TRIMs

Trade Related Investment Measures

Jani Purnawanty Jasfin, S.H., S.S., LL.M.

m.k. Hukum Perdagangan Internasional

Fakultas Hukum Universitas Airlangga

Surabaya, 2021
What is this Agreement and what does it do?
• Under the Agreement on Trade-Related Investment Measures of the World Trade
Organization, commonly known as the TRIMs Agreement, came into force in 1995, as
part of the Uruguay Round negotiations.
• WTO members have agreed not to apply certain investment measures related to
trade in goods that restrict or distort trade.
• The TRIMs Agreement prohibits certain measures that violate the national treatment
and quantitative restrictions requirements of the General Agreement on Tariffs and
Trade (GATT) ONLY.
• The TRIMs Agreement does not cover services.
Objective of TRIMS
• As defined in its preamble:
• “the expansion and progressive liberalization 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”.

1. the expansion and progressive liberalization of world trade

2. to facilitate investment across international frontiers
3. to increase the economic growth of all trading partners,
particularly developing country members
4. ensuring free competition
What is a “Trade-Related Investment Measure”?
• The term “trade-related investment measures” (“TRIMs”) is not defined in the
Agreement.
• However, the Agreement contains in an annex An Illustrative List of Measures
that are inconsistent with GATT Article III:4 or Article XI:1 of GATT 1994.
• Article III:4 of the GATT 1994 provides that:
• The products of the territory of any Member imported into the territory of any
other Member shall be accorded treatment no less favorable than that accorded
to like products of national origin in respect of laws, regulations and requirements
affecting their internal sale, offering for sale, purchase, transportation,
distribution or use…  National Treatment Obligation  prinsip non-diskriminasi
What is a “Trade-Related Investment Measure”?
• The term “trade-related investment measures” (“TRIMs”) is not defined in the
Agreement.
• However, the Agreement contains in an annex an Illustrative List of measures that
are inconsistent with GATT Article III:4 or Article XI:1 of GATT 1994.

• Article XI: 1 General Elimination of Quantitative Restrictions

• 1. No prohibitions or restrictions other than duties, taxes or other charges,
whether made effective through quotas, import or export licenses or other
measures, shall be instituted or maintained by any contracting party on the
importation of any product of the territory of any other contracting party or on the
exportation or sale for export of any product destined for the territory of any other
contracting party.
The TRIMs Agreement and Regulation of Foreign Investment

• As an agreement that is based on existing GATT disciplines on trade in

goods, the Agreement is not concerned with the regulation of foreign
investment.

• The disciplines of the TRIMs Agreement focus on investment measures

that infringe GATT Articles III and XI.

• In other words, that discriminate between imported and exported

products and/or create import or export restrictions.
The TRIMs Agreement and Regulation of Foreign Investment
• For example:
• A local content requirement imposed in a non-discriminatory
manner on domestic and foreign enterprises is inconsistent with the
TRIMs Agreement because it involves discriminatory treatment of
imported products in favor of domestic products.
• The fact that there is no discrimination between domestic and
foreign investors in the imposition of the requirement is irrelevant
under the TRIMs Agreement.
Basic Substantive Obligations

• Article 2.1 of the TRIMs Agreement requires Members not to apply

any TRIM that is inconsistent with the provisions of Article III
(national treatment of imported products) or Article XI (prohibition
of quantitative restrictions on imports or exports) of GATT 1994.

• An Illustrative List annexed to the TRIMs Agreement lists measures

that are inconsistent with paragraph 4 of Article III and paragraph 1
of Article XI.
Mandatory Measures
• The Illustrative List covers both TRIMs which are mandatory or
enforceable under domestic law or under administrative rulings and
TRIMs compliance with which is necessary to obtain an advantage.
• Distinction between Paragraphs 1 and 2 of the Illustrative List
• TRIMs identified in paragraph 1 of the Illustrative List as being
inconsistent with Article III:4 concern the purchase or use of products
by an enterprise
• while the TRIMs listed in paragraph 2 as inconsistent with Article XI:1
of GATT 1994 concern the importation or exportation of products by
an enterprise.
TRIMs which are inconsistent with the National Treatment Obligation
of Article III:4 of GATT 1994

• Paragraph 1(a) of the Illustrative List covers local content TRIMs,

which require the purchase or use by an enterprise of products of
domestic origin or domestic source (local content requirements)
• while paragraph 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.
• In both cases, the inconsistency with Article III:4 of GATT 1994 results
from the fact that the measure subjects the imported products (to be
purchased or used by an enterprise) to less favorable conditions than
domestic products (to be purchased or used by and enterprise).
TRIMs which are inconsistent with the prohibition on imposition of
quantitative restrictions of Article XI:1 of GATT 1994

• Paragraph 2(a) of the Illustrative List covers measures which limit the
importation by an enterprise of products used in its local production,
generally or to an amount related to the volume or value of local
production exported by the enterprise.  limit on importation
• There is a conceptual similarity between this paragraph and
paragraph 1(b) in that they both cover trade-balancing measures.
• The difference is that paragraph 1(b) deals with internal measures
that affect products after they have been imported,
• while paragraph 2(a) deals with border measures affecting the
importation of products.
TRIMs which are inconsistent with the prohibition on imposition of
quantitative restrictions of Article XI:1 of GATT 1994

• Measures identified in paragraph 2(b) of the list involve a restriction of

imports in the form of a foreign exchange balancing requirement.

• Importation by an enterprise of products used in or related to local

production is limited by restricting the enterprise's access to foreign
exchange to an amount related to the foreign exchange inflows
attributable to the enterprise.
TRIMs which are inconsistent with the prohibition on imposition of
quantitative restrictions of Article XI:1 of GATT 1994

• Finally, paragraph 2(c) covers measures involving restrictions on the

exportation of or sale for export by an enterprise, whether specified
in terms of particular products, volume or value of products or in
terms of a proportion of volume or value of its local production.
• Since paragraph 2 applies the provisions of Article XI:1 of GATT 1994,
it deals only with measures that restrict exports.
• Other measures relating to exports, such as export incentives and
export performance requirements, are therefore not covered by the
TRIMs Agreement.
Prohibited TRIMs
1. local content requirements NTO ? | tend to resource / tend to market sudah
punya resources-nya sendiri kualitas, harga, kesinambungan ketersediaan
barang kualitas outputberpengaruh pada daya saing di pasar internasional.
2. restriksi impor tend ka1
to market
3. restrictions on the exportation or sale for export / domestic sale tend to
resources (Nadja) ka2
4. trade-balancing (balance the amount/percentage of imports with the
amount/percentage of exports)
5. a foreign exchange balancing requirement (inflows and outflows)
6. transfer technology or proprietary business information to local persons
7. kewajiban terkait SDM
Slide 15

ka1 kerugian bagi perusahaan yang tend to market adalah tidak mendapatkan kepastian output yang diharapkan ya
bu? akhirnya akan mempengaruhi tujuan untuk meluaskan size pasarnya itu tidak tercapai?
Elsa
kemala ainuura; 02/12/2021

ka2 Investor yang tend to resources, unlike tend to market yang dekat dengan target market, belum tentu target
marketnya ada di negara yang sama.
kemala ainuura; 02/12/2021
Prohibited TRIMs
1. local content requirements investor yang tend to market atau tend to sources jika investor
menggunakan local content, maka kualiats barang yang dihasilkan mungkin tidak lagi memiliki daya
saing yang tinggi | kualitas tidak sesuai, menghambat produksi karena spec dan harga tidak sesuai |
NTO perbedaan harga raw material
2. trade-balancing (balance the amount/percentage of imports with the amount/percentage of
exports) tend to market yang akan banyak melakukan import, akan kesulitan memenuhi ekspor,
karena hasil produksinya Sebagian besar dijual/dikonsumsi oleh pasar domestik
3. a foreign exchange balancing requirement (inflows and outflows)
4. restrictions on the exportation or sale for export / domestic sale requirementsmenguntungkan
tend to market, akan menyulitkan bagi tend to source karena pasarnya belum tentu di dalam
negeri dan dirugikan karena dibatasi pemasaran ke luar negeri
5. transfer technology or proprietary business information to local persons Transfer of Technology ~
Technical Assistance, selalu melekat dengan pembelian barang modal
6. Kewajiban SDM
Enforcement
• When the TRIMs Agreement went into effect in 1995, all
WTO member countries were required to:
1. Notify their non-conforming trade-related investment
measures. Member States were given 90 days to notify
WTO of any existing non-conforming measures.
2. Bring those measures into compliance with the
Agreement following a transition period.
Transation Period
• The length of the transition period varied based on the
Member's individual level of development.
1. Developed countries (such as the United States and the
countries of the European Union) received a two-year
transition period.
2. Developing countries received a five year transition
period.
3. Least-developed countries received seven-year
transition period.
Notification & Transation Period
• There were in total 43 notifications by 24 developing countries*
• After the stipulated transition periods had expired, 10 developing
countries under Article 5 of the Agreement requested extensions of
the transition period.
• At this time, all transition periods have expired, although a limited
number of countries were granted extensions for particular programs
• These extensions generally expired on or before December 2003
• By early 2007, virtually all notified TRIMs had been abolished by the
countries concerned
Indonesia: Local Content Requirements
Since before the WTO came into force, Indonesia has imposed local content
requirements in the automotive sector.

In addition, Indonesia also requires that set percentages of domestic products, such
as soybean cake and fresh milk, be consumed.

Both measures are local content requirements falling under paragraph 1(a) of the
Illustrative List annexed to the TRIMs Agreement.

There are indications that the local content requirements in fresh milk have been
abolished at the beginning of 1998 (although the WTO has not been notified of it)
Indonesia: Local Content Requirements
The Government of Indonesia notified the measures regarding the above two items to the
WTO.
It however announced on 31 October 1996 that it would withdraw its auto-related
notification on the grounds that the local content requirements in its auto sector did not
constitute a TRIM within the meaning of the Agreement.
Those measures that the WTO has been notified of are not in contravention of the
Agreement, but Japan must still watch that they are not expanded and that they are
eliminated on schedule.
The National Car Programme, which was introduced in 1996, is the measure that gives an
advantage in proportion to achievements of local content requirements. A panel was
established in June 1997 by the requests of the United States, EU, and Japan.