WTO Interim Panel Rules for EU in Brazil Retread Dispute

A WTO panel has reportedly made a preliminary ruling in favour of the EU’s complaint against Brazil’s retread import restrictions. According to local news sources, a confidential interim report circulated to the two parties on 12 March ruled that Brasilia’s policy of allowing imports from its Mercosur trade bloc while banning them from the rest of the world was not consistent with WTO rules. It is extremely rare that WTO dispute panels reverse the findings of their interim rulings.

Despite the apparent setback, Brazilian officials have expressed some satisfaction with the decision, suggesting that the findings would, if maintained, allow them to retain the measures with only modest adjustments.

The dispute dates back to 2005, when Brussels filed its complaint at the WTO. Brazil has argued that since retreaded tyres have a shorter life-span than new ones, they are more strongly linked to the adverse environmental and health effects caused by all waste tyres. According to the O Estado de São Paulo newspaper, the EU supplied 95 per cent of Brazil’s imports of retreaded tyres prior to the ban, accounting for roughly 25 per cent of its total market.

The panel agreed with the EU that Brazil’s policies violated prohibitions on most types of quantitative import restrictions and failed to meet the country’s national treatment and non-discrimination obligations. According to Brazilian newspaper O Globo, the panel also rejected Brazil’s argument that it lacked sufficient capacity to safely dispose of used tyres.

An ICTSD article reports that Brussels counters Brazil’s arguments saying they are not justifiable – not only because it imports retreaded tyres from elsewhere in Mercosur, but it also continues to import used tyres to convert them into retreaded tyres domestically. The EU argues that Brazil needs to improve its system for disposing of waste tyres.

In response to the report, Brazilian Environment Minister Marina Silva noted that there was a substantial difference in environmental terms between disposing of 100,000 tyres from Uruguay and doing the same for 80 million tyres from the EU.

In addition to health and environmental concerns, substantial commercial interests are at stake in the dispute. O Globo reports that while used tyres can be imported for as little as $0.20, they fetch as much as $70 once retreaded. Brazilian tyre makers were critical of the interim ruling, even though not all of them agreed with Brazil’s arguments. A representative of the retreaded tyre industry claimed that it was conceivable that Brazil would end up having to import EU retreaded tyres, while maintaining a ban on importing old used tyres to retread.

The final ruling is expected to be circulated to the parties in late April and to the public in June.