targeted the recruitment of students from high-income groups and particularly white students who may otherwise have gone overseas to study. As you can imagine, the impact of such agendas on our efforts to build non-racial South African higher education institutions can be quite profound.
19. I am pleased to say that, through the implementation of our policy and legal frameworks, we have been able to ensure the planned development of the private sector in ways that do not threaten the sustainability and integrity of the higher education system as a whole. I must emphasise that this is not an attempt to exclude foreign institutions but to ensure that those who operate in South Africa do so with due regard to our policy goals and priorities and in ways that meet our national transformation agenda and quality assurance requirements.
20. It is important that we remain vigilant to ensure that increased trade in education does not undermine our national efforts to transform higher education and, in particular to strengthen the public sector so that it can effectively participate in an increasingly globalising environment. Trade considerations cannot be allowed to erode the ‘public good’ agenda for higher education. Higher education must play a central role in nurturing the values of our democracy and to help build a critical citizenry. As argued by the Chief Executive Officer of the Council on Higher Education, Saleem Badat, “the achievement of equity, development, justice and democracy in South Africa requires academics and higher education institutions to become powerhouses of knowledge production and knowledge dissemination and diffusion, and of the formation of new generations of thinkers and actors” (Re-inserting the ‘Public Good’ into Higher Education Transformation, 2001).
21. We cannot also countenance the excessive marketisation and commodification of higher education, which amongst others, can lead to the unfortunate homogenisation of academic approaches and can undermine institutional cultures, academic values and the search for truth.
At the recent Council on Higher Education Colloquium on Building Relationships between Higher Education and the Private and Public Sectors, Minister Erwin was forthright: “Knowledge is not a commodity and can never be one. Knowledge is the distillation of human endeavour and it is the most profound collective good that there is.” Minister Erwin goes on to argue that the more knowledge is turned into a commodity and privatised “the more it will either corrode the collective knowledge base or itself corrode as it distances itself from that collective wellspring”
GATS in education, then, has huge implications for our knowledge base. I do not need to remind you that under globalisation, knowledge is indeed the wellspring, the electricity for our country’s economic and social development.
22. We are not alone in having reservations about GATS in education. Members of the Committee will be interested to know that there is a ‘Joint Declaration on Higher Education and the General Agreement on Trade in Services’, adopted by the Association of Universities and Colleges of Canada, American Council on Education, European University Association and the Council for Higher Education Accreditation. The declaration encourages countries not to make commitments in Higher Education Services’ or in the ‘Adult Education’ and ‘Other Education Services’ categories of the GATS. According to Knight, “instead it supports the notion of reducing obstacles to international trade in higher education using conventions and agreements outside of a trade policy regime”.
23. It would only be fair for us to ask what value can be added by GATS in higher education. The proponents of GATS will argue that the potential benefits are as follows:
· -it provides a strategy to attract foreign providers by creating certainty in the regulatory environment. This could be a desirable strategy to attract capacity in areas of scarce or specialised skills;
-it provides a platform for South African providers to export services;
- -it creates leverage possibilities in the broader negotiations, particularly with respect to sectors that South Africa might wish to gain market access i.e. as a bargaining tool.
Regarding certainty in the regulatory environment, we already have this. We have a transparent policy and legislative framework for the registration of private providers – both local and foreign. Our quality assurance regime applies the same criteria and conditions for all providers.
With respect to the export of services, some of our institutions are active in the rest of Africa (and other parts of the world). We will have to ensure that we conduct ourselves within a principled framework that does not adversely affect our fellow Africans.
Finally, we certainly could use education as a bargaining tool. But given the relationship between education, and culture and society, we must be certain that we do not bargain away our values, our hard won independence and our ability to contribute to the global pool of knowledge and innovation.
24. I am pleased to report that officials from my Department have been having good discussions with their colleagues in the Department of Trade and Industry and are well on the way to developing a coordinated approach to GATS in education. I am also awaiting a report from the Council on Higher Education on the challenges of GATS and our options in this regard.
25. While those of us in education acknowledge that there may, in the long term, be enough flexibility within GATS to protect the integrity of our national regulatory frameworks within larger multilateral frameworks, we believe that, at this point, there is more to be lost than gained from making any commitments in education within the GATS. Instead, we favour the strengthening of our current activities designed to promote our role in the global environment. At the same time, there is a transparent framework to govern those foreign providers that choose to operate in South Africa.
26. In conclusion, I hope I have managed to convey to you some of the complexities of the matter before us. The unintended consequences and costs of trade liberalisation in education cannot be underestimated.
My proposal to you is that, at least for the moment, we do not make any commitments in the education sector. Furthermore, given the concerns in different parts of the world, we must ask whether there should not be a fundamental re-thinking of the inclusion of education in GATS. We must engage with GATS in a way that holds promise for our own agendas and needs. We must avoid at all costs a GATS in education that puts our education, our culture and our future in peril.
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