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Economy
2020
External Sector
FDI and FII

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:

D.1, 2 and 3
C.1 and 3 only
B.2 only
A.1 and 2 only

Correct Answer: Option C

The Agreement on Trade-Related Investment Measures (TRIMs Agreement), under the World Trade Organization (WTO), aims to prevent trade-distorting investment measures.

The agreement focuses on trade in goods, not services. Therefore, Statement 2 is not correct.

TRIMs prohibit measures that violate national treatment (Article III) and quantitative restrictions (Article XI) of the General Agreement on Tariffs and Trade (GATT) 1994. This includes measures requiring local procurement, restricting import volumes, or mandating trade-balancing. Thus, Statement 1 is correct.

While TRIMs recognize that some regulations on Foreign Direct Investment (FDI) can distort trade, the agreement is concerned with the trade effects of investment measures, not the regulation of investment itself. Hence, Statement 3 is correct.

Therefore, statements 1 and 3 are correct.

Sources:

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