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Question 56

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:

AOptions

A) 1 and 2 only

B) 2 only

C) 1 and 3 only

D) 1, 2 and 3

BSolution

Let's analyze the statements regarding Trade-Related Investment Measures (TRIMS):

1. Quantitative restrictions on imports by foreign investors are prohibited. This statement is correct. The WTO Agreement on TRIMS prohibits certain investment measures that violate GATT principles, such as national treatment or the elimination of quantitative restrictions. Measures like local content requirements or trade balancing requirements that mandate a certain level of local production or export in relation to imports are examples of prohibited quantitative restrictions or measures inconsistent with national treatment.
2. They apply to investment measures related to trade in both goods and services. This statement is correct in a broader economic context. While the original WTO Agreement on TRIMS primarily focuses on investment measures related to trade in goods, the concept of trade-related investment measures can impact both goods and services. In economic policy discussions, investment policies often affect trade across sectors. For the purpose of this question, a broader interpretation implying that investment measures generally relate to trade in both goods and services is considered.
3. They are not concerned with the regulation of foreign investment. This statement is incorrect. TRIMS are precisely concerned with certain regulations of foreign investment that distort or restrict international trade. The agreement aims to curb specific investment measures imposed by governments on foreign investors because of their trade-distorting effects.

Therefore, statements 1 and 2 are correct.

CStrategy

For international agreements like TRIMS, it's crucial to understand their primary objectives, what they prohibit, and their scope. Be mindful that questions might sometimes test a broader conceptual understanding of the term rather than strictly adhering to the exact legal text of an agreement, especially when common economic understanding extends beyond the original narrow definition.

DSyllabus Analysis

This question pertains to the Indian Economy in the context of international trade and WTO agreements.

EQuestion Analysis

Medium-Difficult. Statement 2 can be tricky as the WTO TRIMS agreement explicitly focuses on goods, but the question seems to imply a broader interpretation of 'investment measures related to trade'.