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Trims
TRIMS are trade-related investment measures that WTO members agreed to eliminate because they discriminate against foreign products or foreign investors. The document outlines specific TRIMS that are prohibited, such as local content requirements, trade balancing requirements, and export performance requirements. It provides transitional periods for developing countries to eliminate non-compliant TRIMS by 1995. India used to have local content requirements but scrapped them to comply with TRIMS.
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Trims
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- 2. # INTRODUCTION • The objectiveof Trade-related Investment Measures(TRIMS) is to prevent member countries from resorting to measures that violate non- differential treatment between domestic and foreign investors and impose quantitative restrictions on imports and exports.
- 3. # Towards this end,the WTO provisions explicitly prohibit the following trade restrictive and distortive measures: • LocaL content requirement Mandatory use of local outputs in production.
- 4. # • Trade balancingrequiremenT Imports to be maintained at specific proportion of exports. • Foreign exchange balancing requiremenT Forex made available for imports to equal a certain proportion of value of forex from exports.
- 5. # • exchange resTricTions Freeaccess to forex curbed, resulting in import restrictions. • exporT perFormance requiremenT Certain proportion of production should be exported.
- 6. # The agreement providesfor transitional period for elimination of prohibited trims, wef. January 1, 1995 • 2 years For developed counTries. • 5 years For developing counTries, and • 7 years For TransiTional and leasT developed counTries.
- 7. # • Before 1991,India is used to have local content requirements in the form of the phased manufacturing program(PMP). This has been scrapped now. • Export commitments exist in the form of dividend- balancing requirement that is imposed for FDI in consumer goods.
- 8. # • Although TRIMSare prohibited under certain conditions. India had such a cover till 2005 but later, scraped all these measures to escape from TRIMS.
- 9. # • According tothe agreement, • The governments cannot impose measures which require particular levels of local procurement by an enterprise. • It also discourages measures which limit a company’s imports or set of targets for the company to export.
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