Discouraging Protectionism and Promoting Free Trade in Paraguay

The Republic of Paraguay believes that free trade is the best way to support the economy of a country. Starting from the mid-20th Century till this day, many countries have embraced international free trade practices such as reducing tariff barriers and currency restrictions. A cornerstone of world trade liberation was the formation of the General Agreement on Tariffs and Trade (GATT), it remained in effect until its successor, the World Tarde Organization (WTO), came to be. However, many countries are currently experiencing a rise in protectionism, which negativity impacts economies that are export driven. For instance, Hungary, who’s main target market for exporting certain products such as electrical machinery, is the Garman vehicle industry. Therefore, in light of the recent protectionism policies adopted by US President Trump, which imposes tariffs on certain products such as steel, which might indirectly affect the Hungarian economy. If there were more tariffs on European cars, this would result in a significant decline in the German vehicles industry and would, therefore, indirectly hurt the Hungarian industry. The ECOSOC forum recently discussed the rising tensions between nations and that especially hinder developing countries and called for multilateral trading system reforms. Moreover, many countries such as the Europe, China, and the US, which make up the world’s largest economies, are all predicted to suffer economically from the rise of protectionism.

Paraguay’s history is scarred with corruption, political unrest, and chronic economic problems that have plagued that country since it emerged into a democracy, after 35-years of authoritarian rule. Also, while Paraguay lies at the heart of South America, however, unlike our neighbors, we do not have a large tourism industry. Thus, our economy is reliant on agriculture exports; as a result, any implemented tariffs would directly hurt our export driven economy. Therefore, numerus multilateral trade agreements helped to create a new spirit of optimism in Paraguay about what an isolated, small country could achieve. During the 1960s, our economy was on a path of steady economic growth, due to the establishment of a Technical Planning Secretariat which is the major economic planning arm of the government, and is the outcome of a United States-sponsored Alliance for Progress with the assistance of organizations such as the United Nations Economic Commission for Latin America (ECLA). In the 1970s, GDP grew at over 8 percent a year and exceeded 10 percent from 1976 to 1981, a growth rate faster than in any other economy in Latin America. This was mainly due to the soaring price of soybeans and cotton, which came to dominate the country's production and exports.

Another cornerstone was the Investment Promotion Law for Social and Economic Development. Which opened Paraguay's doors even further to foreign investors by providing duty-free capital imports, income-tax breaks and additional incentives. In addition, we are a member of important trade organizations such as WTO, ECOSOC, and a founding member of Mercosur. During the 65th session of UN general assembly, our mister of exterior called for a new international architecture for fair trade mechanisms and efficient regulations and condemned “coercive economic measures that denied countries their right to determine their own economic and social systems”. Therefore, Paraguay advocates for an UN-sanctioned policy that prohibits countries from adopting extreme protectionism policies that would negatively affect export driven countries. Also, policies that encourage countries to remain a part of free trade treaties. Therefore, these policies would include a yearly check on a country’s tariff rate, to ensure that they stand around the world average of 2.59 percent. The aim is to protect developing countries and to maintain steady world economies, and to avoid fluctuations in GDP that could result in inflation. These steps will hopefully result in fair globalization and stable global economies.