Trade Related Investment Measures Agreement - UPSC Notes (2024)

The agreement on Trade-Related Investment Measures or “TRIMs” acknowledges that investment measures can control and twist trade. This states World Trade Organisation members might not apply any measure that differentiates or leads to quantitative restrictions, both of which disobey any fundamental WTO rules.

A list of restricted TRIMS is a part of this agreement. The TRIMS Committee looks after the operation and execution of this agreement and allows members the chance to consult on any appropriate matters.

Agreement on TRIMs resulting from Uruguay recognises that certain investment measures may cause restrictive effects on international trade in goods.

Objectives of Trade-Related Investment Measures

TRIMs believe that there is a strong connection between trade and investment. The goal oftrade-related investments measuresis 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.

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The TRIMs agreement has directly restricted the following.

1. Local Content Requirement

Local content requirement is the measure that if a developed country wants to trade their products in a developing country. Then the developing country wishes to agree on that deal if and only if it uses one of the domestic items on their product. It means that the growth of domestic products will increase.

For example, suppose a mobile brand wants to sell its products in India. However, India agrees if only the brand uses the battery made in India. If that mobile brand agrees to this agreement, the value of ‘made in India’ batteries will increase gradually, which is India’s benefit.

However, that mobile brand doesn’t get proper profit because of purchasing those domestic products or using those products. In other words, a developing country is restricting developed countries from trading their products.

1. Trade Balancing Requirements

Trade balancing measures require that an enterprise’s purchase of imported products is equivalent to the quantity or worth of exported products. In simple words, someone from India has a business of desi ghee, and they export it in foreign.

However, they want to expand their business and import foreign cheese. Then, Indian government gave them the condition that they could import the same amount of foreign cheese as the amount of desi ghee they export. Basically, balancing the import and export amount of product or trade is called Trade Balancing.

However, the government is restricting the individual as per the TRIMs agreement.

1. Foreign Exchange Restrictions

These include measures restricting importation by limiting access to foreign exchange.

1. Domestic Sales Requirements

By using domestic sales requirements, many nations restrict the export of domestic products and distort trade. Because of this, the value of those products gradually decreases. As a result, the production of those products is highly available in the market.

Developing countries are permitted to retainTrade-Related Investment Measuresby virtue of the economic development needs of developing countries. In TRIMs, some restrictions are overlooked for the developing countries’ economic needs.

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