BRAZIL FILES FIRST SUBMISSION IN WTO RETREADED TYRES CASE

On 8 June, Brazil filed its first written submission with the WTO in a dispute with the EU concerning trade in retreated tyres. In its submission, Brazil responded to allegations made in the EU's first submission, which was confidentially submitted to the WTO in April. The WTO created a dispute settlement panel on 20 January 2006 regarding an EU claim that a Brazilian import ban on retreaded and used tyres, associated fines, the exemption of Mercosur countries from these measures and a domestic prohibition on the marketing of imported retreaded tyres were WTO inconsistent. In its response, which was made publicly available, Brazil did not deny the WTO inconsistency of the targeted measures and the EU allegation of a General Agreement on Tariffs and Trade (GATT) violation, but rather tried to make a defence of the measures under the Agreement's Article XX "exemption" clause (See Bridges Trade BioRes, 3 February 2006).

In its defence, Brazil held that the measures are justified under Article XX (b) as necessary to protect human life and health and the environment and that no alternative measures are reasonably available. Furthermore, it defended the so-called 'anti-circumvention' fines, a regime penalizing traders who circumvent import controls by placing fines on the importation, transportation, and storage of used and retreaded tyres within the country. It argued that these fines are justified under Article XX (d) because they are, as required by that article, necessary to secure compliance with the import ban.

Brazil's defence of the measures under Article XX

For the targeted measures to be allowed by the WTO as a legitimate exemption to other WTO rules, Brazil needs to satisfy a two pronged test. Firstly, it has to prove that the measures are necessary to protect human, animal or plant life or health, as specified in Article XX(b). Secondly, Brazil will have to prove that the measures fall within the chapeau of Art. XX in that they are not applied in an arbitrary or unjustifiably discriminatory fashion.

In taking on the first leg of the test, beginning with Article XX(b), Brazil pointed out that the Appellate Body has recognized in previous cases the legitimacy of policy that seeks to protect human life and health and the environment, and that WTO Members have significant autonomy to determine domestic environmental policy objectives and the legislation necessary to fulfil these goals. The submission went on to explain that the government policy objective behind the measures in question was indeed the protection of human life and health by directly reducing "harm to health and the environment" from waste tyre accumulation and disposal.

It further stated that the ban was 'necessary', as required by Article XX, because there was no less trade-distorting measure that would contribute so effectively in reducing the health and environmental threats posed by retreaded tyres. If the import ban had not been implemented, the submission argues, a high number of retreaded tyres would have entered Brazil and, as they have a short life span and can not be retreaded again, they would have quickly become waste. The import ban as such prevents waste tyres from entering the country, and so arguably reduces detrimental effects to human life and the environment. The domestic prohibition on marketing of imported retreaded tyres, insofar as it supports the import ban, is similarly defended under Article XX (b).

In laying out its defence of the 'anti-circumvention' fines under Article XX (d), Brazil contended that it was not, as alleged by the EU, protecting its domestic tyre industries. Rather, it said that the fine scheme was applied on an equal basis among domestic and foreign businesses and significantly enhanced the effectiveness of the ban.

After having argued that the measures were covered by the provisions of Article XX, Brazil went on to address the measures vis-à-vis the chapeau of Article XX and thereby satisfying the second prong of the test. They argued that the ban was applied in a reasonable, consistent and predictable and thus not arbitrary or discriminatory manner. They further noted that the relevant issue in making this determination was whether the measure was the least trade-restrictive measure possible and whether it was applied 'reasonably' which it held the measure to be.

The exemption of the Mercosur countries

In its submission, Brazil agued that the exemption given to Mercosur countries was required under its obligations to Mercosur, a customs union to which it belongs that is authorised under GATT Article XXIV. In 2002, a Mercosur tribunal found, in a case brought by Uruguay against Brazil, that the retreaded tyre measures were in violation of the Mercosur agreement. To comply with this ruling, Brazil exempted Mercosur countries Argentina, Paraguay and Uruguay from the measures, and so allows imports from these countries. The exemption was targeted by the EU as being in violation of Article XIII of the GATT, which prohibits discriminatory administration of quantitative restrictions, and the Most Favoured Nation (MFN) principle in Article I. Brazil, in its defence, underlined that the exemption did not raise new barriers but merely lifted the trade restrictions for the Mercosur countries. In addition, they argued, imports from Mercosur countries were necessary to secure compliance with Brazil's obligations under the WTO-recognised regional trade agreement. Under Article XX(d) Members are allowed to implement measures necessary to secure compliance with laws and regulations which are consistent with WTO law -- possibly including, Brazil argued, measures necessary to ensure compliance with regional agreements authorised under Article XXIV.

The first hearing of the panel is expected to take place in early July, after which time the EU submission will be released to the public.

The submission and other documents relating to the case are available online at
http://www.trade-environment.org/page/theme/tewto/tyrescase.htm

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