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World Trade Organization WT/DS332/AB/R 3 December 2007 (07-5290) Original: English BRAZIL – MEASURES AFFECTING IMPORTS OF RETREADED TYRES AB-2007-4 Report of the Appellate Body I. Introduction 1 II. Arguments of the Participants and the Third Participants 6 A. Claims of Error by the European Communities – Appellant 6 1. The Necessity Analysis 6 2. The Chapeau of Article?XX of the GATT 1994 12 3. Conditional Appeal 18 B. Arguments of Brazil – Appellee 21 1. The Necessity Analysis 21 2. The Chapeau of Article?XX of the GATT 1994 25 3. The European Communities Conditional Appeal 29 C. Arguments of the Third Participants 33 1. Argentina 33 2. Australia 34 3. Japan 37 4. Korea 38 5. The Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu 40 6. United States 43 III. Issues Raised in This Appeal 45 IV. Background and the Measure at Issue 46 A. Factual Background 46 B. The Measure at Issue 47 C. Related Measures 50 V. The Panels Analysis of the Necessity of the Import Ban 52 A. The Panels Necessity Analysis under Article XX(b) of the GATT 1994 52 1. The Panels Analysis of the Contribution of the Import Ban to the Achievement of Its Objective 52 2. The Panels Analysis of Possible Alternatives to the Import Ban 63 3. The Weighing and Balancing of Relevant Factors by the Panel 70 B. The Panels Necessity Analysis and Article 11 of the DSU 73 1. Article 11 of the DSU and the Panels Analysis of the Contribution of the Import Ban to the Achievement of Its Objective 74 2. Article 11 of the DSU and the Panels Examination of Possible Alternatives to the Import Ban 78 C. General Conclusion on the Necessity Analysis under Article XX(b) of the GATT 1994 82 VI. The Panels Interpretation and Application of the Chapeau of Article XX of the GATT 1994 83 A. The MERCOSUR Exemption and the Chapeau of Article XX of the GATT 1994 83 1. The MERCOSUR Exemption and Arbitrary or Unjustifiable Discrimination 85 2. The MERCOSUR Exem