WTO APPELLATE BODY AGREES WITH EU, REINFORCES RULING AGAINST BRAZIL TYRE IMPORT BAN

The WTO's highest court on 3 December confirmed an earlier ruling that Brazil's import ban on used and retreaded tyres violated multilateral trade rules because it was applied in a discriminatory manner.

Notably, the Appellate Body set a substantially higher bar for Brazil to make its import ban WTO-compliant, by reversing some aspects of the original panel's ruling.

In its dispute with the EU, Brazil had argued that retreaded tyres -- used tyres reprocessed for a second and final use -- had a shorter life span than new ones and therefore contributed to a faster accumulation of waste tyres. Growing piles of waste tyres in turn provide fertile breeding grounds for disease-carrying mosquitoes, Brazil said, and their sheer volume exceeds the country's capacity for environmentally responsible disposal.

Brussels had charged that the import limitations were motivated by a desire to protect local tyre makers rather than to pursue genuine public health objectives, pointing in particular to repeated court injunctions that allowed Brazil's retreaded tyre industry to import millions of otherwise-banned used tyres between 2000 and 2005. It also noted that Brazil had continued to import relatively small numbers of retreaded tyres from its Mercosur partners Argentina, Paraguay, and Uruguay.

The earlier panel had accepted that the import ban could be necessary on health grounds, but said that its application was discriminatory: the Brazilian retreaded tyre sector was benefiting at the expense of its EU counterpart. Furthermore, it noted that the imports of waste tyres under court injunction undermined Brasilia's own rationale for the prohibition (see BRIDGES Weekly, 20 June 2007).

The Appellate Body agreed that Brazil's import ban could be justified for public health reasons. However, it was stricter in assessing the extent to which the ban was "being applied in a manner that constitutes unjustifiable discrimination." For instance, it deemed the Mercosur exemption to have caused the import ban to be applied "in a manner that constitutes arbitrary or unjustifiable discrimination." It also reversed the panel's finding that the Mercosur exemption as well as the injunction-sanctioned imports would only be discriminatory if they resulted in tyre import volumes high enough to threaten the objective of the import ban.

The relatively low bar the initial panel set for Brazil to bring the ban into WTO compliance put Brussels in the unusual position of appealing a ruling that it had nominally won.

Environmental groups such as the Centre for International Environmental Law and WWF had welcomed the initial panel ruling, and criticised the EU's appeal (see BRIDGES Trade BioRes, 7 September 2007).

The Brazilian government has been working to convince the Supreme Court to stop the injunctions.

ICTSD reporting.

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