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Higher Education Shows a Big Trade Surplus for the United States

Recent figures show that the United States posted a healthy trade surplus of $12.6 billion in the education sector. Despite the effects of the recent worldwide economic slowdown, a modest increase in this vital sector is foreseen.

by John Siegmund

U.S. receipts from international students studying in the United States reached $17.8 billion in 2008, the highest amount yet recorded. Those U.S. exports come primarily from travel by international students, who then pay tuition, fees, and living expenses to U.S. institutions. The Department of Commerce estimates that the $17.8 billion represents 40 to 45 percent of the global market for education services. Thus, the United States is very competitive in education services trade. In 2008, expenses from U.S. students studying abroad were about $5.2 billion, which yielded a positive trade balance of about $12.6 billion.

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stock photo of U.S. university scene, with foreign students in evidence
(istock)

 

Long-Term Increases

From 1997 to 2008, there have been continual increases in U.S. receipts—that is, exports—and nearly continual increases in the trade balance for education services (see chart). Some of the increases seem to occur because of changes in tuition and fees as well as in the number of international students. The trend toward higher tuition may harm U.S. competitiveness in the long run.

Tuition and fees paid by international students are valuable revenues for public and private institutions. At public institutions, international students typically pay out-of-state tuition.

The number of international students currently enrolled in U.S. higher education institutions is impressive. In 2007/08, 623,805 international students attended U.S. institutions of higher learning, which is a 7 percent increase over the preceding school year. For the ninth year in a row, the United States has had more than half a million foreign students.

 

U.S. Trade In Education, 1997 - 2008

 

Five countries—four from Asia—accounted for almost half (49 percent) of all international students. India, with 94,563 students, and China, with 81,127, came in first and second.

A Vibrant Industry

The Department of Commerce estimates that the worldwide market for international students is about $35 billion. The estimated U.S. market share is possibly as high as 45 percent. In 2006, the Organization for Economic Cooperation and Development found that the United States attracted 22 percent of international students worldwide.

According to information published by the Council on Higher Education Accreditation, there are 7,006 degree-granting and non-degree-granting institutions in the United States. Of that number, 4,488 (or 64 percent) grant associate’s degrees and above. Between 1995 and 2005, enrollment in the degree-granting institutions increased from 14.3 million to 17.5 million, representing a 22.6 percent increase. International students represented about 3 percent of students enrolled in U.S. higher education.

Effects of Recession

That bright picture of U.S. trade in education services is somewhat dampened by the recent recession, which has eroded the economic position of U.S. education institutions by reducing the value of their endowments and the level of state funding of public institutions. Although limited data for the first quarter of 2009 reveal no decline in U.S. revenues from international students, complete data on the number of international students enrolled in the 2008/09 academic year will not be available until late 2009.

For community colleges, the recent economic recession has led to an increase in enrollment, especially of laid-off workers who are seeking retraining. The lower cost and the ability for students to transfer to four-year colleges have appealed to cost-conscious students and families. That flexibility is not available in many countries competing with the United States for foreign students. Community colleges, however, have not received additional funds from state and county governments, which face budget shortfalls.

Outlook for Modest Growth

The worldwide economic crisis contributes to the complexity of predicting future trends in the number of international students coming to the United States. Despite recent success in attracting foreign students, the United States will continue to face stiff competition in the international market from such countries as Australia, Canada, and the United Kingdom. Yet, given the sizable increase in foreign students coming to the United States in 2007/08, a modest rate of growth is likely.

John Siegmund is an international trade specialist with the International Trade Administration’s Manufacturing and Services unit.