Trims Agreement Objectives

The Ministerial Declaration of Punta del Este, which launched the Uruguay Round, addressed the issue of trade-related investment measures as a theme of the new round through a carefully crafted compromise: after examining the functioning of GATT articles with regard to the restrictive and trade-distorting effects of investment measures, negotiations should, if necessary, develop other provisions that might be necessary to avoid such negative effects. The emphasis on the commercial effects of this mandate highlighted the fact that the negotiations were not intended to deal with the regulation of investments as such. The Uruguay Round negotiations on trade-related investment measures were marked by strong differences of opinion among participants on the coverage and nature of possible new disciplines. While some industrialized countries have proposed provisions prohibiting a wide range of measures in addition to local content requirements, which were found to be inconsistent with Article III in the case of the FIRA Panel, many developing countries have opposed them. The compromise that ultimately resulted from the negotiations is essentially limited to an interpretation and clarification of the application of the GATT provisions on the questioning of imported goods (Article III) and quantitative import or export restrictions on trade-related investment measures (Article XI). The TRIPS agreement therefore does not cover many of the measures discussed in the Uruguay Round negotiations, such as export results and technology transfer. Political measures, such as local content requirements and trade balance rules, which have traditionally been used to promote the interests of domestic industries and combat restrictive trade practices, are now prohibited. Trade-related investment measures are one of the four main legal agreements in the WTO trade agreement. Sorting is a rule that restricts the preference of domestic companies and thus allows international companies to operate more easily in foreign markets.

Pending the conclusion of the Uruguay Round negotiations, which resulted in a well-concluded agreement on trade-related investment measures (the «TRIMs agreement»), the few international agreements providing for disciplines for foreign investment restraint measures have provided only limited guidance on substance and countries. The OECD Code on the Liberalization of Capital Movements, for example, requires members to liberalize restrictions on direct investment in a number of areas. However, the effectiveness of the OECD code is limited by the many reservations of each member. [2] Under the TRIM agreement, members are required to report to the WTO Merchandise Trade Council their existing TRIMs that are incompatible with the agreement. These notified TRIMs were to be removed by December 31, 1999. None of these measures are currently in effect. As a result, India has no outstanding obligations under the TRIMs agreement with respect to notified TRIMs. As an agreement based on THE existing GATT disciplines on trade in goods, the agreement does not deal with the regulation of foreign investment.

The disciplines of the TRIPS agreement focus on investment measures that are contrary to Articles III and XI of the GATT, i.e. that distinguish imported and exported goods and/or create import or export restrictions. For example, a local content requirement, which is not discriminatory for domestic and foreign companies, is contrary to the TRIM agreement, as it involves discriminatory treatment of imported products in favour of domestic products. The fact that there is no discrimination between domestic and foreign investors when imposing the measure is not negligible in the context of the ON TRIPS agreement. Among the objectives of the agreement, as defined in its preamble, are the gradual extension and liberalization of world trade and the facilitation of investment across international borders in order to