Q. With reference to Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct?

(1) Quantitative restrictions on imports by foreign investors are prohibited.
(2) They apply to investment measures related to trade in both goods and services.
(3) They are not concerned with the regulation of foreign investment.

Select the correct answer using the code given below:

  • 1 and 2 only
  • 2 only
  • 1 and 3 only
  • 1, 2 and 3

Answer: (c) 1 and 3 only

Agreement on Trade-Related Investment Measures (TRIMs)
  • The Agreement on Trade-Related Investment Measures (TRIMs) are rules that are applicable to the domestic regulations a country applies to foreign investors, often as part of an industrial policy.
    • The agreement, concluded in 1994, was negotiated under the WTO’s predecessor, the General Agreement on Tariffs and Trade (GATT), and came into force in 1995.
    • The agreement was agreed upon by all members of the World Trade Organization.
    • Trade-Related Investment Measures is one of the four principal legal agreements of the WTO trade treaty.
  • TRIMs are rules that restrict preference of domestic firms and thereby enable international firms to operate more easily within foreign markets.
    • Policies such as local content requirements and trade balancing rules that have traditionally been used to both promote the interests of domestic industries and combat restrictive business practices are now banned.
  • Objectives of Trade-Related Investment Measures
    • TRIMs believe that there is a strong connection between trade and investment. The goal of trade-related investments measures is to give fair treatment to all investing members across the world.
    • As the TRIMs deal says, members have to inform the World Trade Organization (WTO) council to buy and sell various services and goods of their current TRIMs that are incompatible with the agreement.
  • Main Features of TRIMs
    • It only applies to investment measures related to goods trade.
    • This doesn’t apply to service trade.
    • It doesn’t regulate the entry of foreign industry or investment.
    • It is about the discriminatory treatment of imported/exported products.
    • Concern measures were applied to both foreign & domestic firms.
    • A transition period of 2 years in the case of developed countries, 5 years in the case of developing countries and 7 years in the case of LDCs, from the date this agreement came into effect, which is 1st January 1995.
  • The main obligation contained in this agreement is that members shall not apply any trade-related investment major that is inconsistent with Article III (national treatment) or Article XI (general elimination of quantitative restrictions) of the GATT.