WORLD TRADE WT/TPR/M/26
25September 1997
ORGANIZATION(97-3986)
Trade Policy Review Body
17-18 July1997
TRADE POLICY REVIEW
PARAGUAY
MINUTES OFMEETING
Chairperson: H.E. Mr.Munir Akram (Pakistan)
Page
I. INTRODUCTORY REMARKS BYTHE CHAIRPERSON 2
II. OPENING STATEMENT BYTHE REPRESENTATIVE OFPARAGUAY 3
III. STATEMENT BYTHE FIRST DISCUSSANT 4
IV. STATEMENT BYTHE SECOND DISCUSSANT 5
V. STATEMENTS BYMEMBERS 6
VI. REPLIES BYTHE REPRESENTATIVE OFPARAGUAY AND
ADDITIONAL COMMENTS 10
VII. CONCLUDING REMARKS BYTHE CHAIRPERSON 15WT/TPR/M/26
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I. INTRODUCTORY REMARKS BYTHE CHAIRPERSON
1. ThefirstTrade Policy Review ofParaguay washeldon17and18July1997 under the
chairmanship ofAmbassador Munir Akram.
2. TheChairperson welcomed thedelegation ofParaguay, ledbytheHonourable Mr.Atílio
Fernández, Minister ofIndustry andTrade, andthediscussants, Mr.JoséLuisPérez Sánchez ofSpain
andMr.Sebastián SáezofChile. Asusual, bothdiscussants would actintheirpersonal capacities.
Thediscussants hadmade available, inadvance, outlines ofthemain issues theyintended toraise,
these were circulated indocument WT/TPR/D/11.
3. TheChairperson recalled thepurpose oftheTrade Policy Reviews andthemain elements of
theprocedures forthemeeting. Thereport bytheGovernment ofParaguay wascontained indocument
WT/TPR/G/26andthatoftheWTOSecretariatindocumentWT/TPR/S/26.Copiesofwrittenquestions
submitted byfivedelegations (Hong Kong, theUnited States, Switzerland, Australia andJapan) had
beentransmitted tothedelegation ofParaguay. Iffullreplies could notbeprovided during themeeting,
supplementary written replies could beprovided within onemonth.WT/TPR/M/26
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II. OPENING STATEMENT BYTHE REPRESENTATIVE OFPARAGUAY
4. Therepresentative ofParaguay expressed satisfaction forhiscountry 'sparticipation intheTrade
Policy Review (TPR) exercise, anessential procedure forensuring compliance withWTO provisions,
onlythree years afteraccession totheGATT. Thisandtheestablishment ofanInter-departmental
Committee,interaliatocoordinateworkrelatedtotheTPR,wereindicativeofhiscountry'scommitment
toWTO undertakings. Hispresentation focused onrecent political andeconomic reforms aimed at
theestablishment ofademocratic system andamodern market-oriented economy, aswellastheireffect
oneconomic indicators.
5. Since theadoption ofParaguay 'snewConstitution in1992, theindependence ofpowers among
theexecutive, legislative andjudiciary andtheobservance ofcivicrights andelectoral procedures were
ensured andassisted byanewinstitutional structure. Guarantees concerning freedom ofcompetition
andmovement ofgoods, aswellastheprotection ofintellectual property rights (IPRs) andthetransfer
ofpublic enterprises totheprivate sector, were alsocontained intheConstitution. Legislation had
beenadopted toreform theforeign exchange, fiscal andinvestment regimes aswellastomodernize
thefinancial sector, liberalize interest rates, andaddress thequestion ofmoney-laundering. Reforms
hadalsobeenintroduced inareassuchasinsurance, telecommunications, privatization, re-afforestation
andlabour relations.
6. Paraguay'stradepoliciesweregovernedbytheprinciplesofnon-discriminationandtransparency.
Participation intheUruguay Round, aswellasaccession totheGATT andtheWTO, formed part
oftheadjustment oftheeconomy toglobalization; inthisrespect, theauthorities werealsopromoting
theinstallation ofindustrial parks andexport-processing (free) zones. Thepolitical changes hadallowed
participation inMERCOSUR, which wasconceived asaninstrument foropenregionalism rather than
aprotectionist device; inthiscontext, hereferred toMERCOSUR 'sagreements andnegotiations with
other countries from theregion andother regional groups.
7. Thebeneficial effects ofthese reforms were reflected inariseinGDP percapita atcurrent
prices; anincreasing share oftrade ingoods andservices inGDP; growing international reserves
andinvestment inflows; andfalling inflation, interest ratesandexternal public debt. Henoted that
Paraguay hadthelowest debtpercapita indicator inLatin America.WT/TPR/M/26
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III. STATEMENT BYTHE FIRST DISCUSSANT
8. Thefirstdiscussant (Mr.JoséLuisPérez Sánchez) noted that,despite positive trends inmost
ofParaguay 'smacroeconomic indicators, developments ininflation andpopulation growth raised some
concern. Toappraise Government efforts intheareaofeducation, hesought recent dataonschool
enrolment ratios. Paraguay faced significant challenges ofdevelopment; noting therecent adoption
byParaguay ofitsfirstsocial development andreactivation plans, heasked whether itwould have
beenpreferable toadopt asingle, integrated planwhich would cover allareas, lastlonger andemploy
more financial resources. Inthelightoftheincreases inpublic expenditure linked toelection years,
which could haveinflationary effects, hewondered whether apactmight beconcluded between the
Government andopposition parties inorder tocutspending.
9. Concerning shopping tourism, which heconsidered beneficial tomanufacturers, traders
anddomestic andforeign consumers, hewasinterested inknowing thereasons fornotmeasuring this
activity, which wasestimated asequivalent totheentire GDP ofthecountry. Heshared concerns
expressed byotherMERCOSUR governments onthelackofcontrol overtheshopping tourism regime.
Hewasalsointerested inknowing thetypeofmeasures taken forcontrolling informal activities.
10. Thediscussant, drawing attention tothescaleofStateinvolvement, requested datapermitting
anevaluation ofitsincidence ontheParaguayan economy interms ofGDP andemployment. He
remarked thatprivatization, which hadbeendelayed forpolitical reasons, wasthebestmeans ofraising
theproductivity andcompetitiveness ofpublic firms. Hesought more information about reasons for
delays in,andplans concerning, theprivatization process.
11. Regarding transparency ingovernment procurement operations, herecalled recent efforts and
theobjectives forthenegotiation ofamultilateral agreement inthisarea. Hesought Paraguay 'sviews
onconstraints imposed bytheintroduction ofaRegistry ofSuppliers andContractors, aswellasother
initiatives forincreasing transparency inthisarea.
12. Certain MERCOSUR undertakings appeared contradictory toParaguay 'sliberal trade policy
frameworkanditsWTOcommitments;morespecifically,hereferredtotheexpectedincreaseinaverage
tariffprotection andtheconsequent needforrenegotiation ofbinding levels, aswellastheimpossibility
forParaguay toundertake unilateral liberalization intheservices sector andtoparticipate inthe
Information Technology Agreement. Heexpressed concern overthelevel oftheconsular taxas
compared totheaverage applied tariff, andratesofstorage feesapplied bythestate-owned National
Shipping andPorts Administration. Hesuggested thatthefinancing oftheExternal Relations Service
should notbeborne byimports, andthattheAgreement onCustoms Valuation might beapplied on
anexperimental basis. Recognizing thatParaguay hadfulfilled most ofitsWTO notification
requirements, heasked foranyreasons forimpeded compliance, andurged theearly submission of
remaining notifications.
13. Thediscussant recognized thepositive impact ofParaguay 'sinvolvement intheexpansion of
regional integration initiatives; however hehoped thatMERCOSUR would resist pressure restricting
external competition andthatitwould undertake liberalizing action inthenextround ofmultilateral
trade negotiations envisaged tobegin intheyear2000. Furthermore, inthelightofitsgeographical
location, hewasoftheview thatfuture improvements inParaguay 'stransport infrastructure would
bereflected inimproved access forregional partners, greater competitiveness andmore efficient
utilization ofresources.WT/TPR/M/26
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IV. STATEMENT BYTHE SECOND DISCUSSANT
14. Thesecond discussant (Mr.Sebastián Sáez) congratulated Paraguay forthesignificant andwide-
ranging reforms undertaken insuchashort period. Heemphasized theimportance ofParaguay 's
commitments resulting from itsmembership oftheGATT, theWTO andMERCOSUR; hepraised
theoverall decline inaverage tariff protection since 1988, andthequalitative change inParaguay 's
tradepolicy formulation andimplementation. Hesought information onpriority areas fortradepolicy
improvements, other thanthose falling under thescope ofMERCOSUR.
15. Hewelcomedtheopeningoftheforeigninvestmentregime,characterizedbyanon-discriminatory
legalframework, providing forincreasingly wider access opportunities, expanded guarantees through
bilateral treaties, andfiscal incentives. Henoted thatshort-term capital inflows hadaffected
macroeconomic management. Herequested theauthorities 'views onthenegative impact ofthistype
ofcapital inflows oneconomic stability.
16. Since 1989, incooperation withtheInter-American Development BankandtheWIPO, Paraguay
hadmade progress intheprotection ofintellectual property rights (IPRs) byadherence tointernational
agreements, working ontheintroduction ofmodern legislation, reinforcing theinstitutional framework
andlaunching apublic campaign against IPRviolations. Herequested information ontheprogress
inpassing anewlawonpatents, andontheresults oftheIPRcampaign.
17. Although Paraguay 'sgeneral trade policy trends andoutlook wereclearly drawn, hesought
more information ontheGovernment 'sviewandroleinregard tosectoral policy issues. Noting that
substantial finance wasextended, onpreferential conditions, fortheagricultural sector, heasked what
wereseenasthemostpromising alternative crops tosoybeans andcotton, andwhatmeasures might
beconsidered forencouraging production, diversification andincreasing local value added. Inthe
lightoftheexisting pattern oftariff escalation andtheforthcoming adoption ofacommon automotive
regime within MERCOSUR, heasked whatindustries might takeadvantage ofthelatter. Recalling
Paraguay 'slargepotential inhydro-electric resources, aswellasregulatory difficulties andParaguay 's
concessional electricity tariff policy, hesought theauthorities 'viewconcerning theprospects ofthe
Paraguayan energy sector within MERCOSUR.
18. Thediscussant noted theimportant regulatory changes thathadtaken place inthefinancial
sector, hesought information onmeasures adopted intheaftermath ofthe1995 crisis, withrespect
tothestructure ofinterest ratesandthecreation ofalong-term capital market. Withrespect toregulatory
improvements inthetelecommunications sector, heasked whatwasthecurrent status ofthestate-owned
monopoly onbasic telecommunications services, aswellastheGovernment 'sviewondevelopment
prospects forthissector. Heraised asimilar question ontransportation, where heconsidered that
privatization hadnotprogressed evenly.WT/TPR/M/26
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V. STATEMENTS BYMEMBERS
19. MembersthankedtheGovernmentofParaguayandtheWTOSecretariatfortheircomprehensive
reports, aswellastheParaguayan delegation andthediscussants fortheiruseful presentations. They
commended Paraguay 'swide-ranging political andeconomic reforms. Innoting itsinvolvement in
regional integration initiatives, particularly those falling under MERCOSUR, theyrecalled thatthese
should notundermine commitments undertaken inthemultilateral trading system. Noting thatone
delegation hadraised theissue ofcorelabour standards initsadvance written questions andits
intervention ofthemeeting, certain participants (Hong Kong, thePhilippines, India, Colombia, Brazil,
Uruguay, Venezuela) wereoftheviewthatissues relating tocorelabour standards weretoberaised
intheappropriate international forum rather thantheWTO.
20. Therepresentative ofHong Kong referred tothemain features ofthe"Buy Paraguay" policy
intheareaofgovernment procurement (including goods, services andpublic works). Opening up
thismarket would allow forabetter useoffinancial resources andmore foreign competition.
21. Therepresentative oftheUnited States raised several specific questions concerning thevaluation
basis oftheconsular taxandfees; pending notifications onimport prohibitions andstate-trading
enterprises;stepsforthetimelyimplementationoftheWTOCustomsValuationAgreement;theappeals
procedure under thepreshipment inspection (PSI)regime, andtheinvolvement ofcontracted PSIentities
incustoms valuation operations; andnon-preferential rules oforigin. Herecommended Paraguay
toliberalize thepublic procurement market, toadhere totherelevant WTO Agreement andparticipate
intheInformation Technology Agreement.
22. Onprotectionofintellectualpropertyrights,hewasinterestedinknowingtheproposedtimetable
forenactment ofnewcopyright, patent andtrademark legislation; specific anti-piracy action taken
bytheCustoms andtheNational Council fortheProtection ofIPRs; andtheresources devoted for
training lawenforcement officials. Healsoreferred toimpediments inenforcement ofIPRs, which
were allegedly duetoalackoftransparency andindependence ofthejudiciary.
23. Concerninginvestmentmatters,heaskedwhetherParaguaywasconsideringreducingbureaucratic
delays (e.g. business registration) andfurther strengthening itsregulatory framework. Hesought
information onefforts toopenupsectors runbystatemonopolies. Heasked whether Paraguay intended
totable arevised offer inthenegotiations onfinancial services, andwhether itintended tomake a
similar offer intheNegotiating Group onBasic Telecommunications.
24. Withregard tocorelabour standards, hepraised Paraguay 'sconstitutional protection ofcertain
rights, aswellasimprovements under the1993 Labour Code which hadmoved Paraguayan norms
closer toILOstandards. Hesought information ontheconformity ofexisting legislation andrecent
government action withILOconventions.
25. Therepresentative ofSwitzerland praised thereforms undertaken byParaguay, which had
stimulated investment inflows, butrecalled thatprogress hadtobeconsolidated. Hecommended the
deepening ofParaguay 'sregional andmultilateral commitments aswellasthemeasures taken forthe
protection ofIPRs. HisGovernment hadexpressed interest inparticipating inArticle XXIV:6
consultations toensure thattheadoption oftheMERCOSUR Common External Tariff (CET) would
notweaken Paraguay 'soriginal WTO commitments.
26. TherepresentativeofAustraliacongratulatedParaguayonitsfurtherintegrationinthemultilateral
trading system byparticipating intheTPRexercise, aswellasitsrecent membership oftheCairns
Group. Shecommended Paraguay 'slowlevelofgovernment intervention andtariff-only regime for
agriculture. However, while recognizing theinvestment andtrade-creating opportunities which resultedWT/TPR/M/26
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from itsMERCOSUR membership, sheexpressed concern overtheeffect oftheconvergence tothe
CET onaverage tariff protection andtariff escalation.
27. TherepresentativeofJapanpraisedthereformsundertakenandthemacroeconomicdevelopments
under wayinParaguay, butregretted thelarge scaleofunregistered trade operations. Inthelightof
Paraguay 'sextension ofexport prohibitions toallun-andsemi-processed wood, hesought comments
onwhether thisborder action would favour localindustry andinformation onplans forthereplacement
oftheexport prohibition withinternal measures.
28. Concerning regional commitments, heasked about theWTO consistency ofthe
LAIA Partial-Scope Agreements andtheadoption andtradecoverage oftheMERCOSUR CET. His
delegation believed thattheCETdidnotcorrespond toGATT Article XXIV:8(a) andthatthetariff
rates were tobeincreased under these agreements byParaguay despite GATT Article XXIV:5
obligations. Heasked forthereason fornotfollowing theprocedures ofArticle XXIV:6 oftheGATT.
Hesought information onthecontent ofplanned MERCOSUR agreements withtheEU,theAndean
Community andMexico.
29. Thedevelopment ofappropriate infrastructure andthefurther opening upofcertain services
sectors (i.e.finance, telecommunications andtransport), hesaid, were indispensable fortrade and
investment promotion. While hewelcomed theexpansion ofParaguay 'scommitments under theGeneral
AgreementonTradeinServices(GATS),hequestionednon-participationinthenegotiationsonmaritime
transport andbasic telecommunications, aswellastheInformation Technology Agreement.
30. Healsoraised some questions onintellectual property rights andnotification requirements.
31. TherepresentativeofIndiacommendedParaguayonitsintegrationintheglobaleconomythrough
autonomous reforms ensuring macroeconomic stability. Among several positive developments, he
pointed outthatshopping tourism hadincreased prosperity inthefrontier towns. Nevertheless, the
current account deficit waswidening, export earnings stilldepended ontwocommodities, andthe
manufacturing sector remained underdeveloped. Herecommended thepromotion ofexport-oriented
agro-industries asameans ofadvancing product andmarket diversification. Hewaspleased tonote
that,although Paraguay hadtaken action toimplement WTO commitments inthefields ofanti-dumping
andsafeguards, ithadnothadrecourse inthese areas.
32. Therepresentative ofCanada stated thatParaguay 'saccession toGATT anditsparticipation
intheUruguay Round hadbeenamilestone initsreform process. Heregretted thattheprocess of
privatization hadadvanced more slowly thanoriginally planned. Hepraised Paraguay 'sgreater
involvement intheglobal economy andrecent membership oftheCairns Group. Nevertheless,
MERCOSUR CET commitments werelikely tohaveunfortunate effects onitsWTO bindings, tariff
escalation andparticipation intheInformation Technology Agreement. Heurged Paraguay towork
withitsMERCOSUR partners toregularize theirbinding commitments.
33. Theapplication ofaconsular taxanddocumentation feesbyParaguay required further
examination. Herequested thescientific basis forprohibiting theimportation ofgrowth hormones
foranimal production, aswellascomments onplans forremoving thisban. Hewasinterested in
knowing recent developments regarding theimplementation ofthe1995 legislation onfreetradezones.
Heasked about theeffectiveness ofthemeasures taken toaddress deforestation problems.
34. Therepresentative oftheEuropean Union highlighted Paraguay 'spersistent dependence on
exports ofafewproducts. Hewelcomed positive developments concerning other sources offoreign
exchange earnings suchasshopping tourism andexports ofelectric power. Herecalled thelinksbetweenWT/TPR/M/26
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Paraguay andtheEUanditsmembers through cooperation, trade, andassistance agreements, andthat
EUfirms were thelargest investors inParaguay.
35. While praising Paraguay 'sexclusive reliance ontariffs forborder protection, henoted that
some rates under theMERCOSUR CET were higher thanitsbound levels andasked when the
renegotiation ofWTO bindings wastobeinitiated. Henoted Paraguay 'slackofcompliance withits
WTO notification obligations inanumber ofareas, forexample, concerning statetrading; healso
asked about theauthorities 'intentions forscaling down these activities.
36. Concerning customs clearance procedures, hereferred tocost-raising practices applied by
theCustoms inspiteofverification procedures carried outbyPSIentities (including non-acceptance
ofPSI-certified merchandise value, additional inspection bytheCustoms, andpayment ofillegal "fees"
toavoid time-consuming Customs inspections). Theconsular taxanddocumentation fees,which in
hisview violated several WTO commitments, should beabolished. TheEUalsoregarded high,
discriminatory portfeesandother charges asunjustified.
37. Therepresentative requested information onseveral aspects ofwork within MERCOSUR on
standards andother technical requirements. These included compliance ofadopted standards withthe
provisions oftheAgreement onTechnical Barriers toTrade; thecompulsory adoption ofharmonized
andtherepeal ofnon-harmonized standards; thebasis oftheharmonized procedures forconformity
assessment; andthepossibilities open toindividual MERCOSUR countries fornegotiating mutual
recognition agreements withthirdcountries.
38. Intheabsence ofanyscientific basis (including linksto"mad cowdisease") andinaccordance
withtheprovisions oftheAgreement ontheApplication ofSanitary andPhytosanitary Measures (SPS),
heasked Paraguay tolifttheimport banonbovine semen fortheimprovement ofcattle herds, asother
MERCOSUR countries hadalready done. Hementioned complaints bytheEUcarindustry concerning
thedistortion ofcompetition created bythenumber ofillegally imported automobiles circulating in
Paraguay. Hesought theview oftheauthorities ontheWTO consistency ofexport restrictions on
rawhides andskins; thismeasure caused aproblem ofsupply fortheEUtanning industry andresulted
inadefacto subsidy tothelocalindustry.
39. Inthelightofconsiderable losses fortheprivate sector duetosound recording andentertainment
softwarepiracy,aswellasproblemswithcigarettecounterfeitingactivities,hewelcomedrecentinitiatives
fortheprotection ofIPRs. Heasked foranupdate ontheresults ofefforts undertaken against illicit
activities inthisarea.
40. Hesought clarification onthestateofreview oftheWTO Basic Telecommunications Agreement
atMERCOSUR level, andwondered whether Paraguay would make anofferpriortoNovember 1997.
Heurged Paraguay toparticipate intheongoing negotiations onfinancial services andtojointhe
Information Technology Agreement.
41. Therepresentative ofColombia wasinterested inParaguay 'sviewwithrespect totheimpact
ofshort-term capital inflows, andontherelationship between theconsular taxandParaguay 'sbinding
commitments.
42. Therepresentative ofBrazil recalled thatParaguay andMERCOSUR were moving along a
steadyandprogressivecourseoftradeliberalizationandmarketopening.Thiseffortwasnotreciprocated
byothertrading partners. Herdelegation didnotintend toraiseanyquestions because thesehadalready
beenwidely dealtwithinother WTO forawhere MERCOSUR hadbeendiscussed.
43. Therepresentative ofArgentina supported thestatement made byBrazil.WT/TPR/M/26
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44. Therepresentative ofUruguay wasalsooftheviewthatquestions raised bycertain participants
weremorecloselyrelatedtotheworkoftheCommitteeonRegionalTradeAgreements.Thesequestions
hadbeenextensively answered, clarified anddebated attheMay1997 meeting ofthatCommittee.
45. Therepresentative ofVenezuela commended Paraguay 'shighlevel ofparticipation inthe
TPRexercise andexpressed interest inclarifications relating totheconsular tax,raised bythe
representative ofColombia. Concerning thedebate onregional issues, heshared theview ofthe
representative ofUruguay, andstated thattheWTO-consistency ofLAIA Partial-scope Agreements
wasbased ontheEnabling Clause; these activities hadbeenrecently notified totheWTO Committee
onTrade andDevelopment.WT/TPR/M/26
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VI. REPLIESBYTHEREPRESENTATIVEOFPARAGUAYANDADDITIONALCOMME NTS
46. Thereplies bytherepresentative ofParaguay weredivided intofourthemes: (i)macroeconomic
issues,(ii)regionalismandmultilateralism,(iii)WTOandotherrelatedissues,and(iv)sectoralquestions.
Hestated thathispresentation constituted apreliminary response toquestions thathadbeenraised so
far;detailed replies would bedelivered inwritten form induetime.
(i) Macroeconomic issues
47. Paraguay wasmaking significant andcontinuous efforts toovercome structural problems with
aview toachieving sustainable growth. Openness oftrade wasakeyelement intheestablishment
ofappropriate conditions favouring thedevelopment ofoutward-looking production. Poverty, which
remained aconcern, wasbeing dealt withthrough thepromotion ofagricultural diversification and
thesearch foralternative production activities inrural areas.
48. With respect tostatereforms, herecalled that,outoffivepublic enterprises covered under
the1991privatization regime, two(theairline andalcohol production companies) hadbeentransferred
totheprivate sector aswellasalarge partofthemerchant fleet. Delays intheprivatization ofthe
steelcompany could notbeattributed totheGovernment. Options fortheprivatization oftherailway
company wereunder examination. Reforms inthetelecommunications sector, initiated in1995 with
thecreation ofaNational Telecommunications Committee, weretobepursued withtherestructucturing
andenvisaged privatization oftheNational Telecommunications Company; andthesigning ofajoint-
venture contract fortheinstallation of80,000 telephone lines. Theexpansion ofcellular telephone
services,whichhadalwaysbeensuppliedbytheprivatesector,wascurrentlysubjecttotender.Paraguay
intended tosubmit itsnotification onstate-trading enterprises induecourse.
49. Paraguay hadnointention tosigntheWTO Agreement onGovernment Procurement, because
thisareaformed partofMERCOSUR 'swork programme. Nevertheless, itintended topromote
transparency initsdomestic legislation onpublic procurement practices. Heclarified thatthere was
nodeadline forregistering withtheRegistry ofSuppliers andContractors oftheState.
50. Theinvestment framework wasaimed atpromoting thedevelopment ofindustrial activities,
forthebenefit ofinvestors andtheeconomy. Theauthorities were aware thatthisfavourable
environment could alsoattract short-term investment flows.
51. Thepromotion ofwelfare wasaneconomic policy objective; inthisconnection direct welfare
support wastocontinue. Social policies weretofocus onmore investment inhuman resources and
assistance fortheinsertion ofmicro-enterprises totheformal economy. Inaddition, thedeepening
ofstructuralreformswouldaimattheequitabledistributionofgrowthbenefitsandtheactiveparticipation
oftheprivate sector ininvestment andjobcreation.
52. Thefirstdiscussant tooknoteofthepositive points concerning plans forwelfare promotion,
andtherolesofprivateinitiativeandoftheState,aswellasParaguay'sundertakingtonotifystate-trading
enterprises; hehoped thatthenotification would contain dataontheimportance ofthese entities in
GDP.
53. Thesecond discussant thanked therepresentative ofParaguay fortheadditional information
provided inseveral areas including infrastructure, themerchant fleetandtheprivatization process.
54. Therepresentative oftheUnited States considered that, insome respects, registration
requirements forGovernment procurement could bepotentially restrictive. Hesought aperspective
onhowthese requirements could increase transparency andpotential access forsuppliers.WT/TPR/M/26
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55. Inresponse,therepresentativeofParaguayclarifiedthatthe1996registrationprocedures,which
wereaimed atimproving records inthisareaandensuring observance oftheentire legislative framework
byallfirms, didnotestablish anyrestriction ordeadline forinterested suppliers toregister. Prior
totheestablishment ofthisRegister, firms which hadproperly registered theircapital andhadmet
theirfiscal obligations, hadhadtherighttoqualify forpublic procurement contracts.
(ii) Regionalism andmultilateralism
56. Therepresentative ofParaguay considered thatregional integration agreements suchasthe
MERCOSUR Agreement, which wasrepresentative ofopenregionalism, werefullycompatible with
themultilateral trading system. Inaddition tothe1995 Framework Agreement with theEU,
MERCOSUR hadbeenincontact withseveral countries (Canada, China, India, Japan, Republic of
Korea,Panama,Switzerland)andregionalgroups(ANZERTA,ASEAN,CIS,EFTA,SADEC)interested
inestablishing trade relations.
57. HenotedthatrepliestoquestionsregardingMERCOSURhadalreadybeengivenattheMay1997
meeting oftheCommittee onRegional Trade Agreements. Asrepresentatives ofcountries raising
these questions hadattended thatmeeting, herecommended themtoconsult thedocuments submitted
byMERCOSUR onthatoccasion.
58. Thefirstdiscussant reiterated hisinterest indiscussing theissue oftheimpact of
MERCOSUR 'sCETonParaguay 'sbinding commitments. Herequested further information onthe
expected timing oftherenegotiations under Articles XXIV:6 andXXVIII.
59. Thesecond discussant referred toparagraph 22(Chapter II)oftheSecretariat report which
reflected adequately thelegalrelationship between WTO andMERCOSUR commitments.
60. While expressing hisappreciation forreplies, therepresentative ofJapan saidthatthedelay
of40minutes inthestartofthesecond Session oftheTPRB meeting should notbeaprecedent. With
respect totheParaguay 'sstatement onregional preferential trade arrangements, henoted thathis
delegation hadexpressed itsinterest onMERCOSUR matters atthemeeting oftheCommittee on
RegionalTradeAgreements.Healsoappreciateditsstatementinfavourofopenregionalismandrecalled
thatheexpected replies toquestions raised inthisTPRB meeting ontheWTO consistency of
MERCOSUR-related matters. These included thepartial coverage oftheCETandtheincrease inthe
levelofalmost alltariffs toconverge toCET inthelightofArticles XXIV:8(a) andXXIV:5 ofthe
GATT, aswellasthegranting oftariff preferences under Partial-Scope Agreements inthelightof
theMFN principle.
61. Therepresentative ofBrazil stated thatregional integration issues should beraised inthe
appropriate forum, rather thantheTPRB.
62. Therepresentative oftheEuropean Union saidthat,although MERCOSUR questions should
bediscussed elsewhere, theadoption ofitsCEThadincreased applied ratestolevels higher thanthose
bound byParaguay attheMarrakesh meeting. Heconsidered thatParaguay 'sspecific commitments
under theWTO could legitimately bediscussed intheTPRB. Hesought amore precise reply onthe
datefortherenegotiation ofbindings, asthisissue hadnotbeensufficiently clarified inthereport of
thelastmeeting oftheCommittee onRegional Trade Agreements concerning MERCOSUR.
63. Therepresentative ofAustralia recalled thatdiscussions intheTPRB could raiseabroad range
ofissues andwerenotlimited tonarrow WTO obligations. Sheexplained thattheinformation received
andthetypeofdiscussion attheTPRB meetings were ofadifferent nature from those ofother
committees. Shewould beseriously concerned ifthiskindofdiscussion were tobeprevented.WT/TPR/M/26
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Participation indifferent organizations created asituation ofinteraction andsymbiosis which shaped
trade policies.
64. Therepresentative ofUruguay hadnodoubts onParaguay 'scompliance with itsWTO
commitments. Hisdelegation wasopposed toanydebate ofMERCOSUR issues atTPRB meetings,
which would create difficulties andconfusion. Questions which hadbeenraised byonedelegation
atthisTPRB meeting, hadalready beensubmitted bythesame delegation atthesecond meeting on
MERCOSUR heldbytheCommittee onRegional Trade Agreements. MERCOSUR countries had
initiated theprocedure forthesettlement oftheirbinding commitments withother trading partners in
accordance withtherelevant WTO provisions.
65. TherepresentativeofCanadaemphasisedthattheTPRprocessprovidedforanoverviewcovering
allagreements andaspects ofWTO Agreements. Thereports prepared bytheSecretariat covered a
widerange oftrade-policy-related issues, including regional tradearrangements. Questions oncountry-
specific commitments rather thanonsystemic issues could be,andhadbeen, asked. Heemphasized
thatthediscussion should remain open; otherwise, anyundesirable question could bereferred toanother
committee. Therefore hewould appreciate areply fromParaguay onitsbinding commitments, ifnot
thesame day,atanappropriate timeinwriting.
66. Inresponse, therepresentative ofParaguay saidthatregional issues hadbeenbroadly debated
attheappropriate WTO bodyandthatreplies hadalready beengiven atdifferent opportunities, including
previously supplied documentation andtheTPRs ofother MERCOSUR members. Heconsidered that
questions onMERCOSUR issues attheongoing meeting weremainly duetocoordination problems
within delegations. Hisdelegation would provide replies onMERCOSUR matters attheCommittee
onRegional Trade Agreements, asanother major trading entity hadalready done. Inresponse toa
comment made byonedelegation concerning thelatestartoftheTPRB meeting, hesaidthatthiswas
duetotheunusually tightschedule forthemeeting onParaguay, which hadlefthisteamwithinsufficient
timetofinalize itsreplies.
(iii) WTO andother related issues
67. TherepresentativeofParaguayexplainedthathisauthorities'lackofcompliancewithnotification
requirements wasduetothetransition period ofadoption ofMERCOSUR regulations. However, he
reiteratedParaguay'sinterestinpromotingtransparencyintradepolicymatters,andpledgedthatpending
notifications would besubmitted within thefollowing twomonths. AWorkshop onNotifications,
organized bytheWTO Secretariat uponrequest ofhisauthorities, wastotakeplace sooninParaguay.
68. Hestated thattheconsular tax,previously known as"Consular Invoice", regulated byLaw46
of1972 andlevied at5percentoftheinvoice value, hadbeeneliminated byLaw133of1993. At
present, alegalization fee,setatafixed rateofUS$15 percommercial invoice, represented thecost
ofdocument legalization services rendered byParaguayan consulates. Under Law904of1981, an
additional taxof7percentofthelegalization fee(i.e.US$1.05) wascharged bytheMinistry ofFinance
tofinance theParaguayan Institute forIndigenous Peoples (INDI).
69. Concerning customs clearance andvaluation, heclarified thatthespecialized PSI
entities (Bureau Veritas, SGS) werecontracted toinform onquantity andmerchandise quality matters.
Their opinion onthevalue ofgoods served forreference purposes only. Nevertheless, Customs used
thisreference valuation asaceiling forcomparison withvalues declared inprevious shipments; a
maximum difference of15percentwastolerated. Incases ofsubstantial differences, thepossibility
foranadjustment ofthecustoms value wascommunicated totheimporter, whohadtherighttoappeal
thisdecision either totheValuation ortheTechnical Assistance Departments oftheCustoms foran
investigation aposteriori. Ifdisagreement persisted, theimporter could request anAdministrativeWT/TPR/M/26
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Indictment (Sumario Administrativo )foradefinitive settlement. Heconfirmed thatthecostsofservices
ofPSIentities, equivalent to1.3percentofthef.o.b. invoice value, wasborne entirely bythe
Government without anycharge totheimporter.
70. Under thetourism regime, the10percentVAT ratewascharged on15percentoftheinvoice
value. Theregime wastopromote 800"tourism" items. Thebasis ofvaluations forVAT purposes
onallitems ("tourism" ornot)didnotdiscriminate against imports.
71. Paraguayanlegislationestablishingimportprohibitionsonveterinaryproductspromotinggrowth
wasaresponse torestrictions applied bycertain meat-importing countries. Nevertheless, there were
plans torevise thismeasure inthelightofrecent evidence onitsimpact onanimal andpublic health.
72. Concerning theimport prohibition onbovine semen fromtheEU,heclarified thatthismeasure,
which hadbeendecided byMERCOSUR 'sVeterinary Committee rather thanParaguay alone, affected
countries withalarge share ofBovine Spongiform Encephalopathy (BSE) cases andcountries where
BSEoriginated. Atpresent, theCommittee wasrevising itsdecision inaccordance withtheactual
BSEsituation andprovisions ofinternational zoosanitary codes.
73. Theexport prohibition onun-processed wood wasintended tocombat deforestation mainly
duetosmuggling; asmall share ofcutwood wasprocessed domestically while thelargest partofit
wassmuggledabroad.Localwoodprocessingfirmshadtocomplywiththedomesticforestconservation
regulations.
74. Noexport prohibitions onrawhides andskins wereinforce inParaguay. Inthepast,certain
export authorizations hadbeenrefused because ofnon-compliance withtechnical standards setbythe
Ministry ofAgriculture andLivestock.
75. RegardingtheprotectionofIPRs,heprovideddetailsonthemembership,objectivesandworking
areas oftheNational Council fortheProtection ofIPRs. TheNational Council assisted congressional
commissions examining IPRbills, carried outapublicity campaign, undertook counterfeit product
detection (onwhich anotewascirculated), andorganized seminars onIPRmatters (forjudges, public
prosecutors, legislators).
76. OutofthreeBills,preparedwiththeassistanceofWIPO,theWorldBankandtheInter-American
DevelopmentBank,two(ontrademarksandauthors'rights)wouldprobablybeapprovedbytheCongress
inthecurrent legislative period. TheBillonpatents wasstillunder examination bytwocommissions
oftheSenate.
77. Under existing legislation, theCustoms were authorized toconfiscate falsified products
immediately afterdetection andcommunicate theseizure totherelevant tribunal. Representatives
ofinternationally known trademarks coordinated training courses forcustoms officers from allover
Paraguay toimprove theirdetection skills. Headded thattheIPR-related billsunder examination by
theCongress contained chapters allowing forseizure offalsified goods upon entry totheParaguayan
territory.
78. Thefirstdiscussant acknowledged Paraguay 'sefforts tocomply withnotification requirements.
Concerning thequestion oftheconsular tax,heurged allWTO members under TPRreview topursue
efficient cooperation withtheSecretariat soastospare delegations fromunnecessary discussion. He
reiterated hisconcern overthediscretionary application ofportandstorage feesandrecommended
theelimination ofratesfavourable toexports. Hecommended Paraguay 'sprogress intheprotection
ofIPRs, which wasparticularly important forpharmaceutical firms, andrecommended theutilization
ofPSIentities forcustoms valuation purposes.WT/TPR/M/26
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79. Therepresentative oftheEuropean Union wasconfused bythereply ontheapplication ofthe
consular tax. Thiscontradicted hisinformation based oncomplaints byEUtraders anddifferent
independent sources. Heasked iftherewasadifference between theory andpractice, orifofficial and
non-official practices wereapplied simultaneously. Hewould pursue thismatter further. Withrespect
tothePSIregime, hesaidthatmeasures undertaken bytheCustoms tocheck import values should
beinconformity withtherelevant WTO Agreement.
80. Therepresentative oftheUnited States alsorequested aclearresponse ontheelimination of
theconsular tax.According totheWorking Party report onParaguay 'saccession totheGATT, this
taxhadbeeneliminatedin1992;otherwise,Paraguaywouldbecontraveningitsaccessioncommitments.
81. Inresponse, therepresentative ofParaguay assured participants thatawritten reply would be
provided confirming theelimination oftheconsular tax.Hesought specific information about the
problems encountered byEUexporters withrespect tothismatter. Thiswould contribute inimproving
theinternal monitoring oftrade policy commitments.
(iv) Sectoral questions
82. Therepresentative ofParaguay saidthat,under itsWTO commitments inagriculture, Paraguay
hadrenounced itsrighttomaintain trade restrictions anddidnotgrant domestic orexport subsidies.
Itscommitment totradeliberalization inagriculture hadbeenreinforced byitsmembership intheCairns
Group. Production diversification waspromoted through technical, training andcredit assistance with
aview toreducing dependence ontraditional exports; henoted thatParaguay hadmany modern
biotechnology laboratories. Re-afforestation incentives hadledtotreeplanting operations covering
10,000 hectares eachyear.
83. Theliberalization andrestructuring oftheservices industry, animportant element ofthe
Paraguayaneconomy,wasprogressingandthede-monopolizationoftelecommunicationswasenvisaged.
Atpresent, Paraguay wastaking partinthenegotiations foraMERCOSUR framework agreement
inservices; therefore itdidnotintend tomodify itsGATS Schedule ofConcessions intheshort run.
84. Inreply toquestions byoneparticipant concerning corelabour standards, hestated thatthe
Singapore Ministerial Declaration indicated theILOasthecompetent bodyfordealing withthisissue.
AsthisDeclaration hadbeenadopted byallWTO Members, including thecountry raising thequestion,
hisdelegation considered itinappropriate todiscuss thismatter attheTPRB.
85. Therepresentatives ofBrazil andPerushared andsupported Paraguay 'sviewontheissue of
labour standards.
86. Therepresentative oftheUnited States replied thattheTPRM wasafar-ranging exercise which
could lookatavariety ofpolicy issues, including those oflabour standards.WT/TPR/M/26
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VII. CONCLUDING REMARKS BYTHE CHAIRPERSON
87. ThefirstTrade Policy Review ofParaguay wasconducted on17-18 July1997. These remarks,
prepared onmyownresponsibility, areintended tosummarize thediscussion andnottobeafullreport:
thiswillbecontained intheminutes ofthemeeting.
88. Thediscussion developed under fourmain themes:
Macroeconomic issues
89. Members commended Paraguay 'srecent macroeconomic performance, which hadbeenassisted
bywidespread political andeconomic reforms; thereduction ininflation wasspecifically noted.
Nevertheless, itwasalsoobserved thateconomic growth hadbarely keptpacewithpopulation growth
andthatmanychallengesrelatedtodevelopmentremainedtobeaddressed.Theroleofshoppingtourism
intheeconomy andParaguay 'sdependence onexport revenue fromtwocashcrops (soybeans andcotton)
andelectricity wasevident. Concerns wereraised regarding thepossibility ofaninflationary increase
inspending duetopossible increases inpublic expenditure inanelection year.
90. Questions wereposed ontheroleandincidence ofstateinvolvement intheeconomy andthe
need toaccelerate progress inprivatization. Information wassought onrecent improvements in
transparency oftheregime ofgovernment procurement, andonprovisions favouring domestic suppliers;
Paraguay wasencouraged bysome members toopen itsprocurement market tostimulate greater
efficiency intheuseofresources.
91. Members highlighted Paraguay 'ssuccess inimproving thelegalframework forinvestment.
Inthisconnection, questions wereraised ontheindependence ofthejudiciary, aswellastheimpact
ofstrong capital inflows onmacroeconomic management, andother investment-related issues such
asbusiness registration procedures.
92. Inreply, therepresentative ofParaguay noted thathiscountry wascontinuing itsefforts to
overcome numerous structural problems; tradeliberalization wasakeyfactor inthisprocess. Efforts
todiversifyagriculturalproductionwouldhelpinthealleviationofpoverty.Increasedefficiencythrough
privatization wasoneoftheaimsofthereform ofstateenterprises; therepresentative gavedetails
oftheprogramme. Paraguay 'snotification onstate-trading enterprises would becompleted assoon
aspossible. Government procurement waspartofthework programme ofMERCOSUR; Paraguay
thusdidnotintend tosigntheGovernment Procurement Agreement inthenearfuture, although it
wasseeking maximum transparency inthisarea. Paraguay sought toencourage foreign investment
tohelpindustrial development; integration waspartofthese efforts. Therepresentative indicated
thatParaguay would continue itspursuit ofdevelopment through balanced andstable macroeconomic
policies anddeepening thestructural reforms.
93. Inreply toasupplementary question, therepresentative ofParaguay provided details regarding
theRegister ofSuppliers forgovernment procurement; thiswasopentoalllegitimate, taxpaying firms
andwasnotarestrictive device.
Regionalism andmultilateralism
94. Members praised Paraguay 'sincreasing integration intotheglobal economy, anditsrolein
promoting aliberal trade regime forMERCOSUR coupled withastrengthened dispute settlement
mechanism. However, concerns werevoiced thatconvergence totheMERCOSUR common external
tariff would leadtoanincrease inParaguay 'saverage tariff, aswellastogreater tariff escalation.
Itwaspointed outthat,totheextent thisprocess affected Paraguay 'sscheduled WTO commitments,WT/TPR/M/26
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these should besettled through negotiations under Article XXIV:6 assoonaspossible. MERCOSUR
commitments mayalsoinfluence Paraguay 'sinterest inparticipating inmultilateral liberalization efforts,
among which theInformation Technology Agreement andthenegotiations onfinancial and
telecommunications services werementioned. Aquestion wasraised regarding compliance withthe
provisions ofArticle XXIV andseeking information onParaguay 'sparticipation inother free-trade
arrangements.
95. Inreply, therepresentative ofParaguay, supported byanumber ofregional partners, noted
thatregional agreements werecompatible withthemultilateral trading system. MERCOSUR should
beseeninthiscontext; itsphilosophy wasbased onthepractice ofopenregionalism. Contacts had
beenestablished withmany othercountries andregional groups. Many ofthequestions onMERCOSUR
werecurrentlybeingconsideredintheCommitteeonRegionalTradingAgreements,whichwasregarded
astheappropriate forum forsuchissues; replies hadalready beenprovided inthatforum. Some
members emphasized that,bearing inmind thebroad transparency roleoftheTPRM, questions on
members 'participation inregional trading arrangements were legitimate andhadbeendealtwithin
other cases.
WTO andother related issues
96. Members urged Paraguay tomeetitsoutstanding WTO notification obligations without delay,
particularly inareas suchasimport restrictions andstate-trading enterprises. Questions wereasked
about theWTO consistency andapplication of"other" import charges suchastheconsular taxand
portandstorage fees. Information wassought onefforts made byParaguay toimplement the
WTO Customs Valuation Agreement, andonprocedural aspects ofthepreshipment inspection regime.
Onedelegation expressed concerns oncostsanddelays withrespect tocustoms clearance procedures,
despite theexistence ofthePSIregime. Onemember asked several questions onthecompliance with
internationally agreed rulesoftechnical standards adopted atMERCOSUR level, aswellaswhether
mutual recognition agreements concluded bythesub-regional group were open tonegotiation with
thirdcountries.
97. Some Members questioned theconsistency withWTO rules ofexport restrictions affecting
timber, hides andskins.
98. Positive action taken byParaguay toimprove thelegalandinstitutional framework forprotection
andenforcement ofintellectual property rights wascommended. Information wassought onprogress
innewlegislationinthisarea,trainingarrangementsforjudiciaryandothersconcernedwithenforcement,
theresults oftheNational Campaign Against theViolation ofIPRs, andspecific actions taken bythe
National Council fortheProtection ofIPRs andtheCustoms tocombat piracy.
99. Inreply, therepresentative ofParaguay saidthathisauthorities hadbeenmaking agreateffort
tomeetthenotification requirements oftheWTO; however, thiswasdifficult while many MERCOSUR
measures werebeing adopted. Technical assistance fromtheWTO wasbeing sought tohelpParaguay
meetitsobligations. Concerning theconsular tax,hepointed outthatthecharge wasafixed amount
ofUS$15 onwhich 7percentwaslevied (i.e.US$1.05) forthesupport oftheParaguayan Institute
forIndigenous Peoples. Itwasnotbased onthec.i.f.value ofthegoods. Theoriginal consular charge
of5percentofthec.i.f. value waseliminated in1993. Preshipment inspection companies provided
information tothecustoms service toverify declared values, which were generally accepted within
a15percentmargin; thecosts were absorbed bytheGovernment. Information wasprovided on
theapplication oftheVAT under thetourist regime, levied atarateof10percenton15percentof
theinvoice value.WT/TPR/M/26
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100. Therepresentative alsoprovided information onthework oftheNational Council forthe
Protection ofIntellectual Property andefforts totrainofficials, judges andlegislators inthisarea.
Thelegalframework fortrademarks, authors 'andrelated rights andpatents wasalsobeing updated
inaccordance withtherequirements under theTRIPS Agreement, andthiswould alsostrengthen
enforcement. Export restrictions ontimber were intended tocombat deforestation; theprocessing
industry wasalsorequired tocomply withdomestic restrictive measures. There wasnorestriction
ontheexport ofrawhides andskins.
Sectoral questions
101. Paraguay wasasked toexpress itsviews onsectoral policy prospects andtheroleofstate
intervention inthiscontext. Thelowlevelofgovernment intervention inagriculture wasappreciated
andtherecent accession ofParaguay totheCairns Group waswelcomed. Information wassought
onpolicies tobeadopted todiversify, andraise value added in,theagricultural sector. Questions
werealsoposed ontheeffectiveness ofmeasures taken toprevent deforestation, aswellasthescientific
basis forbanning imports ofbovine semen.
102. Members commented ontheexistence oftariff escalation inprocessing andmanufacturing
industries; theyraised questions concerning theimpact onParaguay oftheMERCOSUR common
automotive regime, tobeintroduced inthenearfuture.
103. Notewastaken ofreforms inthelegalframework forthefinancial sector intheaftermath of
the1995 banking crisis. Improvements intheregulatory framework governing telecommunications
serviceswerealsowelcomed;however,Memberssawscopeforimprovementintransportinfrastructure.
Information wassought onParaguay 'splans formaking offers intheongoing negotiations onfinancial
andbasic telecommunications services.
104. While onedelegation raised questions regarding theobservance ofcorelabour standards by
Paraguay, many others opposed theraising ofsuchquestions inanyWTO body, including theTPRB.
They emphasized thatthese questions arenottrade related and,inaccordance withtheSingapore
Ministerial Declaration, should bedealtwithintheILO.
105. Inreply, therepresentative ofParaguay noted thatParaguay hadnotariff quotas orspecial
safeguards inagriculture, anddidnotgrant export subsidies. Paraguay wasworking actively and
constructivelyininternationalnegotiationsonagriculture,henceitsrecentaccessiontotheCairnsGroup.
Paraguay wastrying todiversify itsproduction toreduce dependency onafewitems. Information
wasprovided onParaguay 'sSPSfacilities, andextension services. Restrictions ongrowth-promoting
hormones weretoconform withrequirements offoreign markets forbeef,while restrictions onbovine
semen from theEUwerelinked totheBSEcrisis. Boththese matters werecurrently under review.
106. Therepresentative stressed thattrade inservices wasofgreat importance fortheParaguayan
economy, andParaguay hadmade progress inliberalizing thesector, especially intelecommunications.
Paraguay wasworking tocomplete aframework agreement onservices within MERCOSUR; therefore,
intheshort term, Paraguay didnotintend tomodify itssector-specific commitments under theGATS.
107. Recalling theterms oftheSingapore Ministerial Declaration inrelation tocorelabour standards,
therepresentative ofParaguay considered thatitwasnotappropriate torespond toquestions onthis
matter intheTPRB orwithin theWTO.
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108. Overall, Members welcomed Paraguay 'sparticipation inthereview process, withastrong
delegation ledatMinisterial level. They welcomed thestepsalready taken byParaguay toward greater
transparency intradepolicy andtheauthorities 'stated commitment tofreeandopentrade, andstrongly
encouraged Paraguay tocontinue along thepathofliberalization andderegulation. They emphasized
theneedforMFN andregional liberalization tobecomplementary, theimportance ofdiversification
oftheeconomy andtheneedfordevelopment tobepursued onasustainable basis. TheTPRB welcomed
theanswers given byParaguay toquestions andlooked forward towritten replies onoutstanding issues.