Agreement On Trade Related Investment Measures

By: sh

Paragraph 1, item a), from the illustration list includes local TRIMs that require the purchase or use by a company of products of national or national origin (local content requirements), while paragraph 1, point b), includes commercial compensation limiting the purchase or use of products imported by a company to an amount related to the volume or value of local products it exports. In both cases, the incompatibility with Article III:4 of the 1994 GATT results from the measure that the measure subjects imported products (purchased or used by a company) to less favourable terms than domestic products (to be bought or used by and by companies). When the TRIPS AGREEMENT came into force in 1995, all WTO member states were required to notify the World Trade Organization within 90 days (until 1 April 1995) of all non-compliant trade-related investment measures. A transition period has been granted to countries that have submitted a transition period in accordance with the notification in order to eliminate their non-compliant policies. Industrialised countries (such as the United States and European Union countries) have benefited from a two-year transitional period. Developing and least developed countries benefited from a transitional period of five and seven years respectively. Sorting is a rule that restricts the preference of domestic companies and thus allows international companies to operate more easily in foreign markets. Political measures, such as local content requirements and trade balance rules, which have traditionally been used to promote the interests of domestic industries and combat restrictive trade practices, are now prohibited. The TRIPS agreement prohibits certain measures that violate national treatment and quantity requirements imposed by the General Agreement on Tariffs and Trade (GATT). Any U.S. company interested in conducting international trade or investment activities in a WTO member country can benefit from this agreement.

Perhaps the most significant development in terms of investment prior to the Uruguay Round was a panel decision in a dispute settlement process between the United States and Canada. In the Canada Administration of the Investment Review Act (FIRA) (BISD 30S/140, 1984), a GATT dispute resolution body reviewed a complaint filed by the United States regarding certain types of businesses or holdings actually required by Canadian authorities by foreign investors as conditions for authorizing investment projects. These commitments related to the purchase of certain products from domestic sources (local content requirements) and the export of a certain amount or percentage of production (export performance requirements). The proceeding concluded that the local content requirements are inconsistent with the GATT Article III landing requirement, paragraph 4, but that the export performance requirements are not inconsistent with GATT`s obligations.

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