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 Linkshttps://www.sciencedirect.com/science/article/pii/S0007681316300908https://www.sciencedirect.com/science/article/pii/S0176268009000159http://www.oecd.org/tax/charting-illicit-trade-9789264251847-en.htmhttp://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 Linkshttps://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=.8301fca754dehttps://www.businessinsider.com/trump-china-trade-war-kuehne-nagel-data-shows-trade-slowdown-2018-12https://www.thebalance.com/tariff-pros-cons-and-examples-3305967https://www.foreignaffairs.com/articles/1928-04-01/international-cartelsPoints 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 Linkshttps://atlas.media.mit.edu/en/profile/country/chl/#Exportshttps://www.iea.org/newsroom/news/2018/october/economic-diversification-for-oil-and-gas-exporters-doesnt-mean-leaving-energy-be.htmlhttps://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?