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TRIMs are often adopted by governments wishing to attract and regulate foreign investment.

Since foreign direct investment is increasingly important in international trade, trade negotiators are concerned about TRIMS.

  1. investment incentives, such as loans, tax rebates, provision of services on preferential terms.

  2. requirements that investors must fulfil (eg. restrict some parts imports, increase locally produced components and materials to stimulate local production).

TRIMS include performance requirements, local content provisions, restrictions on ownership of property, licensing standards, nationality requirements, residency requirements, local procurement policies by government.

Governments need to have policy tools to hire locally. Governments wish to locate new factories in an underdeveloped region of the country. They want to balance exports and imports. Often governments are concerned that multinational corporations will have too much control over technological developments. Governments may wish to prevent MNCs from having complete control over technology.

The policies governments devise to respond to these objectives are resented by multinational corporations. MNCs want to make sure international agreements establish rights for foreign investors and reduce constraints on corporations.

Many people argue that because approximately 40 percent of world trade goes on within multinational corporations (intrafirm trade), corporations have a significant influence on international trade. International production is intertwined with international trade.

There was an agreement reached on TRIMs in the Uruguay Round. The WTO will not allow countries to insist upon conditions for foreign direct investment. The WTO will work to outlaw the use of TRIMS.

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