October 24, 2000
Translation: FTAA Secretariat
COMMITTEE OF GOVERNMENT REPRESENTATIVES ON THE PARTICIPATION OF
CONTRIBUTION IN RESPONSE TO THE OPEN INVITATION
Colegio de Ingenieros de Chile A.G.
Professional engineering body (as named
Proposal on engineering services
1. Initial considerations
Given the considerable dynamism the service sector as a whole in our
continent has displayed in recent years, the College of Engineers
and the Association of Consulting Engineers recognize that the
engineering sector in particular represents high potential for
growth and hemispheric projection. This needs to be fostered through
an institutional framework based on respect for fair trade practices
and transparent market rules, together with reciprocity in
legislation and regulations, as well as in rights and obligations.
The integration process needs to be nurtured in an institutional
framework that provides clear and transparent rules for carrying on
activities, and encourages regionwide processes of business
complementation. This requires a coordinated effort by member
States, aimed at correcting or eliminating factors that could
undermine the competitiveness of engineering firms in the region.
Despite this sector’s significant growth potential, trade in
engineering services has certain characteristics that reduce its
competitiveness compared to trade in goods. These peculiarities can
be grouped under the following headings:
• Obstacles to freedom of travel and registration of professional
• Problems arising from the need for this type of export to be
accompanied by the provision of financial services, insurance, etc.
• Domestic barriers that discourage international trade in services.
a) Obstacles to freedom of travel and registration of professional
people and firms
To overcome these problems an agreement needs to be reached whereby
the parties, through their respective national organizations in each
country, standardize criteria for recognizing university degrees,
professional diplomas and specialties, including granting
In addition, a joint agreement needs to be established to
standardize and streamline procedures for validating and recognizing
degrees; and temporary professional registries need to be set up.
There have been cases of discretionary action in the granting visas
and work permits, as well as general travel problems, such as the
treatment of visas and work permits for family members of
With regard to customs-type restrictions, the existence of customs
duties on professional documents, project models, training
materials, publications, software and other tools needed to provide
services to clients, represents a barrier to free trade in
b) Common procedures for temporary entry of goods
Along with freedom of travel for professional people, common
procedures need to be defined relating to the temporary entry of
goods (equipment/tools) for carrying out consulting services.
The procedure to be defined should include exemption from tariff
duties, validity of insurance policies, rapid customs clearance,
c) Problems of information transparency
Service providers from FTAA-member countries should have transparent
access to local engineering regulations in each member country, and
on the specific treatment provided to the foreign operator,
including conditions of market access, legal, institutional, tax and
labor market issues. Each member country should provide a complete
listing of the legal and regulatory provisions governing this type
d) Tax problems
For countries where no specific legislation exists to avoid double
taxation, the payment of taxes in the country receiving the services
undermines equity in competition and national treatment. It can also
be seen that value added tax (VAT), in practice serves as an
implicit residence requirement given that usually only local firms
have access to the respective deductions, so the concept of national
treatment is ruled out.
Clauses should be introduced to avoid double taxation, using as a
basis the bilateral agreements currently operating between several
countries of the region. In the particular case of VAT, a mechanism
needs to be devised for the return, or eventual exemption from VAT
payment, for non-local firms from an FTAA-member country.
e) Duplication of pension and health costs
To avoid this problem, international coverage should be allowed for
pension funds, through a correspondent system between the respective
institutions, on health, pension saving and workplace accidents.
Alternatively, the payment of origin country pension contributions
should be allowed where the wages of transferred professional people
f) Market access requirements
Restrictions on the type of business structures allowed should be
lifted; i.e. requirements to open branches and form consortia in the
country where the service is provided should be eliminated, as well
as the requirement to physically and legally establish a firm in
that country, and that consortia should be led by local partners.
Apart from this, requirements on the exclusive employment of
national staff and professionals, or quotas thereof within staffing
totals, should be eliminated, as should the use of quotas limiting
transfers within firms.
Governments should agree to eliminate preference clauses in public
bidding processes, both national and international, that exclude
firms from FTAA-member countries. Where such preferences exist, they
should automatically be extended to all member-country firms.
g) Rules of origin
Rules of origin should be established for service provision, in
order to prevent service providers from non-member countries
benefiting from FTAA liberalization agreements. Otherwise, the
prospects for Chilean engineering, and maybe even its very
existence, would be put at risk in the medium run.
h) Intellectual property
Special regulations should be established to protect the
intellectual property contained in civil works, technologies,
designs and processes. In addition, the treatment of the
intellectual property in relation to principles, regulations, record
systems, judicial procedures, responsibility and sanctions, should
adhere to and be consistent with international standards on this
i) Responsibility for work completed
A maximum period of validity should be established with regard to
responsibility for completed civil work once a project is concluded,
in the event that the engineering company concerned does not have a
physical presence in the country where the service was provided.