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UPSC Prelims 2020 Paper-1 📅 04 Oct, 2020

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:

A
1 and 2 only
B
2 only
C
1 and 3 only
D
1, 2 and 3
Result Summary
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UPSC Prelims
2020 • 04 Oct, 2020 • Paper-1
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:
Correct Answer
1 and 3 only
Scope of the Agreement: The TRIMS agreement, negotiated under the World Trade Organization (WTO), is strictly limited to investment measures that affect trade i......
Ref/Book : UPSC Prelims 2020
Ref. Subject Economy
Chapter -
Ref. Topic International Trade
Pg. No -
💡 Analysis & Explanation
Scope of the Agreement ▼
The TRIMS agreement, negotiated under the World Trade Organization (WTO), is strictly limited to investment measures that affect trade in physical goods only. It explicitly does not cover trade in services (which falls under a separate treaty called GATS). Thus, statement 2 is fundamentally incorrect.
Import Restrictions Mechanism ▼
A core principle of TRIMS is to prevent member states from imposing measures that distort free trade. Therefore, it explicitly prohibits practices like enforcing quantitative restrictions on the amount of raw materials a foreign investor is allowed to import. Statement 1 is correct.
Regulatory Limits ▼
TRIMS does not act as a comprehensive, overarching framework to govern or regulate foreign direct investment policies broadly; it narrowly targets and eliminates specific trade-distorting conditions attached to investments. Statement 3 correctly defines this limitation.
Conclusion ▼
Statements 1 and 3 accurately reflect the treaty's strict legal parameters.
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