Chair Letter

Delegates,

My name is Josh Mathew, and I will be one of your chairs. I am a current senior and the Director General here at PrepMunc. I would like to thank you all for taking the time to be a part of Model UN. Being a part of Model UN shows that you have an interest for understanding the world and its most complex issues, and I think this is a great thing. When students are pushed to understand alternative views and move towards compromise, they are forced to ask themselves important which questions which fosters personal growth, personally I think that the real beauty in Model UN lays here. That is why I want to encourage all of you to participate to your fullest ability because discussion fosters change, and change fosters growth, and at the end of the day, Model UN is about helping everyone develop the ability to communicate and compromise. Aside from moderated caucuses and sponsoring resolutions, I enjoy playing chess and simulating stocks. I am very active in the service initiatives sponsored by our Campus Ministry program, and was part of a service team that went to Peru last summer. I am very excited for the conference, and we have a great day planned for you.

Hello delegates! I’m Alexander Kalavanos, and I will also be chairing along with Josh. I am a sophomore at Prep and this is my second year in Model U.N., although it’s my first time chairing. Here at Saint Francis Preparatory School, I take Strings Orchestra, where I play the upright bass, which I also play at home, and I would also like to learn the electric bass. I also like to make dumb jokes, although I think they’re pretty funny. I also enjoy the consumption of ice cream, but I personally prefer vanilla, which is much better than chocolate, but of course that’s only my opinion.

The World Trade Organization(WTO) defines illicit trade as Illicit trade means any commercial practice or transaction related to the production, acquisition, sale, purchase, shipment, movement, transfer, receipt, possession or distribution of: (i) any illicit product defined as such by international law, or (ii) any licit product for non-licit purposes as defined by international law. Illicit trade also covers any conduct intended to facilitate such activities. Typically illicit trade tends to involve 3 main groups of items: contraband items, counterfeit items, and brands being produced legally in one country and then smuggled into another without due process.

Illicit trade is a global phenomenon that abuses international trade systems and destabilizes governments, while neutralizing fair trade policies and promoting corruption in the countries where it occurs. The World Economic Forum estimates that illicit international trade amounts to roughly $650 billion, taking into account – only – trade in goods. Illicit financial flows are on the order of $1.3 trillion. Moreover, the “illicit economy” represents approximately 15% of the world’s GDP and 7% of the world’s circulating merchandise. So, illicit trade can negatively affect both the larger world economy and the economies of individual countries. This large amount of money is due to the presence of illicit trade across all types of exchanges. Illicit trade is present in areas like medicine, tobacco, technology, clothing, and weapons. Illicit trade not only is carried by individual people and groups in the global community, but national governments themselves are trading illicit.

When nations lose faith in the standard rules and procedures that the nation follows, they seem to pursue illicit trade. This issue is especially apparent when dealing with the ideas of state sponsored terrorism, where nations will sell military grade weapons to terrorist groups. Evidence has recently come to surface that Iran has been supplying the Taliban with military grade weapons that have been used against troops in Afghanistan. However, this is not the first time that Iran has been accused of smuggling weapons into Afghanistan and other parts of the world. Iran has been caught on several occasions smuggling drugs and weapons into neighboring countries. Several sources claim that illicit trade makes for about thirteen percent of the total trade in Iran.

With the rise of the internet, illicit trade has become more prevalent and goods are being exchanged at never before seen rates, with great ease though cybernet lockers and darknet markets. The rapid growth in cryptocurrency has tremendously worsen this problem. The enmity of the blockchain currencies make regulation very hard if not impossible to do. These transaction span throughout all types of illicit trade. A study from the Oxford School of Law reports that “illegal activity accounts for a substantial proportion of the users and trading activity in bitcoin. For example, approximately one-quarter of all users (25%) and close to one-half of bitcoin transactions (44%) are associated with illegal activity. The estimated 24 million bitcoin market participants that use bitcoin primarily for illegal purposes (as at April 2017) annually conduct around 36 million transactions, with a value of around $72 billion, and collectively hold around $8 billion worth of bitcoin.”

With all of this in mind, it is very clear that illicit trade is a worsening problem in the modern world. Illicit trade destabilizes economies, and undermines all of the fair trade agreements carried out around the world. So, it will be up to you delegates to find practical solutions to help deter the growth in illicit trade on a local, national and global level.

Questions To Consider

· Does illicit trade occur in my country?

· Do blockchain currencies need to be regulated?

· Should nations be punished for participating in illicit trade?

· What sectors of illicit trade affect my nation the most?

· How can illicit trade be stopped on a national and global level?

· How can governments be incentivized to trade fairly?

Helpful Links

https://www.sciencedirect.com/science/article/pii/S0007681316300908

https://www.sciencedirect.com/science/article/pii/S0176268009000159

http://www.oecd.org/tax/charting-illicit-trade-9789264251847-en.htm

http://www.oecd.org/gov/risk/illicit-trade.htm

Tariffs are taxes set on specific imports that a country has set. Often times tariffs are placed so that a country can protect its domestic industries against foreign competition. Tariffs are essentially sales taxes that creates a gap between the price paid by buyers and the one set by foreign distributors. Tariffs can be set at different rates for thousands of different products based on where they are made, even if there is mutual benefit from both countries. These tariffs encourage lobbying from companies seeking protection from the government.

Although tariffs can protect infant industries from bigger foreign competitors, they can also cause nations to enact their own tariffs as an act of retaliation. The current trade war between the United States and China, two of the globes biggest economies, not only affects them but has serious consequences for the rest of the world. The IMF reported that the world economy should grow by about 3.7%, which is .2% lower than what was expected by the world. This shows some slowdown as a result of the new tariffs. These new tariffs were installed as a result of unfair practices done by the Chinese over the years. The IMF noted that China’s economy will drop to 6.2 percent growth as opposed to the once-expected 6.6 percent. But China has responded with tariffs on its own on American products, making it even harder for US companies to sell in the Chinese market. The United States continues to make aggressive economic moves with new trade deals possibly forming in North America, which will replace NAFTA, and Europe.

Modern day trade focuses on a more specialized form and control of tariffs which is a trade blocs. When countries are unable to compete in global markets, countries will often band together and attempt at controlling market prices in a way that eliminates risk. This produces benefits for only countries within the bloc, and essentially shuts out any foreign competitors. These countries essentially form a monopoly on the market. A notorious bloc is OPEC, an oil cartel that controls most of the oil exports in the world. This cartel has a history of letting political stances influence the trade. OPEC has held oil hostage from the countries that supported Israel in the 1970’s and on many more instances. The idea of an international cartel inherently violates ideas about free trade.

Delegates will have to renegotiate any trade deals and agreements that currently affect the global community, The committee will have to evaluate the necessity for trade blocs and deals on the global market. Delegates can also consider the need and justifications behind unilateral sanctions placed not by the UN but by individual countries. Delegates will have full control over the economic policy and relations of their country and will be able to place embargoes and unilateral sanctions on countries if necessary. However, the main objective of the committee is to work towards creating a global free market.

Helpful Links

https://www.washingtonpost.com/news/monkey-cage/wp/2018/08/24/worried-about-tariffs-trade-blocs-are-the-real-danger-to-the-u-s-and-china/?noredirect=on&utm_term=.8301fca754de

https://www.businessinsider.com/trump-china-trade-war-kuehne-nagel-data-shows-trade-slowdown-2018-12

https://www.thebalance.com/tariff-pros-cons-and-examples-3305967

https://www.foreignaffairs.com/articles/1928-04-01/international-cartels

Points to Consider

· What does trade in my country look like?

· Does my country have any unilateral sanctions against any countries?

· Is my country part of any international cartels?

The global economy is growing more stagnant each year, and people are growing more uncertain about its future. These trends weigh heavily on countries that are known as banana republics:a term that was used to describe a country with an economy that relies on the export of a limited-resource product. Prices of minerals, oils and other basic commodities that control the exports of these countries have declined as well.

When the price of crude oil fell in 2014, the Venezuelan economy had essentially collapsed. The venezuelan economy had shrunk by almost thirty percent. The revenue, amount of products, and quality of life had all plummeted as the country could no longer support the growth they had experienced in recent years. Reports show that oil had once comprised ninety-six percent of the economy, and following the crash, inflation rates are almost at 1,200,000%. Countries in the middle east have a similar fear that the increased competition in the oil industry could cause serious economic damage to their economies.

A new trend moving toward the splitting up of production across the globe, and the development and success of regional and global value chains, helps create new ways for developing countries to export tasks, services and other activities. These new chains offer developing countries a path out of the trap of having to specialize in whole industries, with all of the cost and risk that such a strategy entails.

New technologies that have led to affordability in transport and communications created new opportunities for countries to create exports. Expanding into these new markets broadens production, it also diversifies the types of employment available and, increases opportunities to find real jobs. This is new growth can transform countries and increase participation in education-which, in turn, increases long-term productivity and reduces poverty. Finally, growth in developing countries over the last decade has created the means to reduce dependence on the North American and European markets, which several countries struggle with.

During periods of prosperity, resource-dependent countries have difficulty designing and implementing public investments and reforms that provide a guideline for diversification. High commodity prices often lead to overly appreciated exchange rates that undermine the competitiveness of potential new export activities. Such problems are worsened when governments fail to fill the gaps in the market for products, services or the means of production. With private companies using government subsidies or other favorable treatment combined with a lack of transparency, instability and internal conflict as public and private stakeholders fight for a stake in the revenue generated by resource extraction. Governments need to change their regulatory emphasis away from rigid tools governing investment in extractives toward a more flexible approach that encourages investment in a wider range of activities.

Chile is an example of a diversified economy, exporting more than 2,800 distinct products to more than 120 different countries. Zambia, a country similarly endowed with copper resources, exports just over 700 products to just 80 countries. Other low-income countries have similarly limited diversified economies. The Lao People’s Democratic Republic and Malawi, for example, export around 550 and 310 products, respectively. Larger countries that export oil, such as Nigeria (780 products) and Kazakhstan (540 products), have failed to substantially expand the range of products they produce and export.

Delegate will have to find a way to help struggling nations find a way to diversify their economy in a way that will not make them more dependant on other nations than they already are. Countries need to find ways to develop more industries and productive jobs in their countries, without giving too much influence to one particular person or nation.

Helpful Links

https://atlas.media.mit.edu/en/profile/country/chl/#Exports

https://www.iea.org/newsroom/news/2018/october/economic-diversification-for-oil-and-gas-exporters-doesnt-mean-leaving-energy-be.html

https://www.theatlantic.com/politics/archive/2013/01/is-the-us-on-the-verge-of-becoming-a-banana-republic/267048/

Questions to Consider

· How many exports does my country have?

· Does my country have a main export?

· How can I successfully diversify my country’s economy

· Is my country dependant on other nations for exports or imports?