Question 15 from UPSC CSE 2020 - ECONOMICS

Question

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:

Accepted Answer

Correct Option: C. 1 and 3 only

Strategy: To identify the correct statements regarding the TRIMs Agreement:
- Understand that TRIMs prohibits quantitative restrictions, such as import quotas and local content requirements.
- Recognize that TRIMs applies solely to goods, allowing rejection of any statements concerning services.
- Identify that TRIMs targets trade-distorting investment measures, not broad foreign investment regulation.
- Use these principles to eliminate incorrect options and confirm correct statements.

Key Info: ## TRIMs Agreement Overview

The Trade-Related Investment Measures (TRIMs) Agreement is part of the WTO agreements and specifically concerns trade in goods, not services. It addresses certain investment measures that can adversely affect trade, particularly those violating GATT 1994's national treatment (Article III) and quantitative restrictions (Article XI) principles.

The TRIMs Agreement prohibits measures that:
- Require or incentivize companies to buy local goods (local content requirements).
- Restrict imports to the value or volume of exports (trade balancing requirements).
- Otherwise impose quantitative controls connected to foreign investment (e.g., restrictions on foreign exchange balancing).

The Agreement itself, however, does not provide a framework for regulating the entry or establishment of foreign investment in a country--its focus is strictly on the trade-distorting effects of certain investment policy measures, not on foreign investment regulation per se. Negotiations on extending similar rules to trade in services were addressed separately under the General Agreement on Trade in Services (GATS), not within TRIMs.

Answer

Option A: 1 and 2 only

Answer

Option B: 2 only

Answer

Option D: 1, 2, and 3