1. TRIMS - Trade Related Investment Measures
Presented by:
Anurag Sharma
MBA IB

2. TRIMS
The Agreement on Trade Related Investment Measures (TRIMs) are rules that apply to the domestic regulations a country applies to foreign investors, often as part of an industrial policy. The agreement was agreed upon by all members of the World Trade Organisation. The agreement was concluded in 1994 and came into force in
Came into effect from 1 Jan 1995
In favor of MNE
FDI grew but with restrictions by the host country

3. Restrictions Include local content requirements
Manufacturing requirements
Trade balancing requirements
Domestic sales requirements
Technology transfer requirements
Export performance requirements
Local equity restrictions
Foreign exchange restrictions
Remittance restrictions
Licensing requirements
Employment restrictions

4. Legal Framework It focusses on two Articles
The TRIMs Agreement contains statements prohibiting any TRIMs that are inconsistent with the provisions of Articles III or XI of GATT 1994
It focusses on two Articles
Article III (National Treatment)
National treatment of imported product, unless specified in other agreements
Subjects the purchase or use by an enterprise of imported products to less favorable conditions than the purchase or use of domestic products
Article XI (Quantitative Restrictions)
Prohibition of quantitative restrictions on imports and exports
Part of the general trend in textiles and agriculture to phase out the use of quantitative restrictions
The TRIMs Agreement is not intended to impose new obligations, but to clarify the pre-existing GATT 1947 obligations. Under the WTO TRIMs Agreement, countries are required to rectify any measures inconsistent with the Agreement, within a set period of time, with a few exceptions

5. Aims of the Agreement Desiring Take into account Recognising
to promote the expansion and progressive liberalisaiton of world trade and to facilitate investment, while ensuring competition
Take into account
trade, development and financial needs of developing countries, particularly least developed countries
Recognising
certain investment measures can cause trade- restrictive and distorting effects

6. Notification
Governments of WTO members, or countries entitled to be members within 2 years after 1 January, 1995 should make notifications within 90 days after the date of their acceptance of the WTO agreement.

7. India’s notified TRIMs
TRIMs Agreement India had notified three trade related investment measures as inconsistent with the provisions of the Agreement:
Local content (mixing) requirements in the production of News Print,
Local content requirement in the production of Rifampicin and Penicillin – G, and
Dividend balancing requirement in the case of investment in 22 categories consumer goods.

8. Transition periods Transition periods of
two years in the case of developed countries
five years in the case of developing countries
seven years in the case of LDCs
from the date of entry into force of the Agreement (i.e. 1st January 1995) are provided in the Agreement.
LDCs lack the capacity to identify measures that are inconsistent with the TRIMs agreement and hence are unable to meet the notification deadline.

9. Present Status
The transition period allowed to developing countries ended on 31st December, However, Art. 5.3 provides for extension of such transition periods in the case of individual members, based on specific requests. In such cases individual Members have to approach the Council for Trade in Goods with justification based on their specific trade, financial and development needs.
Accordingly 9 developing countries (Malaysia, Pakistan, Philippines, Mexico, Chile, Colombia, Argentina, Romania and Thailand) have applied for extension of transition period in respect of certain TRIMs which had been notified by them. Examination of their requests is underway in the Council for Trade in Goods of WTO

10. Implementation Difficulties
Difficulties in identifying TRIMs that violate the agreement
Difficulties in identifying alternative policies to achieve the same objective
Difficulties in accounting for non-contingent outcomes such as the financial crisis in Asia and Latin America
Difficulties in meeting the transition period deadlines
LDCs lack the capacity to identify measures that are inconsistent with the TRIMs agreement and hence are unable to meet the notification deadline.
The prohibition of "local content" requirement.
However the Agreement, as it is biased towards the interests of MNEs
FDI has not yielded the benefits anticipated by hosts
Pros:
Reduce imports
Increases balance of payments benefits from FDI
Designed to reduce competition with domestic producers
Cons:
Reduce the benefits of FDI to hosts
Hosts try to impose restrictions on the activities of MNEs so as to capture more of the benefits
Biased towards the interests of MNEs
Undesirable social impacts
Local content requirements - industry will fail to improve its international competitiveness
MNE wants to reduce tech diffusion and wants to maximize its profit by making its value chain efficient.

11. Issues related to the operation of the Agreement
Art. 4 provides that a developing country Member shall be free to deviate temporarily from the obligations arising out of this agreement to the extent and in such a manner as Art. XVIII of GATT 1994, the Understanding on the Balance of Payments Provisions of GATT 1994, and the Declaration on Trade Measures Taken for Balance of Payments Purpose adopted on 28th November, Issues related to operationalization of this provision would be raised by developing countries.
The question of transition period of five years for developing countries has ended before the review of the operation of the Agreement. The issue of transition periods and the need for general exemption, rather than based on individual request, is a matter of concern for developing countries;
Art. 5.3 which provides for request for extension of transition period on individual basis, stipulates that such Members should demonstrate particular difficulties in implementing the provisions of the Agreement. This leaves the decision to the discretion of WTO Members.
The role of the Committee on Trade–Related Investment Measures has so far been confined to monitoring the notification requirements. A changed role could be considered.

12. Issues related to the coverage of the Agreement
The present agreement prohibits trade related investment measures that are violative of Art. III and Art. XI of the General Agreement on Tariffs and Trade. Local content requirements, trade balancing requirements, and export restrictions are prohibited. The efforts of developing countries would be to reduce the prohibitions in view of the experience of these countries based on the operation of the agreement. Developing countries (the Like Minded Group) have submitted certain proposals in this regard in the context of review of implementation of the Uruguay Round Agreements.

13. Thank you!