1. Trade Related Investment Measures K J DEEPAK CYRIL (128922) K V SRIRANGA ABHISHEK (128923)

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 5. Examples of TRIMS Market access Ownership or equity restrictions Joint venture requirements Performance Requirements Local content schemes Export performance requirements Foreign Exchange balancing 6. The TRIMS Agreement Structure Content 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. 14. Implementation Notification Disputes Transition 15. Notification Argentina* Barbados Bolivia Chile* Colombia Costa Rica Cuba Cyprus Dominican Republic Ecuador Egypt* India Indonesia Malaysia* Mexico* Nigeria Pakistan* Peru Philippines* Poland Romania* South Africa Thailand* Uganda Uruguay Venezuela 16. Disputes Three disputes Indonesia vs EU, Japan, US Canada vs. Japan and EU Panama vs EU (Bananas) 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 23. References http://ideas.repec.org/p/hhs/iuiwop/0657.html http://papers.ssrn.com/sol3/papers.cfm?abstract_id=898900 http://www.meti.go.jp/english/report/data/gCT9903e.html http://en.wikipedia.org/wiki/Havana_Charter http://en.wikipedia.org/wiki/Trade_Related_Investment_Mea sures http://en.wikipedia.org/wiki/North_American_Free_Trade_Ag reement 24. THANK YOU 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.