With reference to Trade-Related Investment Measures (TRIMS), which of the following statements is/ar

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UPSC Prelims is a competitive examination conducted in India. This question is from the 2020 UPSC Prelims Economy paper.

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Question

With reference to Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct?Quantitative restrictions on imports by foreign investors are prohibited.They apply to investment measures related to trade in both goods and services.They are not concerned with the regulation of foreign investment.Select the correct answer using the code given below:

Accepted Answer

Correct Answer: C — 1 and 3 onlyStep-by-step Solution:Statement 1: Correct. TRIMS Agreement (WTO) prohibits investment measures that violate GATT Article XI (quantitative restrictions). Examples: local content requirements, trade balancing requirements. ✓Statement 2: Incorrect. TRIMS Agreement applies only to trade in goods, not services. Services are covered under GATS. ✗Statement 3: Correct. TRIMS Agreement is only concerned with trade‑distorting effects of investment measures, not with the regulation of foreign investment as such (e.g., entry conditions, ownership limits, sectoral caps). ✓Why other options are incorrect:Option A (1 and 2): Statement 2 false.Option B (2 only): False.Option D (1,2,3): Statement 2 false.Key Concept: TRIMS was part of the Uruguay Round outcomes. India has challenged certain investment measures (e.g., local content requirements) at the WTO. The agreement has an illustrative list of prohibited measures.

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