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

1. Quantitative restrictions on imports by foreign investors are prohibited.

2. They apply to investment measures related to trade in both goods and services.

3. They are not concerned with the regulation of foreign investment.

Select the correct answer using the code given below:

The correct answer is option 3.

Key PointsTRIMS Agreement:

• Quantitative Restrictions on Imports:
  • The TRIMS Agreement prohibits quantitative restrictions on imports imposed by foreign investors. It ensures that foreign investors do not face limitations on the quantity of goods they can import, allowing for a more open trade environment.
  • Hence, statement 1 is correct.
• Applicability to Goods and Services:
  • The TRIMS Agreement specifically applies to investment measures related to trade in goods, not services. This is clearly outlined in Article 1 of the TRIMS Agreement.
  • Therefore, measures related to services are not covered under TRIMS.
  • Hence, statement 2 is incorrect.
• Regulation of Foreign Investment:
  • TRIMS is focused on rules that restrict the preference of domestic firms, making it easier for international firms to operate in foreign markets.
  • It does not regulate foreign investment per se, as this is governed by domestic laws such as the Foreign Exchange Management Act (FEMA) and guidelines by the Department for Promotion of Industry and Internal Trade (DPIIT).
  • Hence, statement 3 is correct.

Additional InformationFeatures of TRIMS:

• Provides equal rights to foreign investors, similar to domestic players.
• Abolishes restrictions on foreign goods.
• Allows the import of raw materials without restrictions.
• Removes limitations on specific areas of investment.

TRIMS Provisions Notified by India:

• As per Article 5.1 of the TRIMS Agreement, India notified three trade-related investment measures:
  • Local content requirements in the production of newsprint.
  • Dividend balancing requirement in 22 categories of consumer goods.
  • Local content requirement in the production of Rifampicin and Penicillin-G.

Purpose of TRIMS:

• TRIMS aims to restrict measures that favor domestic firms and ensure a level playing field for international investors in goods markets.
• It is intended to create a more open and non-discriminatory investment environment.