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:

The correct answer is 1 and 3 only.

The Agreement on Trade-Related Investment Measures (TRIMs) is a WTO agreement that outlines rules for investment measures that can affect trade. Let us break down the statements to understand why statements 1 and 3 are correct, while statement 2 is incorrect:

1. Quantitative restrictions on imports by foreign investors are prohibited (Correct):
Under Article 2.1 of the TRIMs Agreement, members are prohibited from applying any trade-related investment measure that is inconsistent with the provisions of Article III (national treatment) or Article XI (general elimination of quantitative restrictions) of GATT 1994. Therefore, rules that restrict a foreign investor's imports by linking them to their export performance or local sourcing requirements (which act as quantitative restrictions) are strictly prohibited.

2. They apply to investment measures related to trade in both goods and services (Incorrect):
The TRIMs Agreement applies solely to investment measures related to trade in goods. It does not apply to trade in services, which is governed separately under the General Agreement on Trade in Services (GATS).

3. They are not concerned with the regulation of foreign investment (Correct):
The primary objective of TRIMs is not to regulate foreign direct investment (FDI) policies themselves (such as prescribing investment entry limits, ownership structures, or licensing). Rather, it focuses strictly on the trade-restrictive and distorting effects of investment measures. It governs how investment policies affect the international trade of goods, not the broader regulation of foreign investment.