My thesis is focused on the bilateral trade relations between the Republic of Paraguay and the Republic of China, specifically paying attention to the international trade that boosted the economy and the technical cooperation that the Paraguayan people have benefited from. Approximately, during the last 5 years Paraguay has made an attempt to switch from a soft power diplomacy model to a commercial diplomacy model. The study adopted the qualitative method that entails a comprehensive analysis of recent literature on both economic and poltical facets of the Paraguay-Taiwan relation. The study has also used Taiwanese media and Paraguayan media in English language. The study shows that the relations between Taiwan and Paraguay were mainly because of technical cooperation, education exchanges, and cultural exchanges but mainly emphasized on offering a good impression of Taiwan existence in Paraguay. The study has further unleashed the instruments taken by federal states such as public diplomay, assistance in areas of development, contact between the military, humanitarian aid, exchange programs, and broadcasting. The study shows that globalization has led to the increased interdependence between countries, which has resulted in increased international interaction. Most international relations are based on pooling resources, sharing information, multinational corporations, international politics, security, and trade. For this interaction to be effective, the parties involved have to formulate an agreement that would guide the relationship. Such an agreement is supported by the mutual decision made by the two parties involved. The study shows that the Economic Cooperation Agreement is the third largest commercial concession for Paraguay after Mercosur and the European Union. On the first part of the Economic Cooperation Agreement, Paraguay agreed to lower tariffs on 19 Taiwanese products, including sporting equipment and ink, while Taiwan reduced import duties on 54 products from Paraguay, such as beef, fruit juice and pet food.