Union leaders have warned that including universities in the General Agreement on Trade in Services could lead to the "McDonaldisation of higher education".
Member countries of the World Trade Organisation are negotiating which service sectors will be included in Gats. Several countries are believed to have already offered to open higher education to their trading partners. Talks are due to be concluded in 2004.
Brian Everett, assistant general secretary of the Association of University Teachers, said: "If the sector is opened up to private companies, many institutions - particularly those that may fail in the government's pro-free-market drive - could be gobbled up by US firms, which would then want to use the institutions to sell their goods and services."
The warning followed a report by the student action group People & Planet, Trading it Away - How Gats Threatens UK Higher Education . This was sent last week to vice-chancellors, the Department for Education and Skills and the Department of Trade and Industry, which represents the UK in Gats talks. It says all privately funded higher education was already committed to Gats.
Should Gats be applied to the whole sector, it says, UK institutions could find themselves competing with for-profit overseas higher education providers. This could lead to less public funding for UK higher education, which could in turn threaten the future of "expensive" courses and departments and could mean higher fees for students. University activities could become more commercialised, the report says.
The government has said that all public services are exempt from Gats, but the report questions such reassurances. "It seems more likely that UK higher education will become an important bargaining chip in these high-stakes negotiations," it says.
It wants the DFES to assess what impact Gats will have.
Paul Mackney, general secretary of lecturers' union Natfhe, said: "The debate is taking place behind closed doors, conducted by trade ministers and officials, not those responsible for education, let alone those working in the sector."