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Q46 (IAS/2020) Economy › External Sector & Trade › World Trade Organization Official Key

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 :

Result
Your answer: —  ·  Correct: C
Explanation

The correct answer is Option 3 (1 and 3 only) based on the following justifications:

  • Statement 1 is correct: Under the TRIMS Agreement, WTO members cannot apply investment measures that restrict trade. Specifically, it prohibits "Local Content Requirements" and "Trade Balancing Requirements," which act as quantitative restrictions on imports by foreign investors, violating GATT Article XI.
  • Statement 2 is incorrect: The TRIMS Agreement applies exclusively to investment measures related to trade in goods. It does not apply to trade in services; services are governed separately under the General Agreement on Trade in Services (GATS).
  • Statement 3 is correct: TRIMS is specifically designed to address trade-restrictive and distorting effects of investment measures. It is not a comprehensive framework for regulating foreign investment itself (like an investment code); it only focuses on the trade-related aspects of such investments.

Therefore, as statements 1 and 3 are accurate while statement 2 is false, Option 3 is the correct choice.

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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Q. With reference to Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct ? 1. Quantitative restrict…
At a glance
Origin: Books + Current Affairs Fairness: Moderate fairness Books / CA: 6.7/10 · 3.3/10

This is a textbook 'Sitter' question. Every standard economy book (Singhania, Vivek Singh) explicitly covers TRIMS. The question relies entirely on the fundamental distinction between WTO agreements for Goods vs. Services. If you missed this, you are neglecting the 'International Organizations' pillar of the syllabus.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
Are quantitative restrictions on imports by foreign investors prohibited under the WTO Agreement on Trade-Related Investment Measures (TRIMS)?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > 13.6 Trade Related Investment Measures (TRIMS) > p. 384
Presence: 5/5
“trade distorting. Several restrictive measures on investment are prohibiting trade and hence are not allowable. According to the TRIMs provision, countries should not adopt the investment measures which restrict and distort trade. Investment measures are those steps used traditionally against foreign investment by host countries. Here, the TRIMs instruct that WTO members may not apply any measure that discriminates against foreign investment that violates basic WTO principles (like the MFN and National Treatment). WTO gives a list of prohibited investment measures or TRIMs like local content requirement, export obligation, domestic employment, technology transfer requirement etc. that violates trade. Few exemptions to developing countries are also provided under TRIMs.”
Why this source?
  • Explicitly says TRIMs instruct members not to adopt investment measures that restrict and distort trade.
  • States members may not apply measures that discriminate against foreign investment in violation of MFN and national treatment.
  • Gives examples of prohibited measures (local content, export obligation, technology transfer) illustrating the scope of banned trade‑distorting rules.
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > Trade-Related Investment Measures (TRIMs) > p. 544
Presence: 5/5
“• It is observed that certain investments distort the market and investors. TRIMs recognize G measures to overcome such issues.• TRIMs applies only to measures that affect trade in goods (not services).• All member nations are directed not to discriminate between domestic and foreign investments, particularly when government spending is involved.• WTO gives list of prohibited investment measures like local content requirements, export obligation, technology transfer, etc.”
Why this source?
  • Affirms TRIMs applies to measures affecting trade in goods (the domain where import restrictions operate).
  • Directs member nations not to discriminate between domestic and foreign investments, which covers import restrictions targeted at foreign investors.
  • Lists prohibited investment measures, reinforcing that trade‑distorting investment restrictions are banned.
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > 13.6 Trade Related Investment Measures (TRIMS) > p. 383
Presence: 4/5
“The Agreement on TRIMs of the WTO is based on the belief that there is strong connection between trade and investment. Restrictive measures on investment are”
Why this source?
  • Frames the Agreement on TRIMs as addressing the strong connection between trade and investment.
  • Characterizes restrictive investment measures as trade‑distorting, implying they are not allowable under TRIMs.
Statement 2
Do Trade-Related Investment Measures (TRIMS) apply to investment measures related to trade in both goods and services?
Origin: Web / Current Affairs Fairness: CA heavy Web-answerable

Web source
Presence: 5/5
"Article 1 Coverage This Agreement applies to investment measures related to trade in goods only (referred to in this Agreement as "TRIMs")."
Why this source?
  • This is the Agreement text (Article 1) explicitly defining the scope of TRIMs.
  • It states the Agreement applies only to investment measures related to trade in goods, excluding services.
Web source
Presence: 5/5
"This Agreement applies to investment measures related to trade in goods only (referred to in this Agreement as "TRIMs")."
Why this source?
  • Concise statement declaring the Agreement's coverage.
  • Clearly limits TRIMs to trade in goods only.
Web source
Presence: 5/5
"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."
Why this source?
  • Explains Article 1 and explicitly concludes that the TRIMs Agreement does not apply to services.
  • Provides an interpretive statement tying the Article 1 text to the exclusion of services.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > Trade-Related Investment Measures (TRIMs) > p. 544
Strength: 5/5
“• It is observed that certain investments distort the market and investors. TRIMs recognize G measures to overcome such issues.• TRIMs applies only to measures that affect trade in goods (not services).• All member nations are directed not to discriminate between domestic and foreign investments, particularly when government spending is involved.• WTO gives list of prohibited investment measures like local content requirements, export obligation, technology transfer, etc.”
Why relevant

Explicitly states TRIMs applies only to measures that affect trade in goods (not services), giving a clear rule about the scope being goods-only.

How to extend

A student could combine this with basic knowledge of WTO agreements to infer TRIMs' scope excludes service‑sector investment measures and so test the statement's validity.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > 13.17 Previous Years Questions > p. 402
Strength: 4/5
“• (c) A credit system granted by WTO to its members• (d) A credit system granted by IMF to its members• 3. With reference to Trade-Related Investment Measures (TRIMS), which of the following statements is/are correct? [2020] • 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• 4.”
Why relevant

Presents the exam-style proposition that TRIMs 'apply to investment measures related to trade in both goods and services' as an option, indicating this is a debated/clarified point in study materials.

How to extend

A student could use this to recognise the specific claim is examined and compare it against authoritative provisions (e.g., TRIMs text) to confirm or refute.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > 13.6 Trade Related Investment Measures (TRIMS) > p. 384
Strength: 4/5
“trade distorting. Several restrictive measures on investment are prohibiting trade and hence are not allowable. According to the TRIMs provision, countries should not adopt the investment measures which restrict and distort trade. Investment measures are those steps used traditionally against foreign investment by host countries. Here, the TRIMs instruct that WTO members may not apply any measure that discriminates against foreign investment that violates basic WTO principles (like the MFN and National Treatment). WTO gives a list of prohibited investment measures or TRIMs like local content requirement, export obligation, domestic employment, technology transfer requirement etc. that violates trade. Few exemptions to developing countries are also provided under TRIMs.”
Why relevant

Describes TRIMs as prohibiting investment measures that 'restrict and distort trade' and lists examples (local content, export obligations) that are typically linked to goods trade.

How to extend

A student could note the examples concern goods-related trade practices and thus reasonably infer TRIMs targets goods-related investment measures rather than services.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > 2020 > p. 553
Strength: 3/5
“• 1. In which one of the following groups are all the four countries members of G20? • (a) Argentina, Mexico, South Africa and Turkey• (b) Australia, Canada, Malaysia and New Zealand• (c) Brazil, Saudi Arabia and Vietnam• (d) Indonesia, Japan, Singapore and South Korea• 2. 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.”
Why relevant

Appears in a question context about which TRIMs statements are correct, reinforcing that the scope of TRIMs (goods vs services) is a key, testable distinction in these sources.

How to extend

A student could treat this as a prompt to consult the original TRIMs agreement or course notes to resolve the goods/services scope.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > Achievements of WTO > p. 546
Strength: 2/5
“• Use of restrictive measures for BOP reasons has gone down significantly. • There have been radical changes in trade, exchange and domestic reforms in the developing ö countries with improved investment opportunities and thus economic growth. • Through the Trade Policy Review Mechanism, the process of continuous monitoring of ö trade policy development has led to the promotion of greater transparency.”
Why relevant

Mentions WTO-led reforms improving investment opportunities and trade transparency, suggesting TRIMs functions within WTO's trade-focused mandate.

How to extend

A student could extend this by noting WTO's principal remit is trade (historically goods) and infer TRIMs aligns with that remit, guiding judgment about goods vs services coverage.

Statement 3
Are Trade-Related Investment Measures (TRIMS) concerned with the regulation of foreign investment?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > 13.6 Trade Related Investment Measures (TRIMS) > p. 384
Presence: 5/5
“trade distorting. Several restrictive measures on investment are prohibiting trade and hence are not allowable. According to the TRIMs provision, countries should not adopt the investment measures which restrict and distort trade. Investment measures are those steps used traditionally against foreign investment by host countries. Here, the TRIMs instruct that WTO members may not apply any measure that discriminates against foreign investment that violates basic WTO principles (like the MFN and National Treatment). WTO gives a list of prohibited investment measures or TRIMs like local content requirement, export obligation, domestic employment, technology transfer requirement etc. that violates trade. Few exemptions to developing countries are also provided under TRIMs.”
Why this source?
  • Defines investment measures as steps used traditionally against foreign investment by host countries.
  • Specifies that TRIMs instruct WTO members not to apply measures that discriminate against foreign investment (violating MFN and National Treatment).
  • Lists prohibited measures (local content requirement, export obligation, technology transfer) as examples of trade-distorting investment measures.
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > Trade-Related Investment Measures (TRIMs) > p. 544
Presence: 5/5
“• It is observed that certain investments distort the market and investors. TRIMs recognize G measures to overcome such issues.• TRIMs applies only to measures that affect trade in goods (not services).• All member nations are directed not to discriminate between domestic and foreign investments, particularly when government spending is involved.• WTO gives list of prohibited investment measures like local content requirements, export obligation, technology transfer, etc.”
Why this source?
  • Directs member nations not to discriminate between domestic and foreign investments, emphasizing treatment of foreign investment.
  • Clarifies that TRIMs apply to measures affecting trade in goods and identifies prohibited measures tied to investment.
  • Connects discriminatory investment measures explicitly to the TRIMs framework.
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > 13.6 Trade Related Investment Measures (TRIMS) > p. 383
Presence: 4/5
“The Agreement on TRIMs of the WTO is based on the belief that there is strong connection between trade and investment. Restrictive measures on investment are”
Why this source?
  • States the Agreement on TRIMs is based on a strong connection between trade and investment.
  • Highlights that restrictive measures on investment are central to TRIMs' concern.
Pattern takeaway: The 'Scope Swap' is a recurring UPSC trap for international agreements. They will take a treaty designed for 'Goods' and insert the word 'Services' (as seen in Statement 2). Always verify the jurisdiction of the agreement: Is it border measures (tariffs) or behind-the-border measures (investment rules)?
How you should have studied
  1. [THE VERDICT]: Sitter. Solvable purely by elimination if you knew the basic definition of TRIMS found in Nitin Singhania (Ch 18) or Vivek Singh (Ch 13).
  2. [THE CONCEPTUAL TRIGGER]: WTO Agreements architecture. Specifically, the separation of rules for Goods (GATT/TRIMS), Services (GATS), and Intellectual Property (TRIPS).
  3. [THE HORIZONTAL EXPANSION]: Memorize the 'Prohibited List' under TRIMS: 1. Local Content Requirements, 2. Trade Balancing Requirements, 3. Foreign Exchange Restrictions, 4. Export Restrictions. Contrast this with GATS (Services) modes (Mode 1-4).
  4. [THE STRATEGIC METACOGNITION]: When studying International Bodies, always create a 'Scope Matrix': Does it cover Goods? Services? IP? Investment? UPSC traps usually involve swapping these scopes (e.g., saying TRIMS covers services).
Concept hooks from this question
📌 Adjacent topic to master
S1
👉 Prohibition of trade‑distorting investment measures under TRIMs
💡 The insight

TRIMs forbids investment measures that restrict or distort trade and that discriminate against foreign investors.

High‑yield for WTO/foreign investment questions: knowing TRIMs’ core prohibition helps answer MCQs and explain conflicts between investment controls and trade rules. It links to MFN and national treatment principles and to disputes over investment‑related trade barriers.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > 13.6 Trade Related Investment Measures (TRIMS) > p. 384
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > Trade-Related Investment Measures (TRIMs) > p. 544
🔗 Anchor: "Are quantitative restrictions on imports by foreign investors prohibited under t..."
📌 Adjacent topic to master
S1
👉 TRIMs scope: applies to trade in goods, not services
💡 The insight

TRIMs covers measures affecting trade in goods only, so prohibitions target goods‑related investment measures.

Crucial distinction for exam questions comparing WTO agreements (e.g., TRIMs vs GATS). Helps eliminate wrong options and frames which national measures fall under WTO discipline.

📚 Reading List :
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > Trade-Related Investment Measures (TRIMs) > p. 544
🔗 Anchor: "Are quantitative restrictions on imports by foreign investors prohibited under t..."
📌 Adjacent topic to master
S1
👉 Typical prohibited TRIMs: local content, export obligations, technology transfer requirements
💡 The insight

TRIMs enumerates examples of measures regarded as trade‑distorting and therefore prohibited.

Memorising concrete examples is practical for short‑answer and MCQ formats; these examples connect to broader topics like industrial policy, conditional FDI, and dispute settlement under WTO.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > 13.6 Trade Related Investment Measures (TRIMS) > p. 384
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > Trade-Related Investment Measures (TRIMs) > p. 544
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > 13.6 Trade Related Investment Measures (TRIMS) > p. 383
🔗 Anchor: "Are quantitative restrictions on imports by foreign investors prohibited under t..."
📌 Adjacent topic to master
S2
👉 TRIMs scope — goods only (excludes services)
💡 The insight

TRIMs apply to investment measures that affect trade in goods and do not cover services.

High-yield for UPSC questions distinguishing WTO agreements' coverage; helps answer MCQs and mains questions on the remit of TRIMs versus GATS. Connects trade law topics (goods vs services) and prevents conflation of WTO agreements.

📚 Reading List :
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > Trade-Related Investment Measures (TRIMs) > p. 544
🔗 Anchor: "Do Trade-Related Investment Measures (TRIMS) apply to investment measures relate..."
📌 Adjacent topic to master
S2
👉 Typical prohibited TRIMs (local content, export obligations, technology transfer)
💡 The insight

TRIMs list and prohibit measures such as local content requirements, export obligations and technology transfer mandates that distort trade.

Useful for analysing what investment measures violate WTO rules and for case-based questions on policy restrictions; links to domestic industrial policy debates and WTO dispute examples.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > 13.6 Trade Related Investment Measures (TRIMS) > p. 384
🔗 Anchor: "Do Trade-Related Investment Measures (TRIMS) apply to investment measures relate..."
📌 Adjacent topic to master
S2
👉 Trade–investment nexus & non-discrimination (MFN, National Treatment)
💡 The insight

TRIMs are founded on the connection between trade and investment and forbid measures that discriminate against foreign investment in breach of MFN and national treatment principles.

Essential for framing answers on WTO principles and interpreting TRIMs' rationale; enables cross-linking with topics on GATT, WTO principles, and investment policy constraints.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > 13.6 Trade Related Investment Measures (TRIMS) > p. 384
🔗 Anchor: "Do Trade-Related Investment Measures (TRIMS) apply to investment measures relate..."
📌 Adjacent topic to master
S3
👉 TRIMs target discriminatory investment measures
💡 The insight

TRIMs prohibit measures that discriminate against foreign investment and violate MFN and National Treatment.

High-yield for WTO and international trade questions: clarifies the scope of TRIMs versus general investment policy, links trade law to FDI treatment, and helps answer MCQs and short-answer questions on WTO obligations and investment discrimination.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 13: International Organizations > 13.6 Trade Related Investment Measures (TRIMS) > p. 384
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 18: International Economic Institutions > Trade-Related Investment Measures (TRIMs) > p. 544
🔗 Anchor: "Are Trade-Related Investment Measures (TRIMS) concerned with the regulation of f..."
🌑 The Hidden Trap

Since TRIMS is about investment measures, the logical next question is on the 'Investment Facilitation for Development (IFD)' agreement. Note that India and South Africa have opposed making IFD a formal part of the WTO rulebook. Also, study the 'Peace Clause' under the Agreement on Agriculture (AoA), as it is the other major friction point.

⚡ Elimination Cheat Code

The 'Binary Scope' Hack: In WTO parlance, 'Trade' historically defaults to Goods. Services are handled separately under GATS. If you knew TRIMS applies ONLY to Goods (Statement 2 is False), look at the options: (A) includes 2, (B) is 2 only, (D) includes 2. By simply knowing 'TRIMS ≠ Services', you eliminate A, B, and D. Option (C) becomes the inevitable answer without even reading Statements 1 or 3.

🔗 Mains Connection

Link TRIMS to GS3 Industrial Policy (Make in India/PLI Schemes). While TRIMS bans 'Local Content Requirements', India's PLI (Production Linked Incentive) is carefully designed to be a subsidy on *output*, not a mandate on *input origin*, to remain WTO compliant. This nuance is pure Mains gold.

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