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Paraguay: July 1997

“ Concerns were raised regarding the possibility of an inflationary increase in spending due to possible increases in public expenditure in an election year.”

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18 JULY 1997

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    The Trade Policy Review Body of the World Trade Organization (WTO) concluded its first review of Paraguay's trade policies on 17 and 18 July 1997. The text of the Chairperson's concluding remarks is attached as a summary of the salient points which emerged during the discussion.

    The review enables the TPRB to conduct a collective examination of the full range of trade policies and practices of each WTO member country at regular periodic intervals to monitor significant trends and developments which may have an impact on the global trading system.

    The review is based on two reports which are prepared respectively by the WTO Secretariat and the government under review and which cover all aspects of the country's trade policies, including: its domestic laws and regulations; the institutional framework; bilateral, regional and other preferential agreements; the wider economic needs and the external environment.

    A record of the discussions and the Chairperson's summing-up, together with these two reports, will be published in due course as the complete trade policy review of Paraguay and will be available from the WTO Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.

    Since December 1989, the following reports have been completed: Argentina (1992), Australia (1989 & 1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992 & 1996), Cameroon (1995), Canada (1990, 1992, 1994 & 1996), Chile (1991), Colombia (1990 & 1996), Costa Rica (1995), Côte d'Ivoire (1995), the Czech Republic (1996), Cyprus (1997), the Dominican Republic (1996), Egypt (1992), El Salvador (1996), the European Communities (1991, 1993 & 1995), Fiji (1997), Finland (1992), Ghana (1992), Hong Kong (1990 & 1994), Hungary (1991), Iceland (1994), India (1993), Indonesia (1991 and 1994), Israel (1994), Japan (1990, 1992 & 1995), Kenya (1993), Korea, Rep. of (1992 & 1996), Macau (1994), Malaysia (1993), Mauritius (1995), Mexico (1993), Morocco (1989 & 1996), New Zealand (1990 & 1996), Nigeria (1991), Norway (1991 & 1996), Pakistan (1995), Paraguay (1997), Peru (1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992 & 1996), Slovak Republic (1995), South Africa (1993), Sri Lanka (1995), Sweden (1990 & 1994), Switzerland (1991 & 1996), Thailand (1991 & 1995), Tunisia (1994), Turkey (1994), the United States (1989, 1992, 1994 & 1996), Uganda (1995), Uruguay (1992), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).

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    The first Trade Policy Review of Paraguay was conducted on 17-18 July 1997. These remarks, prepared on my own responsibility, are intended to summarize the discussion and not to be a full report: this will be contained in the minutes of the meeting.

    The discussion developed under four main themes:

Macroeconomic issues

    Members commended Paraguay's recent macroeconomic performance, which had been assisted by widespread political and economic reforms; the reduction in inflation was specifically noted. Nevertheless, it was also observed that economic growth had barely kept pace with population growth and that many challenges related to development remained to be addressed. The role of "shopping tourism" in the economy and Paraguay's dependence on export revenue from two cash crops (soybeans and cotton) and electricity was evident. Concerns were raised regarding the possibility of an inflationary increase in spending due to possible increases in public expenditure in an election year.

    Questions were posed on the role and incidence of State involvement in the economy and the need to accelerate progress in privatization. Information was sought on recent improvements in transparency of the régime of Government procurement, and on provisions favouring domestic suppliers; Paraguay was encouraged by some members to open its procurement market to stimulate greater efficiency in the use of resources.

    Members highlighted Paraguay's success in improving the legal framework for investment. In this connection, questions were raised on the independence of the judiciary, as well as the impact of strong capital inflows on macroeconomic management, and other investment-related issues such as business registration procedures.

    In reply, the representative of Paraguay noted that his country was continuing its efforts to overcome numerous structural problems; trade liberalization was a key factor in this process. Efforts to diversify agricultural production would help in the alleviation of poverty. Increased efficiency through privatization was one of the aims of the reform of State enterprises; the representative gave details of the programme. Paraguay's notification on State-trading enterprises would be completed as soon as possible. Government procurement was part of the work programme of MERCOSUR; Paraguay thus did not intend to sign the Government Procurement Agreement in the near future, although it was seeking maximum transparency in this area. Paraguay sought to encourage foreign investment to help industrial development; integration was part of these efforts. The representative indicated that Paraguay would continue its pursuit of development through balanced and stable macroeconomic policies and deepening the structural reforms.

    In reply to a supplementary question, the representative of Paraguay provided details regarding the Register of Suppliers for government procurement; this was open to all legitimate, taxpaying firms and was not a restrictive device.

Regionalism and multilateralism

    Members praised Paraguay's increasing integration into the global economy, and its rôle in promoting a liberal trade régime for MERCOSUR coupled with a strengthened dispute settlement mechanism. However, concerns were voiced that convergence to the MERCOSUR common external tariff would lead to an increase in Paraguay's average tariff, as well as to greater tariff escalation. It was pointed out that, to the extent this process affected Paraguay's scheduled WTO commitments, these should be settled through negotiations under Article XXIV:6 as soon as possible. MERCOSUR commitments may also influence Paraguay's interest in participating in multilateral liberalization efforts, among which the Information Technology Agreement and the negotiations on financial and telecommunications services were mentioned. A question was raised regarding compliance with the provisions of Article XXIV and seeking information on Paraguay's participation in other free trade arrangements.

    In reply, the representative of Paraguay, supported by a number of regional partners, noted that regional agreements were compatible with the multilateralism trading system. MERCOSUR should be seen in this context; its philosophy was based on the practice of open regionalism. Contacts had been established with many other countries and regional groups. Many of the questions on MERCOSUR were currently being considered in the Committee on Regional Trading Agreements, which was regarded as the appropriate forum for such issues; replies had already been provided in that forum. Some members emphasized that, bearing in mind the broad transparency role of the TPRM, questions on members' participation in regional trading arrangements were legitimate and had been dealt with in other cases.

WTO and other related issues

    Members urged Paraguay to meet its outstanding WTO notification obligations without delay, particularly in areas such as import restrictions and State trading enterprises. Questions were asked about the WTO consistency and application of "other" import charges such as the consular tax and port and storage fees. Information was sought on efforts made by Paraguay to implement the WTO Customs Valuation Agreement, and on procedural aspects of the pre-shipment inspection régime. One delegation expressed concerns on costs and delays with respect to customs clearance procedures, despite the existence of the PSI régime. One member asked several questions on the compliance with internationally agreed rules of technical standards adopted at MERCOSUR level, as well as whether mutual recognition agreements concluded by the sub-regional group were open to negotiation with third countries.

    Some Members questioned the consistency with WTO rules of export restrictions affecting timber, hides and skins.

    Positive action taken by Paraguay to improve the legal and institutional framework for protection and enforcement of intellectual property rights was commended. Information was sought on progress in new legislation in this area, training arrangements for judiciary and others concerned with enforcement, the results of the National Campaign Against the Violation of IPRs, and specific actions taken by the National Council for the Protection of IPRs and the Customs to combat piracy.

    In reply, the representative of Paraguay said that his authorities had been making a great effort to meet the notification requirements of the WTO; however, this was difficult while many MERCOSUR measures were being adopted. Technical assistance from the WTO was being sought to help Paraguay meet its obligations. Concerning the consular tax, he pointed out that the charge was a fixed amount of US$15 on which 7.5 per cent was levied (i.e. US$1.05) for the support of the Paraguayan Institute for the Indigenous People. It was not based on the c.i.f. value of the goods. The original consular charge of 5 per cent of the c.i.f. value was eliminated in 1993. Pre-shipment inspection companies provided information to the customs service to verify declared values, which were generally accepted within a 15 per cent margin; the costs were absorbed by the Government. Information was provided on the application of the VAT under the tourist regime, levied at a rate of 10 per cent on 15 per cent of the invoice value.

    The representative also provided information on the work of the National Council for the Protection of Intellectual Property and efforts to train officials, judges and legislators in this area. The legal framework for trademarks, authors' and related rights and patents was also being updated in accordance with the requirements under the TRIPS Agreement, and this would also strengthen enforcement. Export restrictions on timber were intended to combat deforestation; the processing industry was also required to comply with domestic restrictive measures. There was no restriction on the export of raw hides and skins.

Sectoral questions

    Paraguay was asked to express its views on sectoral policy prospects and the role of State intervention in this context. The low level of Government intervention in agriculture was appreciated and the recent accession of Paraguay to the Cairns Group was welcomed. Information was sought on policies to be adopted to diversify, and raise value added in, the agricultural sector. Questions were also posed on the effectiveness of measures taken to prevent deforestation, as well as the scientific basis for banning imports of bovine semen.

    Members commented on the existence of tariff escalation in processing and manufacturing industries; they raised questions concerning the impact on Paraguay of the MERCOSUR common automotive regime, to be introduced in the near future.

    Note was taken of reforms in the legal framework for the financial sector in the aftermath of the 1995 banking crisis. Improvements in the regulatory framework governing telecommunication services were also welcomed; however, Members saw scope for improvement in transport infrastructure. Information was sought on Paraguay's plans for making offers in the ongoing negotiations on financial and basic telecommunications services.

    While one delegation raised questions regarding the observance of core labour standards by Paraguay, many others opposed raising of such questions in any WTO body, including the TPRB. They emphasized that these questions are not trade-related and, in accordance with the Singapore Ministerial Declaration, should be dealt with in the ILO.

    In reply, the representative of Paraguay noted that Paraguay had no tariff quotas or special safeguards in agriculture, and did not grant export subsidies. Paraguay was working actively and constructively in international negotiations on agriculture, hence its recent accession to the Cairns Group. Paraguay was trying to diversify its production to reduce dependency on a few items. Information was provided on Paraguay SPS facilities, and extension services. Restrictions on growth-promoting hormones was to conform with requirements of foreign markets for beef, while restrictions on bovine semen from the EU were linked to the BSE crisis. Both these matters were currently under review.

    The representative stressed that trade in services was of great importance for the Paraguayan economy, and Paraguay had made progress in liberalizing the sector, especially in telecommunications. Paraguay was working to complete a framework agreement on services within MERCOSUR; therefore, in the short term, Paraguay did not intend to modify its sector-specific commitments under the GATS.

    Recalling the terms of the Singapore Ministerial Declaration in relation to core labour standards, the representative of Paraguay considered that it was not appropriate to respond to questions on this matter in the TPRB or within the WTO.

    Overall, Members welcomed Paraguay's participation in the review process, with a strong delegation led at Ministerial level. They welcomed the steps already taken by Paraguay toward greater transparency in trade policy and the authorities' stated commitment to free and open trade, and strongly encouraged Paraguay to continue along the path of liberalization and deregulation. They emphasized the need for MFN and regional liberalization to be complementary, the importance of diversification of the economy and the need for development to be pursued on a sustainable basis. The TPRB welcomed the answers given by Paraguay to questions and looked forward to written replies on outstanding issues. Back to top