National regulatory factors

Limitations on market access for engineering consultancy services relate to visas and residence permits for foreign service personnel on the one hand and licensing requirements relating to services provision on the other. Because the delivery of engineering consultancy services generally depends on the presence of skilled personnel on the site of a project during most phases of the project life-cycle, national regulations influencing the international movement of labour are important factors affecting cross-border transactions by consulting engineers. Licensing requirements, for their part, influence the ability of engineering consultants to engage in direct cross-border trade as well as transactions involving the movement of personnel by stipulating qualifications and other criteria necessary for service providers.

As regards the movement of personnel, most countries have distinguished between short-term “business” visitors and temporary working residents, where the latter are usually those staying for several months or years to be employed by organizations (including foreign affiliates) in a host country. Engineering consultancy firms rely to a great extent on short-term visits made by small teams of staff, and regulations affecting visa and work permits for these groups may pose significant barriers to trade at arm’s length, with which these visits are generally complementary. Moreover, large international projects often require more permanent presence of engineering consultants on-site, and for that reason engineering consultancy firms will frequently need to set up local offices staffed on a longer-term basis. In those cases, the engineering consultancy staff will usually require more extensive work permits and residence permits, and issues related to national treatment such as restrictions on the rights of dependants and tax become important.

The current efforts to liberalize the international mobility of labour are mostly related to temporary migration, i.e. situations where the sale of services involves the temporary movement of service-providing personnel to the country of the project site and/or the owner (UNCTAD and World Bank, 1994, pp. 103-114). Various measures aimed at liberalization in this area have focused in particular on improving market access and national treatment for service providers relying on the movement of temporary workers. In general, however, the restrictions related to visa requirements and work permits for personnel with advanced technical skills such as engineers have traditionally been fairly minor, as such categories of occupations seldom require labour certification tests, and since they are usually only in the host country temporarily.

In the case of licensing requirements, the restrictions are greater, and most countries have maintained a strict regulatory framework with regard to licensing of foreign professionals. Often, the requirements of nationality, residency and certification of language proficiency will pose significant barriers to practising in foreign countries. There are also problems of limited diploma equivalency as the acquisition of a licence is dependent on the completion of an appropriate degree course. Foreign professionals are, however, often allowed to consult in a country as long as they do not provide services that are subject to the specifications of a special licence.8 Nevertheless, licensing requirements tend to constrain direct trade in engineering consulting services and to encourage forms of delivery which rely on local inputs, for example by the establishment of affiliates staffed with engineers licensed to operate in the host country or by the formation of alliances, consortia and the like with local engineering consultancy firms.

Liberalization of regulations in the areas of market access and, in particular, for facilitating cross-licensing in professional services have mostly taken place in connection with regional integration schemes (UNCTAD and World Bank, 1994, pp. 108-110). A useful illustration of this is provided by the efforts aimed at improving the mutual recognition of professional licensing of engineers and architects in the North American Free Trade Agreement.9 Similarly, the European Community has attempted to harmonize requirements for professional licences and to some degree even educational curricula among countries. Under the Single European Market Act, these efforts have shifted largely to a more pragmatic approach based on partial mutual recognition of qualifications.

In relation to national treatment, i.e. the ability of foreign service providers to offer their services on terms no less favourable than those of domestic suppliers, conditions vary considerably between countries. Usually, restrictions apply to civil rights (e.g. the right to vote), rights of dependants (e.g. the right of the spouse to be employed), overseas remittances, and various aspects of taxation and social benefits. These restrictions tend to increase the cost of using expatriate personnel in the host countries, in particular since engineering consultancy firms may have to compensate for such restrictions by higher remuneration. The barriers imposed by such restrictions are largely motivated by the interest in protecting domestic labour markets and economic interests, and apart from a large number of bilateral tax treaties, liberalization efforts have been confined mostly to regional initiatives (e.g. the Common Nordic Labour Market, the European Union).

It is important to recognize that so far there have been few means of replacing temporary movement of labour for the purpose of delivering engineering consultancy services. The use of advanced information and communication technologies has tended to be complementary to the dispatch of managerial, engineering and technical staff to project sites. The restrictions that exist internationally with regard to labour movement will thus remain important constraints on the ability to deliver design services abroad. Although technologies such as videoconferencing may

reduce the need for labour movement among countries with a high-capacity telecommunications infrastructure, engineering consultancy still requires a substantial staff presence on project sites. A gradual liberalization of visa and work permit requirements for highly skilled personnel will therefore improve the tradability of engineering consultancy services overall by enabling the delivery of services complementary to others that can be rendered from a distance along computer-communication networks, and, with the potential expansion of regional initiatives to provide mutual recognition of professional licences, the prospects for a more liberal environment for the export of engineering design services would be improved.