8th April 2008

NEW ZEALAND - CHINA FREE TRADE AGREEMENT: IMPLICATIONS FOR EDUCATION EXPORTERS

What will change, if anything, for education exporters as a result of the FTA Agreement? 

The short answer for the vast majority of education exporters is that very little will change in a business environment sense as a result of the Agreement.

China’s July 2005 Education Commitments to the World Trade Organisation

In July 2005, the People’s Republic of China revised its offer of commitments to the World Trade Organisation under the General Agreement of Trade in Services (GATS).   These commitments included the following undertakings relating to market access to China by foreign education providers:

• Cross Border Mode of Supply (distance education and internet-based): “Unbound” – meaning that the Chinese have not entered any commitments.  In practical terms, this means they are free to set whatever rules they like for foreign providers of distance and internet based education.

• Consumption Abroad (recruitment of students in China that will be educated abroad): “No Limitations, but excluding national compulsory education” – meaning that all foreign education providers in all sectors apart from national compulsory education are free to access the Chinese market and recruit students without restriction.   This mode of supply is currently of greatest interest to NZ’s education exporters.        

• Commercial Presence (establishment of a commercial education presence in-country, such as a sub-campus or joint venture): “Majority ownership permitted for Joint  Schools” – meaning that the Chinese have not entered any commitments relating to commercial presence apart from allowing majority foreign ownership.

• Movement of Persons (fly-in/fly-out teaching): “Unbound, but a foreign education provider may enter China to provide education services when invited to do so or employed by a Chinese education institution” – meaning that providers can fly-in/fly-out when invited.

China’s April 2007 Education Commitments to the New Zealand/China Free Trade Agreement 

The New Zealand-China Free Trade Agreement that was signed yesterday mirrors the above Mode of Supply undertakings by China.  In other words, there is no change/gain for New Zealand’s education exporters in China’s Market Access and National Treatment provisions. 

However, the Agreement notes the following additional comment.  This comment refers to the JSJ website that the Chinese Government maintains for consumer guidance in offshore education.  New Zealand’s State were already listed on the website, so the gain from the FTA negotiation is the listing of six degree conferring Private Training Establishments: 

• “China will list on its Ministry of Education “Study Abroad” website www.jsj.edu.cn the eight New Zealand universities, the twenty Institutes of Technology and Polytechnics, Te Wananga o Aotearoa, Te Whare Wananga o Awanuiarangi and Te Wananga o Raukawa, and the following six degree conferring Private Training Establishments duly approved and accredited by NZQA: Auckland Institute of Studies at St Helens, International Pacific College New Zealand, New Zealand College of Chiropractic, Pacific International Hotel Management School, Te Kura Toi Whakaari o Aotearoa: New Zealand Drama School, Whitecliff College of Arts and Design.

• Both Parties will jointly initiate work at the official level on evaluation of the quality assurance criteria for qualifications which include a distance delivery component.”

There may be in other schedules additional (horizontal) commitments that create an enabling environment in terms of profit repatriation, and ENZ will seek additional information on this.

Most Favoured National Status

Perhaps the most significant item in the FTA is that the education sector is excluded from winning “Most Favoured Nation (MFN)” status in the Agreement.  MFN is a progressive liberalisation ratchet clause that would enable New Zealand to free-ride on any future more liberal commitments that China gives to other countries. 

In other words, if NZ had won MFN status in the agreement, New Zealand’s education exporters would stand to benefit in future by free-riding if China made more liberal commitments on education in a free trade agreement with, say, Australia, USA or Thailand.    

Summary

In summary, the education schedule of the New Zealand-China Free Trade Agreement is a replication of China’s 2005 GATS commitments to the World Trade Organisation, with no gains in education specific commitments for New Zealand’s education exporters. 

The failure to achieve Most Favoured Nation status for New Zealand’s education providers is disappointing, so New Zealand’s education exporters will be prevented from free-riding on any future liberalisation that China offers other countries.

On the upside, six Private Training Establishments are listed on the JSJ website, and the agreement appears to be generating positive political capital for New Zealand with the Chinese Government, and New Zealand is enjoying a short term boost to its profile within mainland China. This will assist interest in the current ENZ China specific generic promotion campaign ‘New Zealand Through My Eyes’ Blog competition involving Chinese students.

Next Steps

The Agreement is locked in, so unfortunately there is no opportunity to revisit the education commitments.  However, the Agreement will shortly go before a Parliamentary Select Committee.  Education New Zealand will use this opportunity to express disappointment that the agreement does not hold greater gains for education exporters.  We will also be making this point to Government Ministers.     

Attachment

Attached for information and reference is a copy of Education New Zealand’s 2004 Submission to the New Zealand Government with the list of ten trade barriers facing education exporters. Also attached is an updated stats summary showing the current size of the industry and the relative performance of leading markets.

Submission on FTA with China 2004
Student Numbers April 2008

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