Bridges Weekly Trade News Digest • Volume 10 • Number 21 • 14th June 2006

WTO In Brief

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BRAZIL FILES FIRST SUBMISSION IN RETREADED TYRES CASE

Brazil has defended its import ban on retreaded tyres on health and environment-related grounds, in its first written submission to the WTO regarding a dispute with the EU.

In November 2005, the EU formally challenged the WTO consistency of Brazil’s import ban on retreaded tyres, as well as related fines targeting the importation and subsequent marketing, transportation and storage of such tyres. Furthermore, the EU targeted Brasilia’s exemption of some countries — Mercosur partners Argentina, Paraguay, and Uruguay — from these measures, arguing that it violated WTO rules (see BRIDGES Trade BioRes, 3 February 2006)

At issue are car tyres that have been reprocessed for a second use. Brazil has argued that since retreaded tyres have a shorter life-span than new ones, they are more strongly linked than the latter to the adverse environmental and health effects caused by all waste tyres.

In its 8 June submission, Brazil justified the import ban under GATT Article XX(b)’s general exception for measures necessary to protect human life and health and the environment, arguing that no reasonable alternatives were available. Furthermore, it maintained that the fines were required to secure compliance with the import ban — and thus protected by GATT exceptions for measures that governments take to ensure conformity with WTO-consistent laws and regulations, outlined in Article XX(d).

Brazil argued that the exemption for Mercosur countries was necessitated by its obligations under the regional pact, a WTO-authorised customs union. Furthermore, it contended that since those obligations formed part of its domestic legislation, the Mercosur-specific exemption was central to compliance with its international obligations and domestic laws, and hence justified under Article XX(d).

According to WTO jurisprudence, an Article XX defense would require Brazil to prove that the measures were indeed ‘necessary,’ and that they were not being applied in an arbitrary or unjustifiably discriminatory fashion.

The first hearing of the panel is expected to take place in early July.

For more information, please see http://www.trade-environment.org/page/theme/tewto/tyrescase.htm.

ICTSD reporting.

FOUR LATIN AMERICAN COUNTRIES TABLE NEW PAPER ON TROPICAL PRODUCTS

Colombia, Costa Rica, Guatemala and Panama presented a new formal proposal (TN/AG/GEN/19) on the tariff treatment of tropical products, stepping away from earlier calls for duty- and quota- free trade that they had made as part of a larger group of eight Latin American countries (see BRIDGES Weekly, 24 May 2006).

The July 2004 Framework Agreement (WT/L/579) mandates Members to address the "full implementation of the long-standing commitment to achieve the fullest liberalisation of trade in tropical agricultural products" and ‘alternative products’ which could replace the cultivation of illicit narcotic crops.

While the late-April informal paper (JOB(06/129)) had argued that "fullest liberalisation" entailed the complete elimination of all duties and quotas, the 9 June submission simply stated that it meant that an eventual deal "must bring about tariff reductions that are substantially more ambitious" than those required by the general formula (see BRIDGES Weekly, 3 May 2006).

Specifically, the paper called for tropical products to face the maximum level of tariff cuts provided for under the eventual formula. For example, under the G-20 proposal, in which the highest tariffs are slated to be cut by 75 percent, the sponsors suggested that duties on tropical and alternative products should be slashed by that amount irrespective of where their current tariffs would have placed them in the tiered formula.

Furthermore, the submission stipulates that tropical products subject to tariff escalation - when countries levy higher tariffs on processed products than on unprocessed ones — should be subject to an additional 10 percent cut. This would amount to an 85 percent cut in the case of the G-20 formula.

The sponsors argued that developed countries should not be able to designate tropical and alternative products as ’sensitive’ and thus shield them from the full effect of tariff reduction.

Furthermore, the submission would require Members to implement liberalisation commitments for tropical and alternative products in half the time granted to developed countries for other farm products.

ICTSD reporting.