Bridges • Volume 12 • Number 5 • November 2008
Deadlines Loom for Tyres Compliance, Cotton Retaliation
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Brazil must bring its import restrictions on retreaded tyres into compliance with global trade rules by mid-December, a WTO-appointed arbitrator has ruled. Around the same time, the country will learn the value of trade sanctions it may impose to compensate for the economic damage resulting from US cotton subsidies found to contravene WTO disciplines.
The Appellate Body (AB) found on 3 December 2007 that Brazil’s import ban on retreaded tyres was in principle justified under Members’ right to protect human, animal or plant life or health, but discriminatory in its application (Bridges Year 12 No.1 page 13).
In 2000, Brazil prohibited the importation of retreaded tyres, arguing that they had a shorter life span than new ones and therefore contributed to a faster accumulation of waste tyres, which in turn provide fertile breeding grounds for disease-carrying mosquitoes. The EU challenged the ban at the WTO, alleging that it was motivated by a desire to protect local tyre manufacturers from import competition, rather than by the pursuit of genuine public health objectives. Importantly, the AB agreed with Brazil’s argument that the restrictions were based on legitimate health and environmental reasons. However, it faulted Brazil for continuing to import large quantities of used, at least equally harmful, tyres under injunctions from lower courts secured by the local tyre industry. The AB also found discrimination in the ban’s application since Brazil was allowing in retreaded tyres from its fellow Mercosur members Argentina, Paraguay and Uruguay.
Brasilia said it would need 21 months to complete domestic legal action to prevent courts from granting injunctions and to negotiate an agreement on tyre trade with other Mercosur countries. The EU argued that simplest way to comply would be to repeal ban, which could be done without delay, and requested WTO arbitration on the implementation period.
The arbitrator, Yasuhei Taniguchi, refrained from commenting on which means of implementation might be better. However, he found that past practice suggested that Brasilia could take the necessary action much faster, and set the ‘reasonable period’ at 12 months from the AB report’s adoption, i.e. 17 December 2008.
In related news, an arbitration panel was established on 15 October to determine the level of trade retaliation Brazil may impose on the US following the AB’s June ruling that the US had not brought its cotton subsidies in line with WTO rules (Bridges Year 12 No.4 page 13). Brazil estimated in 2005 that the harm caused to its economy by the illegal subsidies amounted to US$4 billion a year. It also warned that in addition to raising tariffs on US goods, retaliatory measures would include the suspension of certain obligations with regard to intellectual property rights and services. The arbitration panel should deliver its verdict within 60 days.
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