Which WTO Rules Can a PTA Lawfully Breach? Completing the Analysis in Brazil – Tyres

Abstract

The proliferation of preferential trade agreements (PTAs) has given rise to possible legal conflicts between PTAs and WTO rules. WTO jurisprudence on the PTA exception in GATT Article XXIV remains scant. A recent dispute concerning Brazilian measures on retreaded tyres in the context of MERCOSUR was the first WTO case in which an environmental and health measure was intertwined with an Article XXIV defence. While the Appellate Body resolved some important aspects of the relationship between PTAs and WTO rules in this case, the operation of Article XXIV itself was not clarified. This article seeks to complete the analysis on Article XXIV in Brazil – Tyres. It considers whether Brazil’s import ban could be justified under Article XXIV, addressing both whether MERCOSUR meets the procedural and substantive conditions laid out in the article and whether Article XXIV is an applicable defence to the measure at issue. Reconciling the panel’s reasoning in US – Line Pipe with the necessity test developed by the Appellate Body in Turkey – Textiles, this article suggests that Article XXIV can be interpreted as excusing only those breaches of MFN that are necessary to establish a PTA under Article XXIV and not independently justifying other breaches. Brazil would therefore be unable to rely on Article XXIV to excuse its discriminatory import ban. In coming to this finding, this article seeks to draw some conclusions regarding the scope and applicability of the Article XXIV exception. In particular, it argues that the overly narrow focus on the definition of ‘other regulations of commerce’ and ‘other restrictive regulations of commerce’ has resulted in an inability to see the Article XXIV forest for the trees and a tendency to improperly invoke Article XXIV in regulatory contexts unrelated to the purpose for which it was provided.