The Education Industry's WTO Commitments

A more liberal educational service trade was a promise China made upon its entry into the World Trade Organization (WTO). WTO divides the service trade into 12 categories -- one of them being educational service.

According to the WTO "General Agreement on Trade in Services" (GATS), apart from educational activities completely subsidized by the government, all educational programs that charge tuition fees and have commercial purposes fall under the educational service trade; all WTO signatory countries are entitled to compete to offer educational services and organize various educational and training activities via tele-education, launching wholly foreign-owned or joint-venture schools, relaxing policies for studying abroad and the free flow of professionals.

WTO rules stipulate that "educational-service" related activities have nothing to do with tariffs and trade barriers. The aim of such activities is to encourage member countries to reform restrictive educational laws and facilitate the educational service trade.

The educational service trade is carried out in four ways:
(1) Cross-border supply. Educational service suppliers in a member country offer educational services to consumers in other member countries through the Internet or by correspondence.
(2) Consumption abroad. Educational service suppliers in a member country offer educational services, such as studying and receiving training abroad, to customers from another member country.
(3) Commercial presence. Educational service suppliers from a member country open commercial or professional institutions, such as schools, in another member country.
(4) Flow of natural persons. Educational service providers from a member country enter into another member country to provide educational services, such as foreign teachers now teaching in China, or Chinese teachers now teaching abroad.

Education is an issue that has a bearing on the state's sovereignty, public morals and inheritance of national culture. All countries are very cautious in opening the education sector, especially elementary education. Most countries now provide non-commercial compulsory education where available space is limited. With the exception of Mexico, Sweden and New Zealand, Western Europe, Canada, Japan and the United States only opened their education market partially. The US boasts of the best educational system in the world although it only opened "adult education" and "other education services" to foreign educational service providers.

In relation to educational services, China's WTO-entry promises fall into four fields:
(1) China makes no promises to open its national compulsory education and special education services, such as military, police, political and Communist Party of China Party school education.
(2) China imposes no limitations on sending students abroad for studying and training, nor on receiving foreign students.
(3) China promises to partly open its higher education, adult education, high school education, preschool education and other education services. Foreign educational service suppliers are allowed to launch joint educational institutions or joint schools in China, with foreign majority ownership permitted. Foreign education service suppliers are forbidden to offer education services independently, and joint schools in China must observe the "Regulations on Sino-Foreign Joint Schools."
(4) Foreign individual educational service suppliers may enter China to provide educational services when invited or employed by Chinese schools and other educational institutions on the condition that they possess a Bachelor's degree or above and an appropriate professional title or certificate, including two years of professional experience.

Although China has promised foreign education institutions access to its educational service market via a "commercial presence" and "majority ownership," this does not necessarily mean foreign educational institutions can violate China's existing non-profit principle for the educational industry. China only promises "market access" and a guarantee of "management rights."

Foreign educational institutions launching non-profit schools and other educational institutions in China may enjoy tax concessions or make moderate profits by organizing lawful activities; the profits, however, must be used to further their educational servicesin China and cannot be used as economic returns or distributed as bonuses to the administrative and teaching staff. To ensure people from all walks of life receive equal access to education, the non-profit principle is widely observed in WTO member and non-member countries.