The WTO-Agreement on Trade-Related Investment Measures (TRIMs) Achim Seiler, Trade Consultant and Capacity Building Specialist EU-Project: Trade and Private Sector Development (TPSD) TPSD is implemented by in cooperation with and

Structure Coverage National Treatment and Quantitative Restrictions Exceptions Developing Country Members Notification and Transitional Arrangements Transparency Committee on Trade-Related Investment Mmeasures Consultatio and Dispute Settlement Review by the Council for Trade in Goods ANNEX: Illustrative List

Objective I Desiring to promote the expansion and progressive liberalisation of world trade and to facilitate investment across international frontiers so as to increase the economic growth of all trading partners, particularly developing country Members, while ensuring free competition Recognizing that certain investment measures can cause trade-restrictive and distorting effects (Preamble)

Objective II Provisions to avoid the use of trade-restrictive and trade-distorting measures in the context of investment policies But not: Regulation of foreign investment

Examples of trade-related investment measures I Local Content requirements (LCRs). Impose the use of a certain amount of local inputs in production Trade-balancing requirements. Oblige imports to be equivalent to a certain proportion of exports Foreign exchange balancing requirements. Stipulate that the foreign exchange made available for imports should be a certain proportion of the value of foreign exchange brought in by the firm from exports and other sources Exchange restriction. Restrict access to foreign exchange and hence restrict imports Domestic sales requirements. Require a company to sell a certain proportion of its output locally, which amounts to a restriction on exportation

Examples of Trade-Related Investment Measures II Manufacturing requirements. Require certain products to be manufactured locally Export performance requirements (EPRs). Stipulate that a certain proportion of production should be exported Product mandating requirements. Require the investor to supply certain markets with a designated product or products manufactures from a specified facility or operation Manufacturing limitations. Prevent companies from manufacturing certain products or product lines in the host country. Technology Transfer Requirements. Require specified technologies to be transferred on non-commercial terms and/or specific levels and types of research and development to be conducted locally

Examples of Trade-Related Investment Measures III Licensing requirements. Oblige the investor to license technologies similar or unrelated to those it uses in the home country to host country firms Remittance restrictions. Restrict the right of a foreign investor to repatriate returns from an investment Local equity requirements. Specify that a certain percentage of a firm’s equity should be held by local investors Note: Not all of the measures listed above are prohibited under the TRIMs Agreement. TRIMs identifies only five measures inconsistent with GATT. Countries are not prevented from imposing inter alia export performance requirements, local equity requirements or technology transfer requirements Source: ITC: Business Guide to the World Trading System, Geneva 1999

Coverage This Agreement applies to investment measures related to trade in goods only (Art. 1)

National Treatment and Quantitative Restrictions (...) no Member shall apply any TRIM that is inconsistent with the provisions of Article III or Article XI of GATT 94 An Illustrative list of TRIMs that are inconsistent with the obligation of national treatment and the obligation of general elimination of quantitative restriction is contained in the Annex to this Agreement (Art. 2)

Annex: Illustrative List I TRIMs that are inconsistent with the obligation of national treatment provided for in paragraph 4 of Article III of GATT 1994 include those which are - mandatory or enforceable under domestic law or under administrative rulings, or - compliance with which is necessary to obtain and advantage, and which require:

Annex: Illustrative List II The purchase or use by an enterprise of products of domestic origin or from any domestic source, 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, or 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 (discrimination in favor of domestic products and hence violation of the national treatment principle)

Annex: Illustrative List III TRIMs that are inconsistent with the obligation of general elimination of quantitative restrictions provided for in paragraph 1 of Article XI of GATT 1994 include those which are mandatory or enforceable under domestic law or under administrative rulings, or compliance with which is necessary to obtain an advantage, and which restrict:

Annex: Illustrative List IV 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; 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

Annex: Illustrative List V 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 (violation of obligation of general elimination of quantitative restrictions) Note: export performance requirements are not covered by the prohibition

Exceptions All exceptions under GATT 1994 shall apply, as appropriate, to the provisions of this Agreement (Art. 3)

Developing Country Members A developing country Member shall be free to deviate temporarily from the provisions of Article 2 to the extent and in such a manner as Article XVIII of GATT 1994, the Understanding on the Balance-of-Payments Provisions of GATT 1994 and the Declaration on Trade Measures Taken fo Balance-of-payment Purposes (...) permit the Member to deviate from the provisions of Articles III and XI of GATT 1994 (Art. 4)

Notification and Transitional Arrangements Notification to the Council for Trade in Goods of TRIMs inconsistent with the Agreement Elimination of inconsistent TRIMS within two years (IC), five years (DC), seven years (LDC) Upon request to the Council for Trade in Goods an extension of the transition period is possible During the transition period notified TRIMs shall not be modified so as to increase the degree of inconsistency with the provisions of Article 2 During the transition period notified TRIMs may be applied to a new investment where the products of such investment are like products and where necessary to avoid a distortion of the competition between the new investment and established enterprises (Art. 5)

Transparency Each Member shall notify the Secretariat of the publications in which TRIMs may be found, including those applied by regional and local governments and authorities within their territories Each Member shall accord sympathetic consideration to requests for information, and afford adequate opportunity for consultation, on any matter arising from the Agreement raised by another member (Art. 6)

Committee on Trade-Related Investment Measures A Committee on Trade-Related Investment Measures is hereby established, and shall be open to all Members. It will meet not less than once a year and otherwise at the request of any Member The Committee shall carry out responsibilities assigned to it by the Council for Trade in Goods and shall afford Members the opportunity to consult on any matters relating to the operation and implementation of the Agreement The Committee shall monitor the operation and implementation of this Agreement (Art. 7)

Consultation and Dispute Settlement The provisions of Articles XXII and XXIII of GATT 1994, as elaborated and applied by the Dispute Settlement Understanding, shall apply to consultations and the settlement of disputes under this Agreement (Art. 8)

Review by the Council for Trade in Goods Not later than five years after the date of entry into force of the WTO Agreement, the Council for Trade in Goods shall review the operation of this Agreement and, as appropriate, propose to the Ministerial Conference amendments to its text. In the course of this review, the Council for Trade in Goods shall consider whether the Agreement should be complemented with provisions on investment policy and competition policy (Art. 9)

Doha Ministerial Declaration Relationship between trade and investment Recognizing the case for a multilateral framework to secure transparent, stable and predictable conditions for long-term cross-border investment, particularly foreign direct investment, that will contribute to the expansion of trade, and the need for enhanced technical assistance and capacity-building in this area (...) we agree that negotiations will take place after the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that session on modalities of negotiations (para 20)

Doha Ministerial Declaration Interaction between trade and competition policy Recognizing the case for a multilateral framework to enhance the contribution of competition policy to international trade and development, and the need for enhanced technical assistance and capacity-building in this area (...) we agree that negotiations will take place after the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that session on modalities of negotiations. (para 23)

Hong Kong Ministerial Declaration (22.12.2005) I 84) Agreement on Trade-Related Investment Measures LDCs shall be allowed to maintain on a temporary basis existing measures that deviate from their obligations under the TRIMs Agreement. For this purpose, LDCs shall notify the Council for Trade in Goods (CTG) of such measures within two years, starting 30 days after the date of this declaration. LDCs will be allowed to maintain these existing measures until the end of the new transition period, lasting seven years. This transition period may be extended by the CT under the existing procedures set out in the TRIMs Agreement, taking into account the individual financial, trade, and development needs of the Member in question.

Hong Kong Ministerial Declaration (22.12.2005) II LDCs shall also be allowed to introduce new measures that deviate from their obligations under the TRIMs Agreement. These new TRIMs shall be notified to the CTG no later than six months after this adoption. The CTG shall give positive consideration to such notifications, taking into account the individual financial, trade, and development needs of the Member in question. The duration of these measures will not exceed five years, renewable subject to review and decision by the CTG. Any Measures incompatible with the TRIMs Agreement and adopted under this decision shall be phased out by the year 2020.