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TRIMS
Agreement on trade related investment matters
Introduction
The Agreement on Trade Related Investment Measures
(TRIMs) is one of
Agreements covered under Annex IA to the Marrakech Agreement, signed at the end
of the Uruguay Round (UR) negotiations. The Agreement addresses investment
measures that are trade related and that also violate Article III (National
treatment) or Article XI (general elimination of quantitative restrictions) of
the General Agreement on Tariffs and Trade. An illustrative list of the measures that are violative of the provisions of the Agreement is annexed
to the text of the Agreement. These pertain broadly to local content
requirements, trade balancing requirements and export restrictions, attached to
investment decision making.
Provisions on elimination of notified TRIMs by WTO Members, and transition
periods
The Agreement requires all WTO Members to notify the TRIMs that are
inconsistent with the provisions of the Agreement, and to eliminate them after
the expiry of the transition period provided in the Agreement. Transition
periods of two years in the case of developed countries, five years in the case
of developing countries and 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.
Temporary deviation on BOP grounds
The Agreement allows developing countries to deviate temporarily from its
provisions on balance of payments (BOP) grounds (as per the provisions of
Article XVIII.B of GATT, 1994).
India’s notified TRIMs
As per the provisions of Art. 5.1 of the 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.
Such notified TRIMs were due to be eliminated by 31st December, 1999. None
of these measures is in force at present. Therefore, India does not have any
outstanding obligations under the TRIMs agreement as far as notified TRIMs are
concerned.
Present Status
The transition period allowed to developing countries ended on 31st
December, 1999. 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.
India had proposed during the Seattle Ministerial Conference that:
Extension of transition period for developing countries should be on a
multilateral basis and not on an individual basis;
Another opportunity should be provided to developing countries to notify
un-notified TRIMs and maintain them for an extended transition period;
The Seattle Ministerial Conference was inconclusive and no decision could
be taken on the proposals.
However, during the General Council meeting of 8th May, 2000, the following
decisions, inter-alia, were taken :
"…… ..members agree to direct the Council for Trade in Goods to give
positive consideration to individual requests presented in accordance with
Article 5.3 by developing countries for extension of transition periods for
implementation of the TRIMs Agreement".
"Members have noted the concerns of those Members who have not notified
TRIMs or have not yet requested an extension. Consultations on the means to
address these cases should also be pursued as a matter of priority, under the
aegis of the General Council, by the Chairman of the Council for Trade in
Goods".
Mandated Review of the Agreement
Art. 9 of the Agreement envisages its review within five years of its coming
into operation, i.e. by 1-1-2000.
The Council for Trade in Goods is to review the operation of the Agreement
and, as appropriate, propose to the Ministerial Conference amendments to its
text. The process of review has started but no specific proposals have been made
by any Member as yet.
Investment Policy and Competition Policy
In the course of this review, the Council for Trade in Goods shall consider
whether the Agreement should be complemented with the provisions on investment
policy and competition policy. The Singapore Ministerial Conference which
established the two parallel Working Groups to study the relationship between
Trade and Investment on the one hand and Trade and Competition Policy on the
other had stipulated that future negotiations, if any, regarding multilateral
disciplines in these areas will take place only after explicit consensus
decision by the Members. The Working Group process is still on.
Likely issues during the review
The review of the Agreement is likely to address the following issues:
-
Issues related to the operation of the Agreement during the last five
years, and
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Issues related to the coverage of the Agreement
A. 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,
1979. 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. There is likely to be demand
for objective criteria;
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.
B. 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.
The TRIMs Agreement has been found by the developing countries to be standing
in the way of sustained industrialization of developing countries, without
exposing them to balance of payment shocks, by reducing substantially the policy
space available to these countries.
Developed countries, on the other hand, have been arguing for a further
expansion in the list of prohibited TRIMs.
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