View source for Agreement on Trade-Related Investment Measures

{{Cleanup|date=April 2009}}
{{refimprove|date=November 2015}}

The '''Agreement on Trade-Related Investment Measures''' ('''TRIMs''') are rules that apply to the domestic regulations a country applies to foreign [[investor]]s, often as part of an [[industrial policy]]. The agreement, concluded in 1994, was negotiated under the WTO's predecessor, the [[General Agreement on Tariffs and Trade]] (GATT), and came into force in 1995.  The agreement was agreed upon by all [[WTO accession and membership#Members and observers|members]] of the [[World Trade Organization]].  Trade-Related Investment Measures is one of the four principal legal agreements of the [[WTO]] trade treaty.

TRIMs are rules that restrict preference of domestic firms and thereby enable international firms to operate more easily within foreign markets. Policies such as local content requirements and trade balancing rules that have traditionally been used to both promote the interests of domestic industries and combat restrictive business practices are now banned.

==How it came in action  ==

In the late 1980s, there was a significant increase in [[foreign direct investment]] throughout the world. However, some of the countries receiving foreign investment imposed numerous restrictions on that investment designed to protect and foster domestic industries, and to prevent the outflow of [[foreign exchange reserves]].

Examples of these restrictions include local content requirements (which require that locally produced goods be purchased or used), manufacturing requirements (which require the domestic manufacturing of certain components), [[trade balancing]] requirements, domestic sales requirements, [[technology transfer]] requirements, export performance requirements (which require the export of a specified percentage of production volume), local equity restrictions, foreign exchange restrictions, [[remittance]] restrictions, licensing requirements, and employment restrictions. These measures can also be used in connection with fiscal incentives as opposed to requirement. Some of these investment measures distort trade in violation of GATT Articles III and XI, and are therefore prohibited.{{citation needed|date=November 2015}}

Until the completion of the [[Uruguay Round]] negotiations, which produced a well-rounded Agreement on Trade-Related Investment Measures (hereinafter the "TRIMs Agreement"), the few international agreements providing disciplines for measures restricting foreign investment provided only limited guidance in terms of content and country coverage. The OECD Code on [[economic liberalization|Liberalization]] of [[capital movement|Capital Movements]], for example, requires members to liberalize restrictions on direct investment in a range of areas. The [[Organisation for Economic Co-operation and Development|OECD]] Code's efficacy, however, is limited by the numerous reservations made by each of the members.{{citation needed|date=November 2015}}

In addition, there are other international treaties, bilateral and multilateral, under which signatories extend [[Most favoured nation|most-favored-nation]] treatment to direct investment. Only a few such treaties, however, provide national treatment for direct investment. The [[Asia-Pacific Economic Cooperation]] Investment Principles adopted in November 1994 are general rules for investment but they are non-binding.

==Legal framework ==

GATT 1947 prohibited investment measures that violated the principles of national treatment and the general elimination of quantitative restrictions, but the extent of the prohibitions was never clear. The TRIMs Agreement, however, contains statements prohibiting any TRIMs that are inconsistent with the provisions of Articles III or XI of GATT 1994. In addition, it provides an illustrative list that explicitly prohibits local content requirements, trade balancing requirements, foreign exchange restrictions and export restrictions (domestic sales requirements) that would violate Article III:4 or XI:1 of GATT 1994. TRIMs prohibited by the Agreement include those that are mandatory or enforceable under domestic law or administrative rulings, or those with which compliance is necessary to obtain an advantage (such as subsidies or tax breaks).

Figure 8-1 contains a list of measures specifically prohibited by the TRIMs Agreement. Note that this figure is not exhaustive, but simply illustrates TRIMs that are prohibited by the TRIMs Agreement. The figure, therefore, calls particular attention to several common types of TRIMs. We would add that this figure identifies measures that were also inconsistent with Article III:4 and XI:1 of GATT 1947. Indeed, the TRIMs Agreement is not intended to impose new obligations, but to clarify the pre-existing GATT 1947 obligations. Under the WTO TRIMs Agreement, countries are required to rectify any measures inconsistent with the Agreement, within a set period of time, with a few exceptions (noted in Figure 8-2).<ref name="meti.go.jp">[http://www.meti.go.jp/english/report/data/gCT9908e.html Chapter 8: Trade-Related Investment Measures]</ref>

{| class="wikitable"
|-
! <Figure 8-1> Examples of TRIMs Explicitly Prohibited by the TRIMs Agreement 
|-
| Local content requirement  
| Trade balancing requirements
| Foreign exchange restrictions
| Export restrictions (Domestic sales requirements)
|-
| Measures requiring the purchase or use by an enterprise of domestic products, whether specified in terms of particular products, in terms of volume or value of products, or in terms of a proportion of volume or value of its local production. (Violation of GATT Article III:4) 
| 1.Measures requiring that an enterprise's purchases or use of imported products be limited to an amount related to the volume or value of local products that it exports. (Violation of GATT Article III:4)2.Measures restricting the importation by an enterprise of products used in or related to its local production, generally or to an amount related to the volume or value of local production that it exports. (Violation of GATT Article XI:1) 
| Measures restricting the importation by an enterprise of products (parts and other goods) used in or related to its local Production by restricting its access to foreign exchange to an amount related to the foreign exchange inflows attributable to the enterprise. (Violation of GATT Article XI:1) 
|  Measures restricting the exportation or sale for export by an enterprise of products, whether specified in terms of particular products, in terms of volume or value of products, or in terms of a proportion of volume or value of its local production. (Violation of GATT Article XI:1)  
|}

{| class="wikitable"
|-
! <Figure 8-2> Exceptional Provisions of the TRIMs Agreement 
|-
| Transitional period
| Exceptions for developing countries
| Equitable provisions
|-
| Measures specifically prohibited by the TRIMs Agreement need not be eliminated immediately, although such measures must be notified to the WTO within 90 days after the entry into force of the TRIMs Agreement. Developed countries will have a period of two years in which to abolish such measures; in principle, developing countries will have five years and least-developed countries will have seven years.
| Developing countries are permitted to retain TRIMs that constitute a violation of GATT Article III or XI, provided the measures meet the conditions of GATT Article XVIII which allows specified derogation from the GATT provisions, by virtue of the economic development needs of developing countries.
| To avoid damaging the competitiveness of companies already subject to TRIMs, governments are allowed to apply the same TRIMs to new foreign direct investment during the transitional period described in (1) above.
|}<ref name="meti.go.jp"/>

==See also==
*[[Bilateral Investment Treaty]]

==References==
<references/>
{{World Trade Organization}}

[[Category:World Trade Organization agreements]]
[[Category:Foreign direct investment]]
[[Category:Industrial policy]]
[[Category:Treaties concluded in 1994]]
[[Category:Treaties entered into force in 1995]]
[[Category:Treaties of Albania]]
[[Category:Treaties of Angola]]
[[Category:Treaties of Antigua and Barbuda]]
[[Category:Treaties of Argentina]]
[[Category:Treaties of Armenia]]
[[Category:Treaties of Australia]]
[[Category:Treaties of Austria]]
[[Category:Treaties of Bahrain]]
[[Category:Treaties of Bangladesh]]
[[Category:Treaties of Barbados]]
[[Category:Treaties of Belgium]]
[[Category:Treaties of Belize]]
[[Category:Treaties of Benin]]
[[Category:Treaties of Bolivia]]
[[Category:Treaties of Botswana]]
[[Category:Treaties of Brazil]]
[[Category:Treaties of Brunei]]
[[Category:Treaties of Bulgaria]]
[[Category:Treaties of Burkina Faso]]
[[Category:Treaties of Burundi]]
[[Category:Treaties of Cambodia]]
[[Category:Treaties of Cameroon]]
[[Category:Treaties of Canada]]
[[Category:Treaties of Cape Verde]]
[[Category:Treaties of the Central African Republic]]
[[Category:Treaties of Chad]]
[[Category:Treaties of Chile]]
[[Category:Treaties of the People's Republic of China]]
[[Category:Treaties of Taiwan]]
[[Category:Treaties of Colombia]]
[[Category:Treaties of the Republic of the Congo]]
[[Category:Treaties of Costa Rica]]
[[Category:Treaties of Ivory Coast]]
[[Category:Treaties of Croatia]]
[[Category:Treaties of Cuba]]
[[Category:Treaties of Cyprus]]
[[Category:Treaties of the Czech Republic]]
[[Category:Treaties of the Democratic Republic of the Congo]]
[[Category:Treaties of Denmark]]
[[Category:Treaties of Djibouti]]
[[Category:Treaties of Dominica]]
[[Category:Treaties of the Dominican Republic]]
[[Category:Treaties of Ecuador]]
[[Category:Treaties of Egypt]]
[[Category:Treaties of El Salvador]]
[[Category:Treaties of Estonia]]
[[Category:Treaties entered into by the European Union]]
[[Category:Treaties of Fiji]]
[[Category:Treaties of Finland]]
[[Category:Treaties of France]]
[[Category:Treaties of Gabon]]
[[Category:Treaties of the Gambia]]
[[Category:Treaties of Georgia (country)]]
[[Category:Treaties of Germany]]
[[Category:Treaties of Ghana]]
[[Category:Treaties of Greece]]
[[Category:Treaties of Grenada]]
[[Category:Treaties of Guatemala]]
[[Category:Treaties of Guinea]]
[[Category:Treaties of Guinea-Bissau]]
[[Category:Treaties of Guyana]]
[[Category:Treaties of Haiti]]
[[Category:Treaties of Honduras]]
[[Category:Treaties of Hong Kong]]
[[Category:Treaties of Hungary]]
[[Category:Treaties of Iceland]]
[[Category:Treaties of India]]
[[Category:Treaties of Indonesia]]
[[Category:Treaties of Ireland]]
[[Category:Treaties of Israel]]
[[Category:Treaties of Italy]]
[[Category:Treaties of Jamaica]]
[[Category:Treaties of Japan]]
[[Category:Treaties of Jordan]]
[[Category:Treaties of Kazakhstan]]
[[Category:Treaties of Kenya]]
[[Category:Treaties of Kuwait]]
[[Category:Treaties of Kyrgyzstan]]
[[Category:Treaties of Laos]]
[[Category:Treaties of Latvia]]
[[Category:Treaties of Lesotho]]
[[Category:Treaties of Liechtenstein]]
[[Category:Treaties of Lithuania]]
[[Category:Treaties of Luxembourg]]
[[Category:Treaties of Macau]]
[[Category:Treaties of Madagascar]]
[[Category:Treaties of Malawi]]
[[Category:Treaties of Malaysia]]
[[Category:Treaties of the Maldives]]
[[Category:Treaties of Mali]]
[[Category:Treaties of Malta]]
[[Category:Treaties of Mauritania]]
[[Category:Treaties of Mauritius]]
[[Category:Treaties of Mexico]]
[[Category:Treaties of Mongolia]]
[[Category:Treaties of Montenegro]]
[[Category:Treaties of Morocco]]
[[Category:Treaties of Mozambique]]
[[Category:Treaties of Myanmar]]
[[Category:Treaties of Namibia]]
[[Category:Treaties of Nepal]]
[[Category:Treaties of the Netherlands]]
[[Category:Treaties of New Zealand]]
[[Category:Treaties of Nicaragua]]
[[Category:Treaties of Niger]]
[[Category:Treaties of Nigeria]]
[[Category:Treaties of Norway]]
[[Category:Treaties of Oman]]
[[Category:Treaties of Pakistan]]
[[Category:Treaties of Panama]]
[[Category:Treaties of Papua New Guinea]]
[[Category:Treaties of Paraguay]]
[[Category:Treaties of Peru]]
[[Category:Treaties of the Philippines]]
[[Category:Treaties of Poland]]
[[Category:Treaties of Portugal]]
[[Category:Treaties of Qatar]]
[[Category:Treaties of South Korea]]
[[Category:Treaties of Moldova]]
[[Category:Treaties of Romania]]
[[Category:Treaties of Russia]]
[[Category:Treaties of Rwanda]]
[[Category:Treaties of Samoa]]
[[Category:Treaties of Saudi Arabia]]
[[Category:Treaties of Senegal]]
[[Category:Treaties of Seychelles]]
[[Category:Treaties of Sierra Leone]]
[[Category:Treaties of Singapore]]
[[Category:Treaties of Slovakia]]
[[Category:Treaties of Slovenia]]
[[Category:Treaties of the Solomon Islands]]
[[Category:Treaties of South Africa]]
[[Category:Treaties of Spain]]
[[Category:Treaties of Sri Lanka]]
[[Category:Treaties of Saint Kitts and Nevis]]
[[Category:Treaties of Saint Lucia]]
[[Category:Treaties of Saint Vincent and the Grenadines]]
[[Category:Treaties of Suriname]]
[[Category:Treaties of Swaziland]]
[[Category:Treaties of Sweden]]
[[Category:Treaties of Switzerland]]
[[Category:Treaties of Tajikistan]]
[[Category:Treaties of Thailand]]
[[Category:Treaties of the Republic of Macedonia]]
[[Category:Treaties of Togo]]
[[Category:Treaties of Tonga]]
[[Category:Treaties of Trinidad and Tobago]]
[[Category:Treaties of Tunisia]]
[[Category:Treaties of Turkey]]
[[Category:Treaties of Uganda]]
[[Category:Treaties of Ukraine]]
[[Category:Treaties of the United Arab Emirates]]
[[Category:Treaties of the United Kingdom]]
[[Category:Treaties of Tanzania]]
[[Category:Treaties of the United States]]
[[Category:Treaties of Uruguay]]
[[Category:Treaties of Vanuatu]]
[[Category:Treaties of Venezuela]]
[[Category:Treaties of Vietnam]]
[[Category:Treaties of Yemen]]
[[Category:Treaties of Zambia]]
[[Category:Treaties of Zimbabwe]]
[[Category:Treaties of Liberia]]