Bridges Weekly Trade News Digest • Volume 12 • Number 28 • 4th September 2008

Brazil Given until Mid-December to Comply with WTO Tyre Ruling

Discuss this articleShare your views with other visitors, and read what they have to say

A WTO-appointed arbitrator has given Brazil until mid-December to bring its import restrictions on retreaded tyres into compliance with a recent dispute ruling, well ahead of the September 2009 date that Brasilia was seeking.

The EU, which initiated the case against Brazil’s import ban on retreaded tyres, sought binding arbitration after it and Brazil were unable to agree on a “reasonable period of time for implementation” of the ruling. Brussels had petitioned for the deadline to be set for mid-October, but Brasilia argued that it needed more time to bring its domestic policies into compliance with the ruling.

‘Retreaded’ tyres are used automobile tyres that have been reprocessed for a second, final use. Brazil in 2000 placed an import ban on retreaded tyres, arguing that these tyres 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.

In the dispute, the EU, whose exports of retreaded tyres to Brazil had been halted almost entirely by the ban, had argued that the import measures were motivated by a desire to protect local tyre manufacturers from import competition, rather than by the pursuit of genuine public health objectives as claimed by Brasilia. It pointed to the fact that despite the ban, Brazil was continuing to import large quantities of used tyres under injunctions from lower courts secured by the local tyre industry. Brazil was also allowing in retreaded tyres from its fellow members of the Mercosur trade bloc - Argentina, Paraguay, and Uruguay.

The WTO’s Appellate Body ruled last year that although the import limitations could be justified as health and environmental safeguard measures, Brazil was applying them in a way that amounted to unjustifiable and arbitrary trade discrimination, in contravention of the WTO rules that allow trade to be restricted for such reasons.

Brazil believes that the import restrictions on retreaded tyres could be made WTO-compliant through two steps: domestic legal action to prevent lower courts from granting the injunctions sanctioning the importation of used tyres, and the negotiation of an agreement on tyre trade with other Mercosur countries. It argued that a reasonable date by which to accomplish the former, longer step would be by 17 September 2009, some 21 months after the WTO Dispute Settlement Body adopted the panel and Appellate Body reports.

In contrast, the EU says that the most “obvious” and prompt way for Brazil to comply with the ruling would simply be to repeal the import ban. It thought Brazil should implement the ruling by 17 October of this year.

The arbitrator, Yasuhei Taniguchi, refrained from commenting on which means of implementation might be better. However, he found that past practice suggested that the Brazilian government would need less than the 21 months it claimed to finish its ongoing federal supreme court case aimed at ending the offending injunctions. He also found that Brazil did not necessarily have to formally negotiate new rules with other Mercosur members before changing its tyre import regime, since it had altered its Mercosur policies through “mere domestic measures” in the past. He thus determined that a “reasonable period of time” would be 12 months, ending on 17 December 2008.

The case, which represents the first-ever challenge against trade restrictions imposed by a developing country for health and environmental reasons, has been closely watched by green groups.

ICTSD reporting.