At the 22 November session of the WTO's Council for Trade in Goods (CTG) (its last regular session of the year), Members discussed, inter alia, a joint Brazil-India submission that seeks to re-open spaces for developing countries to use certain trade-related investment measures in their development policies (see BRIDGES Weekly, 24 October). Tabled in the context of the mandated review of the Agreement on Trade-Related Investment Measures (TRIMs), the proposal (G/TRIMS/W/25, searchable at http://docsonline.wto.org) -- which would see a significant departure from the current TRIMs disciplines -- was not looked upon favourably by the major trading powers. It was however, given warm support by a large number of developing countries.

Article IX of the TRIMs agreement stipulates that the CTG shall review the operation of the agreement and propose to the Ministerial Conference amendments to its text. It adds that the Goods Council may also consider augmenting it with measures on investment and competition policy.

Reactions to the proposal

According to one Geneva-based source, the US, in its criticisms of the Brazil-India proposal, underscored the importance of TRIMs in that it reiterates GATT disciplines -- notably, Article III and XI -- and stated that the review of TRIMs should not weaken its disciplines. The US also reportedly indicated concern regarding a number of implementation-related proposals (tirets 37-40 of JOB(01)152/Rev.1, available at http://www.ictsd.org/ministerial/doha/docs/imp_iss.pdf) that it said would undermine or 'water-down' TRIMs disciplines. As such, the US said it would oppose their inclusion in the mandated review. The EU similarly expressed concern that a "watering-down" of TRIMs disciplines would set a bad precedent. A source close to the negotiations reported that Canada said there was already great flexibility in TRIMs, with the possibility of granting extensions of time-periods to those who required them. Canada also cited a joint study by the WTO and UNCTAD Secretariats (G/C/W/307 & W/307/Add.1), which it felt expressed the view that TRIMs could be "costly" and "inefficient" -- a point reinforced by Switzerland.

Incidentally, Brazil and India have cited the same WTO/UNCTAD study as at best "a decisive argument" in favour of certain trade-related investment measures, and at worst, an argument "against any kind of general assumption that TRIMs measures necessarily distort trade."

Despite this, the EC and Canada were "not convinced" that the Indian and Brazilian proposals were useful, although the EC did express that it was willing to discuss these matters in a serious manner outside the review. In response to claims in the proposal regarding developed country uninhibited use of TRIMs disciplines over past decades, the EC reportedly said that what worked ten years ago may not work now.

Among developing countries, Pakistan, supported by Colombia, Cuba and the Philippines stated that the use of local content requirements had brought down prices in the domestic sector and had helped local manufacturers to be more competitive.

There is no explicit deadline for the TRIMs review, and sources indicate that discussions will likely continue at the next meeting of the CTG, scheduled for February 2003.

Background

Some Members allege that the TRIMs review mechanism was put in place explicitly for the consideration of investment and competition policy. Others, including Brazil and India, argue that the review was included in recognition that the scope of the final agreement exceeded the mandate given to it when the Uruguay Round was launched in Punta del Este in 1986 (that of examining relevant GATT disciplines and coming up with provisions to augment them in order to deal with identified trade restrictive and distorting effects of investment measures). Brazil and India insist that instead of addressing directly alleged adverse effects of TRIMs on trade, the TRIMs Agreement has simply prohibited some investment measures presumed to be inconsistent with Articles III and XI of GATT 1994 (i.e. the principles of 'National Treatment' and 'Prohibition of Quotas').

Furthermore, Brazil and India argue that this item falls into the current negotiating mandate via tiret 40 of the "Compilation of Outstanding Implementation Issues" document (JOB(01)152/Rev.1). Tiret 40 proposes, inter alia, that provisions be added to the TRIMs agreement in order to provide developing countries needed flexibility to implement development policies.

ICTSD reporting.