In the case at issue1, the complainant was the European Communities and the respondent was Brazil.

2 In short, the case is based on two main arguments: the total restriction of imports of retreaded tires to Brazil and EC, and, as a counter-argument, exceptions of Article XX of the GATT in relation to the protection of the environment and human protection. In this context it is worth to highlight four aspects: - The direct economic results arising from the import restriction measure - How to measure the real welfare considering environmental factors and the protecting of human health - The competence of the WTO in relation to cases that integrate a dispute based on environmental and health factors - The necessity of harmonious regulations between member states of an agreement. 3 Taking into account only the economic dimension, in general the aggrieved party would be the European Communities by a restriction of imports of retreaded tires in Brazil. Economic reasons for the institution of an import restriction could be, e.g., to safeguard the balance of payments or to protect domestic industry. In the mentioned case, the option that could be taken as a possible economic reason for the import restriction would be the protection of domestic industry. In Brazil there are two sectors in the tires industry: the industry of new tires and the industry of retreated tires. The first sector is represented by the National Association of Tires Industry (Associao Nacional da Indstria de Pneumticos ANIP) which supported the imports ban imposed. The retreated tires sector had no clear interests on the case, since on the one hand the import prohibition would protect the domestic industry, but on the other hand it could mean a further prohibition on imports of used tires (raw material for retreated tires industry). Economic consequences for a quantitative restriction of imports are the protection of domestic industry, the disincentive for competition (since national industry does not have to

1 2

WTO Dispute DS332: Brazil Measures Affecting Imports of Retreaded Tyres. http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds332_e.htm 3 Slud, Esther; Weinberg Crocco, Fabio (2009). Caso dos Pneus: um exemplo de como decises tomadas em diferentes esferas de poder interagem. Available at: <http://ictsd.org/i/news/pontes/48412/>.

compete with foreign industry), inefficiency, higher prices to domestic consumers and possible internal monopoly. As explained above, domestic industry of retreated tires was not directly interested in the prohibition of imports of retreated tires. In addition to that, the economic impact on the EC seemed to be manageable as4 1. the ban of imported retreated tires lead to a growth of imports of used tires (raw material for the domestic industry of retreated tires) , there was an economic compensation as Brazil imported more used tires. 2. The exports of retreated tires suffered a slight drop in 1999 but recovered in 2000 exporting to other countries according to Figure 1. Figure 1: EC Retreated Imports and Exports

Source: Siel Working Paper

As mentioned above, environmental factors and human protection have key roles in the context of Brazil and in the calculation of the end welfare. Besides the indirectly economic effects, such as costs incurred on collection, transport, fumigation and surveillance of tires, and extra costs for public health care, there are the human and environmental damages which cannot be measured in economic terms. The competence of the WTO is not directly related to environmental factors of the case, but concerning the international trade. Environmental factors are an incidental matter that, however, must be taken into account in solving international trade disputes and its importance
4

Morosini, Fabio (2008). The Mercosur and WTO Retreaded Tires Dispute: Rehabilitating Regulatory Competition in International Trade and Environmental Regulation. Society of International Economic Law, Working Paper N. 42/08. 5 Morosini, Fabio (2008). The Mercosur and WTO Retreaded Tires Dispute: Rehabilitating Regulatory Competition in International Trade and Environmental Regulation. Society of International Economic Law, Working Paper N. 42/08.

has been increasingly recognized. Notwithstanding, because it is not the core competence of WTO, the body does not regulate it properly: only resolves matters incidentally and as exception, and yet, even with little experience and jurisprudence. In the case of retreated tires, the WTO decided in favor of the argument based on the art. XX GATT to Brazil, which represented an important step in the jurisprudence und understanding of international trade. Nevertheless, the lack of harmonization of the member states of Mercosur and the outcome of the Permanent Court of Revision of Mercosur against imports prohibition of retreaded tires in Brazil coming from Uruguay acted inconsistently with Art. I, GATT, which contains the principle of Most-Favored Nation6, led to a WTO unfavorable ruling to Brazil, which had to cancel this prohibition on import of tires of the European Union. The negative impact of this decision to Brazil is greater and more serious than the economic impact to the internal consumers and the European Communities if the case was resolved differently. It shows the necessity of harmonization of rules between member states and of international environmental agreements. The protection of human health and environment are core issues in the international trade context.

http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm