[SOLVED] The Japan Liquor Tax Law, or Shuzeiho,

The Japan Liquor Tax Law, or Shuzeiho, taxes liquors sold in Japan based on the type of beverage. There are ten categories of beverage (the categories are sake, sake compound, shochu, mirin, beer, wine, whiskey/brandy, spirits, liqueurs, and miscellaneous). Shochu is distilled from potatoes, buckwheat, or other grains. Shochu and vodka share many characteristics. However, vodka and other imported liquors fall in categories with a tax rate that is seven or eight times higher than the category for shochu. Foreign spirits account for only 8 percent of the Japanese market, whereas they account for almost 50 percent of the market in other industrialized countries. The United States, the European Union, and Canada called for consultations and brought this complaint at the WTO. The panel held that the Japanese tax law violated GATT, and Japan appealed to the Appellate Body.

REPORT OF THE APPELLATE BODY
The WTO Agreement is a treaty—the international equivalent of a contract. It is self-evident that in an exercise of their sovereignty, and in pursuit of their own respective national interests, the Members of the WTO have made a bargain. In exchange for the benefits they expect to derive as Members of the WTO, they have agreed to exercise their sovereignty according to the commitments they have made in the WTO Agreement. One of those commitments is Article III of the GATT 1994, which is entitled National Treatment on Internal Taxation and Regulation.
The broad and fundamental purpose of Article III is to avoid protectionism in the application of internal tax and regulatory measures. More specifically, the purpose of Article III is to ensure that internal measures not be applied to imported or domestic products so as to afford protection to domestic production. Toward this end, Article III obliges Members of the WTO to provide equality of competitive conditions for imported products in relation to domestic products. “[T]he intention of the drafters of the Agreement was clearly to treat the imported products in the same way as the like domestic products once they had been cleared through customs. Otherwise indirect protection could be given.” Italian Discrimination against Imported Agricultural Machinery, BISD 7S/60, para. 11. Moreover, it is irrelevant that “the trade effects” of the tax differential between imported and domestic products, as reflected in the volumes of imports, are insignificant or even nonexistent. Article III protects expectations not of any particular trade volume but rather of the equal competitive relationship between imported and domestic products. Members of the WTO are free to pursue their own domestic goals through internal taxation or regulation so long as they do not do so in a way that violates Article III or any of the other commitments they have made in the WTO Agreement. * * *
[I]f imported products are taxed in excess of like domestic products, then that tax measure is inconsistent with Article III . . . [We must determine first] whether the taxed imported and domestic products are “like” and, second, whether the taxes applied to………………

Required:
1. What is the purpose of GATT’s Article III and how is that purpose served?
2. Is it necessary that the complaining party show that a discriminatory tax has a negative effect on trade? Is a remedy possible even where the discrimination has no adverse impact on the sales volume of the imported products?
3. How does a WTO panel determine whether two products are “like products” for purposes of the first sentence of Article III:2 or “directly competitive or substitutable products” that fall within the domain of the second sentence of Article III:2?

Question: The Japan Liquor Tax Law, or Shuzeiho,