Some very quick, and preliminary, thoughts on the Appellate Body decision in Brazil-Tyres. The AB reversed the panel on the question, under the chapeau of Article XX, of whether Brazil’s exception of MERCOSUR imports of retreads is arbitrary or unjustifiable. Interestingly, the AB suggested that in order to avoid being arbitrary or unjustifiable, the discrimination must/should have a rationale rooted in the policy goal that formed the basis for provisional justification under Article XX(b). While I agree that this exception seems unjustifiable, especially as Brazil did not even argue a health exception in the MERCOSUR arbitration, I'm not sure I see the basis for the requirement that the AB proposes, but will think about it. The AB also said that the Panel improperly exercised judicial economy in avoiding responding to the EC claims that the MERCOSUR exception violated Articles I:1 and XIII:1 of GATT. Of course, in order to do so, the panel would have been required to address whether MERCOSUR complies with Article XXIV of GATT, and whether the MERCOSUR exception is “necessary” (under the Turkey-Textiles decision) to the formation/maintenance of that customs union.
The part of the decision that I found more puzzling is the earlier part about “necessity” under Article XX(b). Preliminarily, I was glad to see the AB say (para 145) that the panel’s methodological discretion is not “boundless.” I would have liked to see more of that discipline in U.S.-Cotton. First, there seemed to be some confusion (at least on my part) about what precisely the panel and AB were defining as Brazil’s objective. The AB seemed to accept a goal of reducing the amount of waste tires (see paras. 147, 161), rather than reducing adverse effects on health—the latter would seem to be what is required under Article XX(b). However, the AB seemed to center on reduction of exposure to health risks by virtue of waste tires. Second, seemed to me that the AB was extremely imprecise in the way that it dealt with necessity and alternatives. That is, if the goal is to reduce health risks, why not look at the degree to which increased disposal requirements, or enforcement of disposal requirements, or other alternatives, reduce the risks. The risks never get to zero, anyway, so some comparison seems reasonable, and the increased costs should be balanced against the trade restrictiveness. So, this seems to me to be a retread(t) from the kind of balancing announced in Korea-Beef. See the weak statement at paragraph 174 that so-called “non-generation” of waste tires (they are generated in some quantities) is more apt to achieve the goal, while waste management only acts after accumulation. Yet there is a continuing flow of waste tires, and management may reduce the absolute amount just as well as non-generation.
