2. Uruguay Round
• Provided a mandate for the first time to discuss:
• “Following an examination of the operation of GATT
Articles related to the trade restrictive and distortive
effects of investment measures, negotiations should
elaborate, as appropriate, further provision that
maybe necessary to avoid such adverse effects on
trade”
• Previous attempts at incorporating investment
provisions included the Havana Charter in 1947
3. Issues During Negotiations
• Major problem was the lack of definition and
clarity in the mandate due to the work in
identifying which measures were trade related.
• Developed countries took a broad view of
investment and investment measures
• Some developing countries took a much
narrower view, especially in the context of
policies such as technology transfer
requirements
4. Investment and Trade
• The issue is whether or not a policy with a particular target - in
this case an investment measure - can affect trade.
• Are there different degrees of trade effects?
• Export performance requirements, local content schemes and
foreign exchange balancing
7. Legal Framework
• It focusses on two Articles that were identified in a previous
case under the GATT
• Article III (National Treatment)
• Article XI (Quantitative Restrictions)
8. Aims of the Agreement
• Desiring
• to promote the expansion and progressive
liberalization of world trade and to facilitate
investment, while ensuring competition
• Take into account
• trade, development and financial needs of developing
countries, particularly least developed countries
• Recognizing
• certain investment measures can cause trade-
restrictive and distorting effects
9. Structure
• Nine Articles and an Annex
• Art I - clarifies that the agreement applies only to trade in goods
• Art 2 - applies Articles III or XI and refers to the Annex list
• Art 3-4 deal with general exceptions
• Art 5 Notification and transition periods
• Art 9 - Review
10. GATT Articles
• Article III (GATT)
• National treatment of imported product, unless specified in
other agreements
• Subjects the purchase or use by an enterprise of imported
products to less favourable conditions than the purchase or
use of domestic products
• Article XI (GATT)
• Prohibition of quantitative restrictions on imports and exports
• Part of the general trend in textiles and agriculture to phase
out the use of quantitative restrictions
11. Notification
• Governments of WTO members, or countries entitled to be
members within 2 years after 1 January, 1995 should make
notifications within 90 days after the date of their acceptance
of the WTO agreement.
12. Transition periods
• Members are obliged to eliminate TRIMs which have been
notified. Such elimination is to take place within:
• five years for developing
• seven years for LDC
• Two years for developed countries
13. Standstill
• Members are also not allowed to change measures that have
been notified if these changes are inconsistent with the
agreement.
• The same TRIM can be applied to a new investment.
17. Indonesia
• Automotive sector
• National car policy
• required the manufacturer to have local content
• Lower sales tax
• Subsidy issue was also involved.
18. Canada
• Automotive sector - Canada-US Auto Pact
• Required a company to have local content levels beyond the
North American Free Trade Agreement in order to have a
lower tariff rate
• Result was the tariff was increased to MFN rate
19. Implementation Difficulties
• Difficulties in identifying TRIMs that violate the
agreement
• Difficulties in identifying alternative policies to
achieve the same objective
• Difficulties in accounting for non-contingent
outcomes such as the financial crisis in Asia and
Latin America
• Difficulties in meeting the transition period
deadlines
20. Development Dimension of the
TRIMS agreement
• Only developing countries notified TRIMS
• Most frequent sector was the automotive industry
• The most frequent policy was local content schemes
21. Components
• Three components of an investment architecture
• Market access
• Pre and post establishment
• Operations
• National treatment with respect to policies
• Dispute resolution
• NAFTA type investor-state model
• Unworkable in the WTO context
22. Development effects
• I Identify and define TRIMs
• II Historical experience with TRIMS
• III What is ‘development’?
• Include employment
• Technology transfer
• Establishment and development of industry
• Growth
25. Illustrative list - Para 1
• Para 1 (a) covers local content TRIMs which
require the purchase or use by an enterprise of
products of domestic origin or domestic source.
• Para 1(b) covers trade balancing TRIMs which
limit the purchase or use of imported products
by an enterprise to an amount related to the
volume or value of local products that it exports.
26. Ilustrative list- Para 2
• 2(a) deals with border measures that deal with trade
balancing.
• 2(b) restrictions to trade that arise from foreign exchange
access restrictions such as balancing requirements
• 2 (c) deals with measures that restrict exports.
