Policy Analysis No. 720

Liberalizing Cross-Border Trade in Higher Education: The Coming Revolution of Online Universities

Recent developments in higher education, with leading institutions starting to offer courses online, suggest that the Internet is going to disrupt this industry, just as it has already disrupted the music and book industries and many others. We are entering a period of experimentation with new business models for higher education, with MOOCs (massive open online courses) the most prominent among these. At this early stage, it is not clear what the final product will look like. But regardless of the specific form the new industry will take, there is likely to be more competition, lower costs, and higher quality. This is great news for consumers of higher education.

However, some existing institutions may fare badly in this transition and are likely to call for government support. This would happen even if higher education were exclusively a national market. But demands for government protection will be even stronger where foreign online competition is hurting traditional domestic institutions. With education now moving online, it has become tradable across borders like never before. Until now, trade in education was fairly small in scope, limited mostly to students studying abroad and a few foreign branch campuses. The growth of online education will make international trade in higher education services far more common. And in response to this increasing trade, there are likely to be complaints about the impact of foreign competition on domestic institutions.

We must resist these calls for protection. The great beneficiaries of the coming online revolution in higher education are people all around the world looking for access to better educational opportunities. We should embrace this new period of innovation in higher education, not try to hold it off.

One way to promote free trade in higher education is with international trade agreements. Through these agreements, governments can make commitments not to discriminate against foreign online higher education programs. The past few decades have seen great progress in bringing down tariffs and other protectionist trade barriers through trade agreements. In order to bring the benefits of international competition to an important sector of the global economy, we should apply that same model to trade in higher education services.

Simon Lester is a trade policy analyst with Cato’s Herbert A. Stiefel Center for Trade Policy Studies.