Ans. TRADE RELATED INVESTMENT MEASURES (TRIMS)
Many host developing countries want the FDI
flow to be consistent with their development priorities. They also wanted
multilateral measures to protect their interests. Thus the UN Centre for
Transnational Corporations was established to educate developing countries and
also build a code of conduct for TNCs. The code was not approved. Hence it is
called Draft Code of TNCs. Issues covered by the Draft included issues of
national sovereignty, observance of national laws, adherence to the
socio-economic objectives of host countries, appropriation of foreign assets
and compensation and regulation of the restrictive business practices of
foreign enterprises. In the eighties, the US wanted a Multilateral Investment
Agreement preventing national policy discretion on FDI. The main arguments of
the US were that performance requirements imposed by the host countries on
foreign investor had led to distortions in world trade. Further, the investing
countries lost the opportunity of exporting their export potential on the one
hand and constrained to buy products and services from costly and inefficient
sources of supply on the other. Hence it brought the issue of investments under
Uruguay Round of multilateral trade negotiations. Although investment is not a
subject matter of the GATT regulations, the Punta Del Este Negotiating Mandate
on Trade Related Investment Measures stated : "Following an examination of
the operation of the GATT rules related to trade restricting and distorting
effects of investments measures, the negotiation should elaborate as
appropriate, further provision that may be necessary to avoid such adverse
effects on trade". Thus in the Uruguay Round of Multilateral Trade
Negotiations for the first time that some investment issues were directly
introduced as part of the discipline of the multilateral trading system.
GATT's article on national treatment, Art-III
: 4, and quantitative restrictions, XI : I , were invoked to bring TRIMS under
negotiations.
Investment
Measures Prohibited in the Agreement on TRIMS under the Marrakesh Agreement
TRIMS inconsistent
with Article III.4 of GATT
a) The purchase or use by an enterprise of
products of domestic origin or from any domestic source, whether specific 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; or
b) that an enterprise's purchases or use of
imported products be limited to an amount related to the volume of local
products that it exports.
TRIMS
Inconsistent with Article XI of GATT
a) The importation by an enterprise of products
used in or related its local production, generally or to an amount related to
the volume or value of local production that it exports.
b) The importation by an enterprise of
products 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; or
c) 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.
According to the TRIMS Agreement, all
specific measures in the above five categories being applied by any member will
have to be notified within 90 days of the entry into force of the Agreement
establishing the World Trade Organization (WTO). They will have to be
eliminated within two years - within five years by the developing countries and
7 years by the least developed countries. A developing member country shall be
free to deviate temporarily from the obligation to eliminate such measures, on
balance of payment grounds. The operation of this discipline shall be reviewed
after five years. A Committee on Trade-Related Investment Measures has been set
up to monitor the operation and implementation of this Agreement in WTO.
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