Trade Related Investment Measures

NARESH KUMAR(118913) PAWAN KUMAR(118914)

What is a TRIM?
The Agreement did not define TRIMs, but

provided an illustrative list . Examples of TRIMs are;

Local content requirements where governments require enterprises to use or purchase domestic products. Trade balancing measures where governments impose restrictions on imports by an enterprise or link the amount of imports to the level of its exports - Foreign exchange balancing requirements where an enterprise has the level of imports linked to the value of its exports in order to maintain a net foreign exchange earning.
The lack of a precise definition means that

The TRIMS Agreement Structure Content

Legal Framework
The TRIMs agreement does not provide any

new language
It focuses on

two Articles that were identified in a previous case under the GATT
Article III (National Treatment) Article XI (Quantitative Restrictions)

Structure
Nine Articles and an Annex Art I - clarifies that the agreement applies

only to trade in goods Art 2 - applies Articles III or XI and refers to the Annex list Art 3-4 deal with general exceptions and Art XVIIIb Art 5 Notification and transition periods Art 9 - Review

TRIMS EXTENSION REQUESTS (Annexure 2)

Argentina Chile Colombia Egypt

(Annex 2) TRIMS EXTENSION REQUESTS

7 years to 31 December 2006 1 year to 31 December 2001 (originally to 31 May 2001) Automotive industry 7 years to 31 December 2006 5 years to 31 December 2004

Exemption from customs duties for CKD/SKD auto units when off-set by exports Imports subject to absorption of domestic products Reduced customs duties on imported components incorporated in domestic assembly Local content policy on motor vehicles, target of 60% for cars and motorcycles and 45% for commercial vehicles Measures relating to automotive industry and auto transportation vehicles Reduced customs duties on imports of raw material, components and parts for domestic assembly Local content and foreign exchange requirements for cars, motorcycles and commercial vehicles Companies with foreign capital of US$560 million subject to integration value degree of 60% and export of minimum 50% of annual value of production Local content requirement for production of milk and dairy products

Malaysia

2 years to 31 December 2001

Mexico Pakistan

4 years to 31 December 2003 minimum of 7 years from January 2000 five years to 31 December 2004

Philippines

Romania

five years to 31 December 2004

Thailand

five years to 31 December 2004

Aims of the Agreement

Desiring to promote the expansion and progressive liberalization 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 Recognizing certain investment measures can cause traderestrictive and distorting effects

What is the TRIMS Agreement?

The Trade Related Investment Measures

Agreement came into effect on 1 January

1995

as part of the Uruguay Round negotiations. It addressed investment measures that were trade related and which violated Article III (National Treatment) or Article XI (general elimination of quantitative restrictions). Basically it prohibited member countries making the approval of investment conditional on compliance with laws, policies or administrative regulations that

Issues During Negotiations

Major problem was the lack of definition and

clarity in the mandate due to the work in identifying which measures were trade related.

Developed countries took a broad view of

investment and investment measures

Some developing countries took a much

narrower view, especially in the context of policies such as technology transfer requirements

Investment and Trade

The issue is whether or not a policy with a

particular target - in this case an investment measure - can affect trade.

Are there different degrees of trade effects? Export performance requirements, local

content schemes and foreign exchange balancing - ok

Examples of TRIMS
Market access Ownership or equity restrictions Joint venture requirements Performance Requirements Local content schemes Export performance requirements Foreign Exchange balancing

GATT Articles
Article III (GATT)
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 (GATT)
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

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.

Standstill
TRIMS introduced less than 180 days

before the agreement do not benefit from transition period. measures that have been notified if these changes are inconsistent with the agreement. investment.

Members are also not allowed to change

The same TRIM can be applied to a new

Disputes
Three disputes Indonesia vs. EU, Japan, US Canada vs. Japan and EU Panama vs. EU (Bananas)

Implementation Difficulties
Difficulties in identifying TRIMs that

violate the agreement Difficulties in identifying alternative policies to achieve the same objective Difficulties in accounting for noncontingent outcomes such as the financial crisis in Asia and Latin America Difficulties in meeting the transition period deadlines

Development Dimension of the TRIMS agreement

Only developing countries notified TRIMS Most frequent sector was the automotive

industry
The most frequent policy was local content

schemes

References

http://news.alibaba.com/article/detail/international-trade-spe

http://www.wto.org/english/res_e/booksp_e/analytic_index_

http://en.wikipedia.org/wiki/Agreement_on_Trade_Related_

http://www.tradescentre.org.zw/index.php?option=com_doc