ANJUMAN-I-ISLAM’S

AKBAR PEERBHOY COLLEGE

OF
COMMERCE AND COMMERCE

Shaikh Afreen Iqbal

S.Y.BMS.
35.
IMPORT EXPORT
DOCUMENTATION.
Report on:
TRIPS and TRIMS AGREEMENTS
OF WTO
 WTO TRIPS Agreement
The Uruguay Round TRIPS Agreement is one of four new agreements
negotiated during the UR Round that deal with a substantive area totally new &
not previously governed by any part of the GATT’47 (the others being
Agriculture, Services, & Trade-Related Investment Measures (TRIMS)). It
incorporates by reference a number of other essentially unenforceable
international agreements or conventions on aspects of IPR.

TRIPS Agreement is the most comprehensive international agreement on

intellectual property rights & the only one actually enforceable (under GATT
Arts. XXI & XXII & the WTO dispute settlement understanding).

The TRIPS Agreement establishes enforceable minimum standards for the

protection & enforcement of IPR by WTO Members.

The TRIPS Agreement provides a transitional period for developing Members

until 01 January 2005 and for “least-developed” Members of 11 years from date
of entry into effect of the WTO (until 01 January 2006) for implementation of
the TRIPS Agreement. (Extended since to 2016).

TRIPS Agreement: Main Provisions on Patents

Section 5, Part II contains the following standards:

1) Patents shall be granted for any inventions, whether products or

processes, provided they are new, involve an inventive step, & are
capable of industrial application.

2) Patents shall be granted in all fields of technology. No discrimination is

allowed with respect to the place of invention, or based on whether the
products are locally-produced or imported.

TRIPS Agreement: Main Provisions on Copyright

1) Protection of works covered by the Berne Convention, excluding moral
rights to the expression but not the ideas, procedures, methods of operation, or
mathematical concepts as such.

2) Protection of computer programs as literary works & of compilations of

data.
TRIPS Agreement: Provisions on Trademarks
1) Definition of protected signs, e.g., those capable of distinguishing the goods
or services of one undertaking from those of other under-takings. Service marks
receive protection equivalent to that for marks for goods.

2) Registrability, but not filing of an application, can be dependent on use.

TRIPS Agreement: Provisions on Industrial Designs

1) Protection should be conferred on designs which are new or original.

2) Requirements for protection of textile designs should not impair the

opportunity to obtain such protection.

3) Exclusive rights can be exercised against acts for commercial purposes,

including importation.

4) The minimum term of protection is 10 years.

TRIPS Agreement: Provisions for Trade Secrets

1)Undisclosed information is to be protected against unfair commercial
practices, if the information is secret, has commercial value, & is subject to
steps to keep it secret.

2) Secret data submitted for the approval of new chemical entities for
pharmaceutical & agrochemical products should be protected against unfair
commercial use & disclosure by governments.

TRIPS Agreement: Provisions for Geographical Indications

1) WTO Members are obligated under TRIPS Art. 22.2 to provide legal means
for interested parties to prevent:

* use of any means in the designation or presentation of a good that indicates

or suggests that the good in question originates in a geographical area other
than the true place of origin in a manner that misleads the public as to its true
origin; or

* any use that constitutes an act of unfair competition within the meaning of
Paris Convention of 1967.
2) Members are also required to refuse or invalidate registration of a TM that
contains or consists of a geographical indication with respect to goods not
originating in the territory indicated, if it would mislead the public as to the
true place of origin.

WTO TRIMS Agreement

History of TRIMS Agreement
• Prior to the GATT Uruguay Round, there were several efforts to develop
a multilateral, enforceable Code of Conduct Regulating Cross-Border
Investment:

- Efforts after WWII including investment-related provisions of the Havana

Charter for an International Trade Organization found no agreement & was
never ratified.

- U.N. resolution on Permanent Sovereignty over Natural Resources (1962) &

Charter of Economic Rights & Duties of States (1974) foundered.

- U.N. Draft Code of Conduct on Transnational Corporations opposed by

developed nations went nowhere.

- OECD Declaration & Decisions on International Investment &

Multinational Enterprises & its Codes on Liberalization of Current Invisible
Operations & Capital Movements, likewise found little support beyond
developed nations.

• During preparatory process for the GATT Uruguay Round, U.S.A.

proposed that the multilateral trade negotiations should:

- seek to increase disciplines over national investment measures that divert

trade flows at expense of other GATT parties

- explore a broad range of investment issues including National & MFN

treatment & right of establishment

- examine various types of trade-related investment measures which are

inconsistent with GATT trade provisions.

• Two basic issues were encountered:

- should disciplines in this area be limited by existing GATT rules or expanded
to develop a multilateral investment regime? &

- whether some or all actionable trade-related investment measures should be

prohibited outright or dealt with on a case-bycase basis demonstration of direct
& significant restrictions & their adverse effects on trade – e.g., via dispute
settlement

What’s the problem?

- Ancient Maxim: Investment follows trade & trade follows investment – they
are inextricably interrelated in modern business.

- This interrelationship raises 2 issues:

> Trade restrictions can hinder Foreign Direct Investment (FDI) &

> Investment regulations can hinder Trade.

• The UR Agreement on Trade-Related Investment Measures (TRIMS) is a

very limited effort to achieve multilateral disciplines on investment
regulation but only to the extent it directly relates to GATT/WTO trade
rules & principles & doesn’t act to restrict international trade in Goods.

• The General Agreement on Trade in Services (GATS) and the Agreement

on Trade-Related Intellectual Property Rights (TRIPS) contain limited
provisions relating to investment in those areas.

• The TRIMS Agreement does not regulate FDI as such but only addresses
measures resulting in discriminatory treatment of imports & exports by
foreign firms of other WTO Members.

• “Investment” (for purposes of TRIMS) is not defined as such but relates

generally in the context of the TRIMS to Foreign Direct Investment
(FDI).

• Note: FDI is generally defined (by the IMF, OECD, others) as

“ownership by a foreign firm or individual of 10% or more of the shares
or voting power of an incorporated entity or the right to 10% or more of
the profits of an unincorporated entity.

• The TRIMS Agreement essentially forbids (e.g., requires the elimination

or dismantling of) FDI-related measures as conditions for either:
- admission or treatment of FDI in a WTO Member

- qualification for FDI incentives by a WTO Member

TRIMS: Basic Substantive Obligations:

• No WTO Member may apply an investment-related measure that is
prohibited by or inconsistent with the provisions of:

- GATT Art. III (National Treatment of imported products) or

- GATT Art. XI (Prohibition of quantitative restrictions on imports or

exports) except as permitted under provisions of the TRIMS Agreement.

• An Illustrative list of prohibited TRIMS is annexed to the TRIMS

Agreement.

But, generally, they include:

- Local Content measures

- Trade Balancing measures.

• “Local Content” measures are measures setting out minimum levels of

locally-made components that must be incorporated in goods or services
produced domestically.

• “Trade Balancing” measures are measures requiring an investor to use

earnings from its exports to pay for imported inputs or other imports.

TRIMS: Basic Substantive Obligations (2):

• Members must notify to the WTO any investment measure that is
inconsistent with the GATT (Arts. III, XI).

• Members must eliminate any TRIM that is inconsistent with Arts. III, XI
on a schedule of 2 years from entry into effect of the WTO for developed
countries, 5 years for developing countries, & 7 years for least-developed
ones.

• But, note: the WTO Council for Trade-in-Goods may, upon request,
extend the transition period for developing or LDC countries subject to
conditions imposed on them
 • Also, note, that Viet Nam may be required to eliminate any TRIMS
sooner by reason of requirements imposed under its bilateral WTO
accession agreements.

* Members may not institute any new TRIMS or amend any existing measures
that would result in, or increase, their inconsistency with GATT Arts. III, XI
(“Standstill” Clause).

TRIMS: Basic Substantive Obligations (3):

• Special & Differential Treatment:

- Developing Members that can demonstrate particular difficulties in

implementing the provisions of the TRIMS Agreement may request extension
of the transition period from the Council on Goods. More than 30 Members
have requested such an extension.

- The Agreement allows developing countries to deviate temporarily from

TRIMS requirements as permitted under GATT Art. XVIII & related
WTO provisions authorizing safeguards for balance of payments
purposes.

• TRIMS: Transparency Provisions:

- The TRIMS Agreement requires Members to notify to the WTO

Secretariat lists of publications in which their TRIMS may be found.

- The TRIMS Agreement established the WTO Committee on Trade-

Related Investment Measures to review notifications & serve as a forum to
examine Member implementation of the Agreement.

Illustrative List of TRIMS:

• Local Content – impose some certain amount or value of domestic inputs

• Trade Balancing – volume or value of imports tied to levels of exports

• Foreign Exchange Balancing – requires that foreign exchange made

available for imports must be a certain proportion of the value of foreign
exchange realized from exports

• Foreign Exchange Restrictions – restricts access to foreign exchange in

order to constrain the volume of imported inputs
 • Manufacturing Requirements – requires certain products to be produced
locally

• Manufacturing Limitations – prevents firms from manufacturing certain

products or product lines in the host country

• Technology Transfer – requires specified technology to be transferred to

host country for use locally or certain types of R&D to be conducted
locally

• Licensing of Technology – requires investor to license technology for

use in the host country

Illustrative List of TRIMS (2):

• Domestic Sales – requires an investor to sell a certain proportion of its
output in the host country

• Export Performance – requires that a minimum proportion or value of

production in host country be exported

• Export Controls – certain products may not be exported

• Product Mandating – requires investor to supply certain markets with

designated products or products manufactured in a specified facility or
operation or some products may be exported only from host country

• Remittance Restrictions – restricts the right of the investor to repatriate

returns from its investment

• Local Equity – requires that a certain percentage of a firm’s equity must

be held by local investors in the host country.

• Market Reserve Policy – some markets reserved for local production

Other GATT/WTO Agreements Re: TRIMS General Agreement

on Trade in Services (GATS):
- The TRIMS Agreement applies only to trade in goods.

- Under GATS, trade in services is defined by 4 modes of supply, Mode 3 of

which is “supply of services through commercial presence in the territory of
another Member”.
- Although GATS is not an investment agreement as such, it does address the
terms & conditions upon which an investor may establish itself through
“commercial presence”.

- With regard to “establishment”, the GATS defines national treatment as an

obligation that relates only to a Member’s scheduled service commitments &
not as a principle of general application.

- So, the GATS provides for national treatment to be granted only partially (in
those Services sectors or sub-sectors it permits foreigners to participate in) or
subject to specified conditions on their participation.

Other GATT/WTO Agreements Re: TRIMS (2)

• Agreement on Trade-Related Intellectual Property (TRIPS):

- the working definition of “investment” or “foreign direct investment” (FDI) in

many inter-governmental investment agreements includes Intellectual Property.

- Although the TRIPS Agreement does not govern FDI directly, it has
provisions establishing standards for protection & enforcement of IP rights.

- This raises a question, for example, as to whether a TRIMs requiring transfer

of IP-protected technology or use of such technology in the host country as a
condition for admission of investment or incentives could be held to violate the
TRIPS Agreement as well as the TRIMS Agreement.

• Subsidies & Countervailing Measures Agreement (SCM)

- Certain fiscal, financial or indirect investment incentives designed to attract

FDI could fall under the definition of “Subsidy” under the SCM Agreement,
e.g., tax credits, export-related incentives, etc. They are prohibited if granted
contingent upon exportation of goods by the investor or use of domestic over
imported goods, and could, therefore, violate the SCM Agreement as well as
the TRIMS Agreement.