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Explain the Multilateral Trade Agreements regarding Trade Related Investment Measures.

Explain the Multilateral Trade Agreements regarding Trade Related Investment Measures.

Owlgen
Course: M.Com

1 Answer

Trade Related Investment Measures (TRIMs) refer to certain conditions or restrictions imposed by a government in respect of foreign investment in the country. The Agreement on Trade Related Investment Measures (TRIMs) provides that no contracting party shall apply any TRIM which is inconsistent with the WTO Articles. An illustrative list identifies the following TRIMs as inconsistent:

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  • Local content requirement (i.e. a certain amount of local inputs be used in products).
  • Trade balancing requirement (r.e. imports shall not exceed a certain proportion of exports).
  • Trade and foreign exchange balancing requirements.
  • Domestic sales requirements (i.e. a company shall sell a certain proportion of its outputs locally).

The Agreement requires the notification of all WTO inconsistent Trade Related Investment Measures (TRIMs) and their phasing out with in two, five and seven years by industrial, developing and least developed countries, respectively. Transition period can be extended for developing and least developed countries if they face difficulties in eliminating TRIMS.

Article 5 of the Agreement requires members to notify the council for trade in goods within ninety days of the entry, into force of the agreement establishing the W.T.O., of all trade related investment measures that are inconsistent with this agreement. Each member shall eliminate all such inconsistent measures within two years, In the case of a developing country, it is five years. In the case of a developing country, the council for trade in goods may extend the time. Any new investment measures, in the transition period, is allowed in cases of:

  • Where the products of such investment are like products of an established enterprise.
  • Where it is necessary to avoid distorting the conditions of competition between the new investment and the established enterprises.

These measures shall be notified to the council ,for trade in goods. But these also are required to be terminated within the period laid down earlier. Each member shall accord sympathetic consideration to requests for information, and accord other members the opportunity for consultation on any matter relating to the agreement, but no member there by need to disclose any information which may impede its law enforcement or is otherwise contrary to its public interest.

Under Article 7 a committee on trade related investment measures shall be established, which shall carry out such responsibilities as may assigned to it by the council for trade in goods. It shall afford members the opportunity of consultation on any matter relating to the agreement. The committee shall monitor the operation and implementation of this agreement, and shall report annually to the council for trade in goods. Article 8 provides for consultation and disputes settlement. The provisions of Article XXII and XXIII of the GATT 1994 as elaborated and applied by the understanding on rules and procedures governing the settlement of disputes, shall apply to all such consultations and disputes under the agreement.

Article 9 calls for review of the operation of the agreement by the council for trade in goods within five years after the date of entry into force of the agreement establishing the W.T.O.

March 13, 2019
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