RESTRICTEDWORLD TRADE
ORGANIZATIONG/TRIMS/M/9
13 January 1999
(99-0087)
Committee on Trade-Related Investment Measures
MINUTES OF THE MEETING HELD ON 14 SEPTEMBER 1998
Chairperson:  Mr. Dimitrij Gr čar  (Slovenia)
1. The Committee on Trade-Related Investment Measures held its ninth meeting on
14 September 1998.
2. The Committee adopted the following agenda:
A. NOTIFICATIONS UNDER ARTICLE 5.1 OF THE AGREEMENT ON TRADE-
RELATED INVESTMENT MEASURES
B. NOTIFICATIONS UNDER ARTICLE 6.2 OF THE AGREEMENT ON TRADE-
RELATED INVESTMENT MEASURES
C. INDIA – EXPORT AND IMPORT POLICY, APRIL 1997-MARCH 2002
D. OBSERVER STATUS FOR INTERNATIONAL INTERGOVERNMENTAL
ORGANIZATIONS
E. ANNUAL REPORT (1998) TO THE COUNCIL FOR TRADE IN GOODS
A. NOTIFICATIONS UNDER ARTICLE 5.1 OF THE AGREEMENT ON TRADE-RELATED
INVESTMENT MEASURES
3. The Chairman recalled that at the meeting held in March 1998 the Committee had discussed
issues relating to specific notifications submitted under Article 5.1 of the Agreement on Trade-
Related Investment Measures ("the Agreement") and that, in addition,  one delegation had posed
questions regarding the implementation of Article 5.2  (G/TRIMS/M/8, paragraphs 4-34).  Subsequent
to that meeting, written questions submitted by the United States had been circulated in documentG/TRIMS/W/13.  New notifications under Article 5.1 had also been received recently from Bolivia
(document G/TRIMS/N/1/BOL/1) and Ja maica (document G/TRIMS/N/1/JAM/1).
4. The representative of Colombia, also speaking on behalf of Ecuador and Venezuela
,
responded to questions posed by the United States in document G/TRIMS/W/13 regarding the
common automotive régime adopted in th e framework of the Andean Community.1  She emphasized
that no change had occurred in this régime since it had been notified under Article 5.1.  In response to
a question by the United States on the parameters of a possible new régime, she stated that no new
Andean automotive régime had been defined,  bu t that the Automotive Convention was constantly
reviewed in light of the economic development needs of the countries and of their international
commitments.  In response to a question by the United States as to whether it was true that it had beenprovisionally decided to establish local content requirements as high as 45 per cent in 1999 and to
                                                     
1 The responses provided by Colombia have also been circulated in G/TRIMS/W/17.G/TRIMS/M/9
Page 2
increase the percentage thereafter, she observed that no decision had been taken, provisional or
otherwise, to establish local content requirements at 45 per cent in 1999 and at higher levels
thereafter.  There were also no plans to change the way in which the existing local content
requirements operated.  In response to a question by the United States on how the application of new
requirements could be reconciled with Article 5.4 of the Agreement, she stated that, as already had
been explained, there were no new requirements.  With respect to a question posed by the United
States as to whether it was true that a new régime was envisaged which would establish local content
requirements for the period 1999-2004,  and how this could be reconciled with Article 5.2 of the
Agreement,  she stated that no new Andean automotive régime had been defined for the period 1999-
2004, and that any future régime would have indu strial policy and consistency with the WTO
Agreement as a reference framework.
5. The representative of Ecuador responded to a question by the United States in document
G/TRIMS/W/13 on how proposals to change Ecuador's automotive régime were consistent with
commitments undertaken by Ecuador in the context of its accession to the WTO by saying that, since
Ecuador was a member of the Automotive Convention which existed in the framework of the Andean
Community,  the replies provided by the representative of Colombia also applied to Ecuador.
6. The representative of the United States thanked the representatives of Colombia and Ecuador
for their answers and indicated that his delegation might wish to revert to this matter at a later stage.
7. The representative of Argentina responded to questions posed by the United States in
document G/TRIMS/W/13 regarding Decree No. 33/96 which had made certain changes to measures
applied by Argentina to automobiles.  In response to the question of whether this Decree had
increased the local content requirements above those in the 1991 Decree, he stated that the changeintroduced in Decree No. 33/96 concerned the method of calculation of the level of local content in
automobile production.  Pursuant to the Decree,  the dutiable value system was replaced by the
valuation of the parts in f.o.b. terms.  This was designed to overcome the limitations imposed by the
previous method on technological changes in the automobile industry.  Parts with local content might
be heavier, measured in dutiable value terms, but in terms of relative prices they were of lower value,compared with new inputs incorporating technological change, which weighed less.  In response to
the second question posed by the United States, he stated that the change to a model-specific
measurement of local content did not increase the inconsistency of the régime with the Agreement.
The expansion of the automobile industry since 1996 had been taken into account in Decree
No. 33/96, which allowed the possibility of gradual integration with 50 per cent of imported content
averaged over the three years from the date it had come into effect.  In this way,  new models received
preferential treatment.  If the local content requirement had continued to be applied by category,  itwould have been difficult to reach,  given the high percentage of new models in the total produced.
With respect to the question raised by the United States as to whether the régime newly applied to
auto parts manufacturers,  he stated that auto manufacturers had always participated in the régime,
although indirectly.  According to the current me thodology, manufacturers of auto parts might decide
voluntarily not to assign or transfer their export  credit and choose their own counter-trade scheme.
This allowed them to supply automotive assemblers with parts or units which had already been offset
by counter-trade as a result of being included in the autoparts manufacturers' own programmes.  This
change or extension of the way in which Decree No. 33/96 operated did not lead to any penalties,
which did not exist previously either.  It was voluntary and involved no penalties.  Regarding the
United States' question on the intentions of Argentina with regard to its automotive régime by 1January 2000,  he stated that,  since it began in 1991,  the Argentine automotive régime had been
intended as a transitional régime which would end on 31 December 1999.  As from the year 2000,
MERCOSUR would have a common policy for the au tomotive sector, which would be governed by
Decision 24/94 of the Council of the Common Market.G/TRIMS/M/9
Page 3
8. The representative of the United States thanked the representative of Argentina for the
answers provided.  He noted that in document G/TRIMS/W/13 his delegation had also addressed
certain questions to the delegations of Uganda and Nigeria,  but that no answers had as yet been
provided.  In this context, he drew attention to the provisions of Article 6.3 of the Agreement.
9. The representative of the United States recalled that at the last meeting of the Committee her
delegation had posed questions on how Members which had made notifications under Article 5.1 of
the Agreement planned to come into compliance by 1 January 2000.  To date, no answers had been
received to these questions.  In her delegation's view, the request for this information was a matter of
transparency and clearly fell within the terms of Article 6.3 of the Agreement,  which provided that
each Member shall accord sympathetic consideration to requests for information on any matter arising
from this Agreement raised by another Member.  In essence, the Agreement provided only a
temporary five year transition period of legal cover to developing country Members for measureswhich would otherwise be inconsistent with Articles III and XI of GATT 1994.  Thus, the timely
elimination of TRIMs was the key issue concerni ng implementation of the Agreement.  In this
connection, she noted that many of the Members who refused to answer the questions posed by her
delegation had been actively pursuing the issue of the implementation of the WTO Agreement in
other areas.  While she understood that many Memb ers would continue to argue that there was no
legal requirement to provide the information requested,  this argument missed the point.  The
questions posed by the United States were designed to serve several purposes:  first,  to emphasize the
strong concern of the United States that the notified TRIMs would be eliminated by 1 January 2000;
second,  to bring the matter of the elimination of notified TRIMs to the attention of the authorities of
the Members in question;  third,  to express the concern of the United States about the disturbing trendof several Members which had taken steps to extend their TRIMs in the automotive sector well
beyond 1 January 2000; and finally, to ensure an orderly elimination of the notified TRIMs to avoid
the wholesale filing of requests for consultations under the DSU after the expiry of the deadline for
elimination of TRIMs on 1 January 2000.  There would likely be only two more meetings of the
Committee before 1 January 2000 and her delegation had submitted these questions in good faith andremained hopeful that answers would be provided by the time of the Committee's next meeting.
10. The representative of Japan stated that the timely elimination of all TRIMs was a commitment
which had been accepted by all Members.  In light of this obligation and of the importance of securing
transparency in the implementation of the Agreement,  as envisaged by Article 6.3,  it was crucial for
the Committee to receive answers to the United States' questions.  Prompt submission of answers
would be a first step towards the elimination of notified TRIMs and would thus signal the strong
commitment of Members to the implementation of the Agreement.  More generally, the Committee
should address the question of how it should proceed as the date of 1 January 2000 drew nearer.  In
this connection,  he recalled that Members had reaffirmed their commitment to the full and faithful
implementation of the WTO Agreement in paragraph 8 of the Declaration adopted at the Second
Ministerial Conference,  and that at that Conference various developing country Members had
stressed the importance of adequate implementation.  The key issues which arose in this regard werethe timely elimination of TRIMs and the review of the implementation of the TRIMs Agreement.
Thus, it was appropriate for the Committee to start its review of the implementation of the Agreement
so as to ensure that the results of this review could be reported through the Council for Trade in
Goods to the Third Ministerial Conference.
11. The representative of Switzerland stated that the elimination of TRIMs notified under
Article 5.1 was an important issue.  The purpose of the Agreement was to eliminate such measures,
and the deadline for their elimination was approaching.  The process of elimination of notified TRIMs
should take place in a transparent manner.  If information on the elimination of such TRIMs, as
requested at the last meeting, was already available,  this should be communicated to the Committee.
In this respect, it would be interesting to learn when the necessary internal processes by the Members
in question would start.  A discussion of that information in the Committee would be appropriate andG/TRIMS/M/9
Page 4
within the mandate of the Committee.  His delegation was also of the opinion that the Committee
should as soon as possible start consultations on the review of the Agreement which was provided for
in Article 9.
12. The representative of the European Communitie s recalled that at the last meeting his
delegation had endorsed the questions posed by the United States.  His delegation attached great
importance to the effective elimination of notified TR IMs and considered that it was in the interest of
all Members that there be transparency as regards the steps taken by Members in this respect.
13. The presentative of India recalled that at the last meeting many delegations had made the
point that Article 6.3 of the Agreement could not be construed to mean that Members which were
obliged to eliminate notified TRIMs by 1 January 2000 should explain to the Committee what internal
processes and procedures they had adopted in the meanwhile to fulfil that obligation.  Article 6.3 was
designed to cover a situation in which Members wished to raise questions about a measure taken byanother Member, as, for example, the issue raised by several Members regarding India's recent
measures in the automotive sector.  However, this provision could not reasonably be interpreted to
require Members, before a particular obligation became effective,  to provide information on the
internal processes and procedures which Members intended to use to fulfil the obligation.  He pointed
out that there were provisions in other areas of the WTO Agreement which contained obligations
regarding steps to be taken by developed country Members by certain dates,  and expressed doubts as
to whether developed country Members expected to be asked to provide information on how they
intended to comply with those obligations at each m eeting of the relevant WTO bodies.  When,  in the
context of one agreement, this matter had been raised, the response had been that, since Members had
accepted an obligation to take action by a certain date, questions concerning possible non-compliancewith that obligation would become relevant only after that date.  It was therefore surprising that in this
Committee an approach was being proposed wher eby Members, especially developing country
Members,  would in each meeting have to indicate th e steps they intended to take to fulfil obligations
which were not yet applicable.  It was not in the interest of developed country Members to create a
situation in this Committee which could give rise to a perception at the domestic level in developingcountries that undue pressure was being put on developing countries.  It would be very difficult for his
delegation to indicate in the Committee the steps th e Indian Government intended to take in order to
full obligations under the Agreement before the matter had been discussed with the Indian Parliament.
In sum, the approach suggested was not productive and he therefore requested that the delegations
which had requested information on steps which Members intended to take under Article 5.2 of the
Agreement reconsider their position on this issue.
14. The representative of Argentina noted that the United States had recognized that there was no
legal obligation to provide information regarding th e internal procedures which Members might use to
eliminate previously notified TRIMs.  He also emphasized that the TRIMs Agreement represented a
delicate balance of rights and obligations which should not be modified through the working
procedures of the Committee.  Regarding the proposal  to initiate consultations on the review of the
Agreement under Article 9,  he considered that it would be premature to start such consultations in theCommittee because this matter required consideration in a broader context.
15. The representative of Canada stated that all Members were aware that the deadline of
1 January 2000 for the elimination of notified TRIMs was approaching fast.  Her delegation wished to
ensure that this deadline was met.  She encouraged  delegations to provide information on their phase-
out plans or any indication of their capacity to meet the deadline provided for in Article 5.2.However, her delegation did not view this in terms of legal obligations.
16. The representative of Egypt supported the views expressed by India and Argentina.G/TRIMS/M/9
Page 5
17. The representative of Colombia stated that her delegation's views on this matter were
reflected in paragraph 25 of the minutes of the last meeting (G/TRIMS/M/8),  and expressed support
for the views stated by the representatives of India and Argentina.
18. The representative of Mexico stated that there was no legal requirement in the Agreement to
provide information on steps intended to be take n to ensure compliance with Members' obligations
under Article 5.2.  To discuss this matter at this time in the Committee was not only premature, but
also risked being counterproductive in a domestic context, particularly where Members were in
consultations with domestic industry in order to decide how best to comply with their obligations.  It
might also prejudge the position of notifying Members with regard to other Articles of the Agreement.
Her delegation considered that it was important to follow closely developments in other WTO bodies
so that this matter could be addressed in a proper,  more global perspective.
19. The representative of the Philippines, speaking on behalf of ASEAN WTO Members ,  stated
that his delegation's position on this matter was reflected in paragraph 24 of the Minutes of the last
meeting  (G/TRIMS/M/8).
20. The representative of New Zealand recalled that on previous occasions her delegation had
expressed its interest in the plans and preparations of Members for the orderly phase out and
elimination of notified TRIMs.  In doing so, it had been conscious of the usefulness in the domesticcontext of having in place an approach which would prepare industry to make the necessary transition
so that Members could meet their obligations under Article 5.2 by the due date.  Her delegation was
also conscious of the requirement for a review of the Agreement contained in Article 9.
21. The representative of Pakistan said that his delegation's position had remained unchanged and
was reflected in paragraph 22 of the Minutes of the last meeting (G/TRIMS/M/8).  He also expressed
support for the views expressed by India and Argentina.
22. The representative of Australia stated that the discussion on this issue at the present and at the
previous meetings of the Committee showed that this was clearly an aspect of the implementation of
the Agreement on which Members had different views.  Her delegation therefore considered that it
was appropriate to deal with this matter in the context of the review of the Agreement under Article 9.In this connection, she suggested that the Committee defer formal consideration of this issue and
revert to it as part of consultations on the mandate for a review under Article 9.
23. The representative of the United States stressed that the questions posed by her delegation
were intended to seek very simple information on relevant domestic procedures of other Members,
and that her delegation had not suggested that answer s to these questions be discussed or reviewed in
the Committee.  In response to a point made by India,  she stated that the United States stood ready at
any time to answers questions as to how it in tended to implement its commitments under the WTO
Agreement.  Her delegation considered the elimination of notified TRIMs to be a very important
market access issue and took the obligation to eliminate these TRIMs by 1 January 2000 very
seriously.  The United States had posed its questions in good faith in an effort to eliminate any
possibility that Members would claim that they were unprepared for, or unaware of,  their obligation
to eliminate notified TRIMs by 1 January 2000.  On 1 January 2000,  the United States would nothesitate to exercise its WTO rights with regard to any notified TRIMs which had not been eliminated.
24. In regard to the proposal that the Committee start consultations on the review of the
Agreement under Article 9, the representative of India stated that this would be premature for two
main reasons.  First, paragraph 9(a)(i) of the Declaration adopted at the Second MinisterialConference specifically provided for a considerati on of issues brought forward by Members regarding
implementation of the WTO Agreement as part of the General Council's preparatory process for the
Third Ministerial Conference.  It was therefore necessary to wait and see what issues with regard toG/TRIMS/M/9
Page 6
the implementation of the TRIMs Agreement would be raised by Members in that process.  Second,
Article 9 provided, inter alia , that in the course of the review the Council for Trade in Goods should
consider whether the Agreement should be complemented with provisions on investment policy and
competition policy.  In this respect,  account should be taken of the fact that the decision taken at the
Singapore Ministerial Conference to establish a Working Group on the Relationship between Tradeand Investment explicitly linked the creation of this group to the mandate contained in Article 9 of the
Agreement.  The implication of this was that the outcome of the ongoing study process in that
Working Group should be awaited before considering possible steps under Article 9 of the
Agreement.
25. The Committee took note of the statements and agreed
 to revert at its next meeting to
notifications under Article 5.1 of the Agreement.  The Chairman urged delegations to use their best
endeavours to provide answers to the questions  raised in the Committee in the interest of
transparency.
B. NOTIFICATIONS UNDER ARTICLE 6.2 OF THE AGREEMENT ON TRADE-RELATED
INVESTMENT MEASURES
26. With reference to document G/TRIMS/N/2/Rev.4,  which listed the notifications received so
far under Article 6.2, the Chairman stated that, although the decision taken by the Committee in
September 1996 on the procedures for the submission of notifications under Article 6.2 envisaged that
Members would make such notifications by 1 February 1997, there was still a considerable number of
Members which had not yet complied with this notification requirement.  He therefore urged all
Members to submit notifications under Article 6.2 as soon as possible.
27. The representative of the United States echoed the statement made by the Chairman.
28. In response to a point raised by the United States at the last meeting, the representative of
Hong Kong, China stated that Hong Kong, China did not apply any TRIMs and that his delegation
had therefore already fully complied with the requ irements of Article 6.2 through the notification
which it had submitted under this provision.
29. The Committee took note of the statements and agreed  to revert at its next meeting to
notifications under Article 6.2.
C. INDIA – EXPORT AND IMPORT POLICY,  APRIL 1997-MARCH 2002
30. The Chairman pointed out that this agenda item pertained to certain measures applied by
India with respect to automobiles and that it had been discussed at the last meeting of the Committee
at the request of the delegation of Japan  (G/T RIMS/M/8, paragraphs 40-45).  Communications from
Japan on this matter had been circulated in documents G/TRIMS/W/11 and 12 .
31. The representative of India stated that at the last meeting the representatives of Japan and the
United States had raised certain questions regarding the policy announced by the Government of India
in December 1997 relating to the import by joint venture car manufacturing companies of completely
knocked down ("CKD") and semi-knocked down ("SKD") kits into India.  His delegation had since
provided written responses to these questions,  which would be circulated to all Members.2  In view of
the number of questions and the detailed information which had been sought,  it was inevitable that ithad taken some time to reply.  His delegation hoped that the replies would clarify the concerns which
had been expressed at the last meeting.
                                                     
2 See documents G/TRIMS/W/15 and 16.G/TRIMS/M/9
Page 7
32. The representative of Japan expressed his appreciation for the answers provided by India.
but regretted that because of the late receipt of these responses, it was not possible to discuss these
answers thoroughly at the present meeting.  His delegation considered that India's newly introduced
auto policy was likely to be inconsistent with the Agreement and Japan would therefore study the
answers provided by India very carefully.
33. The representative of the United States thanked the delegation of India for the responses
which it had provided,  but also noted that it seemed that these responses did not address all sub-items
of the questions posed by Japan and the United States.  He therefore requested that the delegation of
India complete its responses.  Based on the partial responses provided by India,  his delegation was
convinced that the measures in question were clearly in violation of the Agreement.  In this respect, he
pointed to the requirements contained in paragraph 3 of Public Notice No. 60 which conditioned the
import of wholly and partially knocked down kits, which were otherwise prohibited from entry intoIndia, on the requirements that foreign manufacturers establish an investment of at least
US$50 million,  that local content of 50 per cent be achieved by the third year and 70  per cent by the
fifth year, and that there be a balance over the five-year period between the value of imports of
knocked down kits and components and the f.o.b. value of exports of cars and components.  The local
content and trade balancing requirements were manifestly in violation of items 1(a) and (b) of theIllustrative List annexed to the Agreement.  Since India had conceded in its responses to the questions
by the United States that the measures set forth in this Public Notice were not covered by India's
notification under Article 5.1 of the Agreement and that they had not been notified under Article 5.4,
India could not benefit from the transition period of Article 5.2 in respect of these measures.  He
asked the delegation of India to indicate what steps it intended to take to eliminate these measures.While he realized that the products in question were covered by an ongoing dispute settlement
proceeding regarding India's balance-of-payments situation,  it was the position of his delegation that
the measures were also inconsistent with the TRIMs Agreement.
34. The representative of India stated that most of the issues raised in the comments by Japan and
the United States had largely been addressed in the written responses provided by his delegation.
The measures recently introduced by India with regard to the import of CKD/SKD kits should be
viewed in the context of India's balance-of-payme nts position.  As Members were aware, India was in
the process of gradually phasing out its existing quantitative restrictions.  Under the proposed phase-
out plan, the restrictions on the import of CKD/SKD kits were to be phased out by the year 2002.  It
had therefore been felt necessary to evolve a mechanism by which these quantitative restrictions could
be administered in a transparent and objective manne r, and to obviate any subjective discretion in the
sanction of licences.  It was with this objective in mind that the policy regarding the conclusion of
memorandums of understanding  ("MOU") with car manufacturing firms had been formulated.  The
policy not only specified the manner in which such MOU's would be permitted,  but also laid down
the parameters which, if fulfilled, would lead to automatic licensing.  What was perhaps even more
important was that the policy did away with any discretion in the sanctioning of licences.  The
parameters of minimum investment, foreign exchange neutralisation and indigenisation were essentialon account of the balance-of-payment problems that I ndia continued to face, as also for the structural
adjustment that would be necessary as this balance-of-payments cover was gradually phased out.
Two components of the MOU policy had been highlighted by the United States as being violative of
the TRIMs agreement.  These related to the local content requirements and the provisions for foreign
exchange neutralisation.  Though India had addressed these issues in its replies, it was more thanwilling to consult with other delegations to furthe r clarify the issues which had been raised at the
present meeting. He reiterated that Public Notice No. 60 had to be viewed in the context of Article 4
of the Agreement, which allowed developing country Members to temporarily deviate from the
provisions of Article 2 for balance-of-payments purposes.  It was therefore evident that the entire
MOU policy was a transparent and objective mechanism through which the licensing régimeoperated.  In the absence of such a mechanism, there would be complete discretion in the hands of
certain officials, which was not desirable.  Any new policy, when introduced, was bound to beG/TRIMS/M/9
Page 8
subjected to close scrutiny,  and there were likely to be certain apprehensions till the fine print had
been closely examined and understood.  In this context, he informed the Committee that as many as
five major global automobile companies had now signed MOUs and had been recipients of licences
automatically.  It was his delegation's understanding that,  while there had indeed been some
apprehensions initially about the policy,  these had gradually been allayed and that companies from allover the world had finally appreciated India's c oncerns regarding its balance-of-payments problems
and had also found the MOU policy to be mutually beneficial.  It was against this backdrop that
almost all the major car manufacturers had now signed MOUs.
35. The representative of the European Communities recalled that at the Committee's last meeting
his delegation had also expressed its concerns regarding India's measures concerning the import of
CKD and SKD kits.  His delegation would carefully study the responses provided by India to the
questions raised by Japan and the United States and in this regard he reserved his delegation's right torevert to this matter at a future meeting of the Committee.
36. The representative of Australia stated that her delegation was concerned about India's
measures both for systemic reasons and because of Australia's specific commercial interests.
37. The Committee took note of the statements and agreed  to revert to this matter at its next
meeting.
D. OBSERVER STATUS FOR INTERNATIONAL INTERGOVERNMENTAL
ORGANIZATIONS
38. The Chairman recalled that the Committee had received requests for observer status from the
Inter-American Development Bank,  the Latin American Economic System and the Islamic
Development Bank.   In light of the ongoing consultations on the issue of observer status forinternational intergovernmental organizations in the framework of the General Council, he suggested
that the Committee defer consideration of these pending requests until a later time.
39. It was so agreed.
E. ANNUAL REPORT (1998) TO THE COUNCIL FOR TRADE IN GOODS
40. The Committee adopted its annual report (1998) to the Council for Trade in Goods (G/L/259).
Date of the next meeting
41. The Committee agreed to hold its next meeting on 15 March 1998.
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