On 3 December 2007, theWTO’s Appellate Body found in favour of the EU following a complaint against Brazilian measures concerning imports of retreaded tyres (ie, used tyres that are reprocessed for a second and final use). Environmental groups have been closely watching the case which is the first ever challenge against trade restrictions imposed by a developing country for health and environmental reasons.

The EU had alleged that Brazil’s import restrictions on retreaded tyres were intended to protect the local tyre industry rather than to pursue genuine public health objectives. AWTO panel on 12 June had ruled that Brazil had violated GATT rules, but it did agree with the health and environment related justifications for the restrictions, objecting only to the way in which the measures were applied.

Despite the fact that it was nominally victorious, the EU took the unusual step, in September, of filing an appeal. The Appellate Body ruling of 3 December reinforces the panel’s conclusion that Brazil’s measures are incompatible withWTO rules and emphasises that health and environmental protectionmeasuresmust not be abused to circumvent obligations towards otherWTO Members. Furthermore, suchmeasures cannot be applied in such a way as to result in arbitrary or unjustifiable discrimination, or as a disguised restriction on trade.

However, the Appellate Body then overturned the panel’s findings, and stated that the importation of used tyres into Brazil under court injunctions, and an exemption fromthe retreaded tire ban formembers of the Southern CommonMarket (Mercosur) did, in fact, constitute arbitrary discrimination.