Australian academics are alarmed that a free-trade agreement signed last week with the US could lead to American universities establishing operations in Australia and receiving the same benefits as local institutions.
Under the agreement, American universities would be able to compete with their Australian counterparts for both staff and students, and their students could be eligible for the federal government's loans scheme.
Although full details of the free-trade agreement have not been released, and may not be for months, the National Tertiary Education Union fears that American universities operating in Australia will have to be treated as favourably as local providers.
Ted Murphy, the union's deputy general secretary, said that the agreement did exclude government subsidies and grants for all services. While foreign institutions would not be entitled to receive government funding, they could demand to be treated the same as Australians in receiving land grants to set up their campuses.
Mr Murphy wrote a submission on the agreement for the Australian Council of Trade Unions. He said that preferential treatment such as allowances for local students could be in violation of the agreement. This could also result in an international jurisdiction covering disputes if foreign institutions were to set up campuses in Australia.
Australia is a signatory to the General Agreement on Trade in Services (Gats), which allows private foreign institutions to operate in Australia if they meet accreditation and quality standards.
But Australia reserved the right to treat local public institutions and their students more favourably than foreigners.
Mr Murphy said the American negotiators had asked that this exemption not be included and he believed Australia had agreed.
He said Australia's free-trade agreements with Singapore and Thailand did provide for preferential treatment for public institutions in this country.
"We do know that Australia has given a commitment to treat American institutions as favourably as locals but we don't know how far that extends," he said. "Under Gats, that applies only to private providers."
Australian vice-chancellors are more optimistic about the consequences of the agreement. They believe that it could lead to increased American investment in Australian research while also offering the country's universities greater access to US funding.
Mutual recognition of degrees and other tertiary qualifications could also boost mobility among university graduates. But the agreement might expose Australian institutions to American litigation and its associated costs, the Australian Vice Chancellors' Committee said.
The federal government initially claimed that the agreement would provide A$4 billion (£1.7 billion) in benefits to the Australian economy. But treasurer Peter Costello refused to be specific.
Mr Costello said that Australia was gaining enhanced access to a market of some 300 million people.