UPSC Prelims 2020 Question:

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:

Explanation: 

• The coverage of the Trade Related Investment Measures (TRIMS) Agreement is defined in Article 1, which states that the Agreement applies to investment measures related to trade in goods only. Thus, the TRIMs Agreement does not apply to services. So, statement 2 is not correct.
  
  

• TRIMS recognizes that certain investment measures can restrict and distort trade.  It states that WTO members may not apply any measure that discriminates against foreign products or that leads to quantitative restrictions, both of which violate basic WTO principles. So, statement 1 is correct.
  
  

• The Agreement establishes standards that apply to domestic regulations that a country enacts in response to foreign investment, usually as a component of an industrial policy. Foreign investment is regulated by Foreign Exchange Management Act (FEMA), 1999. So, statement 3 is correct.
  
  

Therefore, option (3) is the correct answer.

Subject: Economics | Foreign Trade and Investment