Universities must fight a multilateral trade deal that could kill public education, even if the government is backing it.

Last year, the Department of Trade and Industry hosted the Knowledge 2000 conference on the knowledge economy. The message from prime minister Tony Blair and secretary of state for trade and industry Stephen Byers was clear: the government would promote open markets to improve Britain's competitive position in the knowledge economy.

New Labour's vision of a liberalised global economy is about to be enshrined in a multilateral trade agreement called the General Agreement on Trade in Services (Gats). National governments have submitted their proposals for the first phase of negotiations, which will begin in Geneva and will culminate in the World Trade Organisation round of talks to be held in March. Curiously, few seem to know anything about Gats: there have been no parliamentary debates, no ministerial clarion calls and only one or two articles in the mainstream press. Why hide the beacon under a bushel?

Services form the largest sector of national economies. They account for more than 60 per cent of world production, 71 per cent in the United States. Given manufacturing's decline, they hold the key to economic growth and profitability. In 1998, the US exported $1.3 trillion worth of services. Education alone, as a global industry, tops $1 trillion in public spending.

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Gats marks a historic development in global economic liberalisation. It was agreed under the General Agreement on Tariffs and Trade in its Uruguay round and signed in Marakesh in 1994. The following year, the WTO replaced the Gatt, and Gats became a part of its agenda, providing "legally enforceable rights to trade in all services". Renato Ruggiero, the former WTO director-general, speaking in Brussels in June 1998, warned: "I suspect that neither governments nor industries have yet appreciated the full scope of these guarantees or the full value of existing commitments."

Gats covers 160 service sectors, including healthcare and education. The WTO's 138 member countries are committed to successive rounds of negotiations "with a view to achieving a progressively higher level of liberalisation". The process has three key principles. First, member countries cannot discriminate against trading partners who are also WTO members. Second, member countries must treat foreign companies the same as domestic companies. Third, member states must ensure equal access to markets by eradicating anti-competitive practices. In education, there are many such practices: limitations on the mobility of students, refusal to recognise foreign or corporate institutions and to give permission to award qualifications, discouraging investment abroad. Even the financing of universities through national funding agencies could be viewed as a discriminatory, monopoly practice.

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DTI and European Union officials insist that Gats will not affect public services such as education because it exempts "services provided in the exercise of governmental authority". But the agreement describes such services as those that are "supplied neither on a commercial basis, nor in competition with one or more service suppliers". It is a description that no longer fits ÖйúAƬ in Britain. Student fees and the increasing use of private finance contracts have contributed to the commercialisation of ÖйúAƬ.

Byers is an enthusiast. "Universities must become an integral part of the economy, developing stronger links with business and commercial applications for their research." The ÖйúAƬ Funding Council for England, which describes ÖйúAƬ institutions as "private sector bodies", has a private finance unit. It promotes private finance initiatives and private-public partnerships in ÖйúAƬ "as procurement methods with potential to deliver better value for money". In a restricted document, the WTO describes the UK process in ÖйúAƬ as "a movement away from public financing and towards greater market responsiveness, coupled with increasing openness to alternative financing mechanisms, (which has) led universities in new directions, balancing academic quality with business management". Such reforms create the conditions and desirability for more liberalisation of services, argues Sergio Marchi, chair of the WTO council for trade in services, which oversees the Gats talks.

The process is already under way, particularly in the US, where for-profits universities are attracting Wall Street investment, and big conglomerates of universities are acting as brokers for distance-learning courses. Corporate education is growing with the likes of Cisco Systems Networking Academy. A number of British universities are copying their US counterparts and forming global consortiums. Universitas 21 is an incorporated company of 18 universities in ten countries, among them Nottingham, Glasgow, Edinburgh and Birmingham. It describes its core business as the "provision of a pre-eminent brand for educational services". Its aim is to "leverage the reputation, resources and experience of its members on behalf of corporate partners". Industry is increasingly supplying its own education enterprises, such as BAE Systems's Virtual University, for employees.

Gats implies a commitment to the liberalisation of public services. There are obstacles, however. Countries retain their national sovereignty and are free to devise domestic regulations in the pursuit of public policy objectives. The voluntary nature of Gats had originally been a means of checking corporate zeal. But since the Seattle WTO summit there has been intense lobbying to remove this freedom and to strengthen the "pro-competitive" disciplines of the agreement. The EU and the US agreed in their London summit of May 1998 to "exchange views on ways to achieve the highest possible level of liberalisation in the framework of the Gats 2000 process" and also to develop "additional disciplines to strengthen market access and guarantee that services can be supplied in a pro-competitive environment". Mike Moore, WTO director-general, has described removing restrictions on market access and national treatment as the priorities of the Gats talks. The DTI has promised that "everything is on the table" during the negotiations.

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Marchi has set up a working party on domestic regulation, which seeks to ensure that domestic regulations do not act as barriers to trade in services. Its intention is to tighten the so-called necessity test, the key mechanism by which the WTO can legally enforce market access. To achieve this, the working party wants to make the regulations pro-competition and applicable to all services, not simply to the ones put forward by member states. If this change is implemented, the WTO's dispute settlement body could require states to deregulate their service industries if challenged by a corporation through its government. A number of disputes already settled suggest that the Gats could be used to attack every conceivable form of domestic regulation that directly or indirectly prohibits or hinders competition.

Universities are being drawn into the growing global information market. Gats could destroy the public interest in policy-making in services such as education and end the ideal of a democratic education system run by accountable public authorities.

The policies of new Labour have created the conditions for the commercialisation of British ÖйúAƬ. The increase in government regulation and prescription has brought universities into closer conformity with the needs of business. The Quality Assurance Agency's quality assurance and proposed benchmarking of subject areas provide the necessary centralised control for the privatisation of provision. Cuts in funding have precipitated a drive for revenue and competition between universities for new markets, a sharp reduction of unit costs and a rise in productivity gains. This commercial onus can conflict seriously with disinterested scholarship.

Faced with this profound economic and ideological assault, the universities have failed to engage forcefully in public policy debates. They have not stood up for what they represent and for their role in the age of mass ÖйúAƬ.

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Jonathan Rutherford is a reader in cultural politics at Middlesex University.