TRADE RELATED INVESTMENT MEASURES AND DEVELOPMENT STRATEGY

Trade related investment measures (TRIMs) refer to a set of conditions which are often applied to multinational enterprises. The most common TRIMs are local content requirements, minimum export requirements and local equity requirements. This article evaluates the use of these and other instruments in developing countries. It argues that the only sound economic case which can be made for these instruments is on second best grounds. This follows because their incidence is invariably correlated with other distortions, either in the form of investment incentives or a sheltered domestic market. In evaluating the role of TRIMs, one cannot isolate them from this wider set of measures.