Free Example of Japanese Alcoholic Beverages Essay

Japan’s alcoholic beverages tax system was discriminative. It imposed high taxes on imported from complainant countries spirits and imposed low taxes on locally produced spirits.

Japan imposed high taxes on the alcoholic beverages imported from the contracting parties that are: European community, United States, and Canada. It also imposed low taxes on locally produced alcoholic beverages, commonly known as shochu (Qureshi, 1996). The reason for this was that imported Vodka had high volumes of alcohol in comparison to the locally produced shochu. This tax system was not consistent with General Agreement on Tariffs and Trade (GATT 1994) Article III.

According to (GATT 1994) protocol, Japan ought to have consulted all the parties within the accord before making such decisions. The contracting parties agreed to make consultations that failed and caused the formation of a panel, done by Dispute Settlement Board to determine whether Japan beverage tax system had violated GATT Article III: 2. (Qureshi,1996) .    

According to GATT, Article III, the contracting parties should not impose low internal taxes on locally produced products as well as it is not to impose high taxes on the imported products to protect domestic consumption (John, 1969).  

The panel ruled that Japan tax system was in direct contradiction to the GATT Article III. It claimed that Japan should impose alcoholic beverages tax system that conforms to the general agreement. It was on the analysis that tax differentiations on similar products or direct competitive products would result in the differences in prices and consumption rate (Richard, 1995). This was against Article III: 2.

Japan filed an appeal against the panel report to an appellate body. The appellate body confirmed the panel’s report that Japan’s tax system was not consistent with GATT Article III. It recommended that Japan should comply and maintain liquor tax law in accordance to the agreement in GATT 1994.