A note prepared by the commerce ministry states that the trade-related investment measures (TRIMs) agreement covers only trade-related investment measures and not investment per se. Therefore, "conditions applied as a pre-requisite for setting up shop in India do not attract TRIMs disciplines", the note said, a copy of which is available with the The Financial Express.

The finance ministry had stated that performance requirements are not permissible under the provisions of the TRIMs agreement of WTO unless exemptions are provided under the provision for transition period and notified to WTO. The ministry had thereby sought aclarification from the commerce ministry on whether performance requirements can be imposed on foreign investments.

The commerce ministry, in its opinion, has stated that negotiating history of TRIMs also shows that there was no consensus to include export performance requirements in the prohibited TRIMs. Hence, the condition of 75 per cent export on Rothmans does not attract TRIMs provisions.

The ministry has stated that once an investment has been made in the country, the TRIMs agreement provisions will be attracted if any advantage accrues on compliance with a mandatory and enforceable TRIM which violates Article III.4 or XI.1 of the General Agreement on Trade and Tariffs (Gatt), 1994. The commerce ministry has stated that none of the entries in the illustrative list of such TRIMs is attracted in the Rothmans proposal. The closest entry to the proposal is 1(a) of the annexure to the agreement which refers to products only. Since manpower is not a product, the condition proposed to be imposed onRothmans for recruiting local labour does not violate the TRIMs agreement. The finance ministry has also imposed certain other conditions for granting approval to the Rothmans proposal. The ministry has stipulated that Rothmans would not export tobacco exceeding twice the quantity used in the local manufacturing unit.

The Rothmans proposal has been hanging fire due to intense political lobbying both for and against the proposal. While a number of members of parliament (MPs) have written letters to the prime minister and industry minister supporting the proposal, several others have opposed the entry of the international cigarette major into the country.