With reference to Trade-Related Investment Measures (TRIMS), which of the following statements is/ar

Question

With reference to Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct?Quantitative restrictions on imports by foreign investors are prohibited.They apply to investment measures related to trade in both goods and services.They are not concerned with the regulation of foreign investment.Select the correct answer using the code given below:

Accepted Answer

Under the Agreement on Trade-Related Investment Measures of the World Trade Organization (WTO), (TRIMs Agreement), WTO members have agreed not to apply certain investment measures related to trade in goods that restrict or distort trade. (TRIMs Agreement is a multilateral agreement on trade in goods, and not services). Hence statement 2 is not correct.The TRIMs Agreement prohibits certain measures that violate the national treatment (Article III) and quantitative restrictions requirements (Article XI) of the General Agreement on Tariffs and Trade (GATT) 1994. The list of TRIMs agreed to be inconsistent with these articles includes measures which require:particular levels of local procurement by an enterprise (local content requirements),restrict the volume or value of imports such an enterprise can purchase,use to an amount related to the level of products it exports (trade balancing requirements).Hence statement 1 is correct. TRIMs Agreement stipulates that certain measures adopted by Governments to regulate FDI can cause trade-restrictive and distorting effects. However, the agreement is only concerned with the trade effects of investment measures. It is not intended to deal with the regulation of investment as such and does not impact directly on WTO members’ ability to regulate and place conditions upon the entry and establishment of foreign investment. Hence statement 3 is correct.