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TOLMUN 2012

WTO
Topic A: Economic Stimulus and Trade Imbalances in Europe Topic B: Genetically Modified Organisms and Trade

TOLMUN 2012

Welcome from your Staff


The Director and Chair of the WTO, TOLMUN 2012 welcome you! Your Director, Edward Chu, is a grade 12 student at R.E. Mountain Secondary school, in the second year of his IB Diploma. He is a devoted mun-er, with previous experience in advanced committees, and an aspiring lawyer. In his spare time he enjoys competitive soccer, snowboarding and volunteering. He also worked as a Summer Student at a law firm this summer. Edward is looking forward to meeting the delegates of the WTO and creating an unforgettable atmosphere. Your Chair, Bobae Choi, is an enthusiastic senior student at R.E Mountain Secondary, Bobae is pleased to serve as the chair of the World Trade Organization. He is a dedicated MUN-er with great participation in previous local conferences and from these experiences; he is excited to step into international affairs through TOLMUN. In addition to MUN and other MUN related things, Bobae can be found participating in team sports and volunteering in various communities. He strongly believes in TOLMUN will be an enriching experience for all delegates and will concentrate on doing his best to make this conference as memorable as can be. The WTO topics are: A) Economic Stimulus and Trade Imbalances in Europe B) Genetically Modified Organisms and Trade Delegates should further research on both topics to understand the relevant opinions of the country that you represent. Remember that you are supposed to represent your government not the population or yourself. We highly recommend all delegates of the committee to submit a position paper outlining the perspectives of your country. You will need to cite the references and list all references in the MLA format. Your understanding of the topics through your study will contribute to a successful debate and resolution. The Dias looks forward to working with you delegates to make history and improving our world. Happy researching! Edward Chu Director WTO Township of Langley Model United Nations wto.tolmun@gmail.com

Table of Contents
Committee Background Topic A: Economic Stimulus and Trade Imbalances in Europe Topic B: Genetically Modified Organisms and Trade

TOLMUN 2012

From the money in our pockets and the goods and services that we use, to a more peaceful world the WTO and the trading system offer a range of benefits, some well-known, others not so obvious.
- World Trade Organization

What is the WTO?


The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the worlds trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. - World Trade Organization The World Trade Organization is not part of the United Nations, but deals with matters on a global scale through cooperation and governance. Inaugurated only seventeen years ago, on January 1st of 1995, it is a newer organization in comparison to the United Nations, but equally as effective by developing a system in which all nations benefit from membership. From the money in our pockets and the goods and services that we use, to a more peaceful world the WTO and the trading system offer a range of benefits, some well-known, others not so obvious. It should be understood that delegates will come upon some bias opinions within their research of the WTO and topics, but rest assured that the WTO is largely misunderstood by the public as a whole. Is it a dictatorial tool of the rich and powerful? Does it destroy jobs? Does it ignore the concerns of health, the environment and development? Emphatically no. Criticisms of the WTO are often based on fundamental misunderstandings of the way the WTO works.

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Topic A: Economic Stimulus and Trade Imbalances in Europe

Introduction
The date is January 1st, 1999, and the currency known as the Euro has officially come into existence. Little did the founders know that it would become the infamous European Debt crisis which would initiate a plunge in global financial markets. In a currency that was meant to unite and strengthen European markets, it has curtailed into a political fiasco. It all started with the lack of fiscal and monetary policies in certain countries of the Eurozone. In 2009 alone, Greece had already accumulated debt amounting to 113% of GDP, almost double the limit of 60% issued by the Eurozone. This followed the immediate downgrade to both Greek bank and government issued bonds, by credit agencies such as Standard & Poor. With rising uncertainty in Greeces accounting procedures and ability to repay the debt, it caused loss of confidence in financial

markets worldwide. Investors were selling stocks left and right. The effects of the European sovereign debt crisis not only impacted the nations of the Eurozone, but also halted the American recovery and slowed Chinas growth. With mounting uncertainty in Greek markets, the government initiates austerity plans in order to slow the financial deficit. With Greece continuing to initiate spending cuts, the citizens of Greece rose to the streets and rioted against the cut in social services.

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The Current Crisis


Fast-forward two years and we arrive at the current European Sovereign Debt Crisis. It is no longer Greece with the mountain high debt, but it has infected other, larger, more financially influential markets - Portugal, Italy, Greece and Spain. These countries are now known as the PIGS that has ruined the once great Euro with debt. If people thought Greece was a big problem, problems within nations like Italy and Spain are much larger, not only geographically, but more importantly financially. The public debt of Italians is 118.1% of GDP, it a nation where the GDP is $2.198 trillion, the debt more than exceeds 2 trillion dollars. With Spains GDP to debt ratio at 146.6% and their GDP is $1.295 trillion. The debt of only these two nations would almost touch 4 trillion dollars. This burden is far too great for just a handful of European nations the carry. Moreover, it doesnt help that the only financial stable nation in the Eurozone is the German economy. Though Merkel (German Head of State) is hesitant to open the coffers of the German Central Bank, she may not have any option. The Eurozone has already backed many bailouts, and now with the battle towards Spain and Italy, the Eurozone needs to come together with either stricter austerity measures that would choke production or find other ways like the use of bonds to encourage infrastructure and financial investment. The latter, more financially sound markets, would prefer austerity as they are lending out their own money to save the PIGS. The issue is that the only reason that the PIGS have thrown themselves in this situation is due to their financial and monetary policies. They spent and borrowed extravagantly at the detrimental costs of other Eurozone nations. They leant out Euros like they were pennies and left the mess for the rest of the nations the burden. One of the PIGS cannot just default on their loan, because all the Eurozone nations are entwined together

through the Euro. They all use the currency and if one defaults on their debt, then the Euro as a whole is devalued. The issue is that debt is loaned on collateral and without trust there is no reason why creditors would want to lend money to the debtor.

Europe's states are not big spenders on either health or education. The variation among countries stems from a difference in spending on pensions and social assistance. Europe's countries also differ how they tax these benefits; Northern European countries tax the social security benefits of people with high incomes more than others in Europe. After taxes are considered, the southern periphery is the biggest social spender in Western Europe. But the reason why Europe spends more than its peer on public pensions is the same in the north, center and south. This is not because Europe has the oldest population (Japan's is much older) nor because of higher pension benefits (annual subsidies per pensioner are about the same in Greece as in Japan). It spends more because of easier and earlier eligibility for pensions. However, the supporters of the PIGS would think otherwise as they believe bonds would be more effective at this time as they are clearly not supportive of any more spending cuts. This is no longer an issue isolated to the Eurozone and should be aided by the nations of the WTO. The WTO must think of ways to help stimulate the economy in Europe and pour investments into the stricken nations to alleviate the financial pain. Without the help of the global community, the Eurozone is indefinitely at a bursting point.

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Trade Imbalances
One of the key causes of these financial crises was Free Trade, essentially a term used to describe the difference of exports and imports. When a trade imbalance occurs, the exporting nation will accumulate another countries currency. In the case of the European nations and America, their currencies are composed of great debt. They are also major importers of goods from emerging and developing nations. For example, China would be a major net exporter. The global system incurred from free trade has brought nations together through easier export and import, but this has also caused the nations to become more reliant on each others financial markets. Even though the trade may be monitored under WTO, financial and monetary policies are governed by each individual nation. Therefore through free trade, one country holds more foreign capital than the other, leading to one nation being a creditor and the other a debtor. In this case, a nation like China would be the creditor and a nation like USA would be the debtor. Essentially, this means that the developing nations, who are major exporters, hold most of the foreign reserves and can therefore provide goods at a much lower cost. An imperative example of trade imbalance is between American and China, where the trade

deficit for America peaked at a record of $295 billion. This lead to the recent complaint filed by the USA to the WTO over a countervailing tariff bill. Additionally, further protectionist sentiment was ignited with the calling of a revaluation to the Yuan or RMB (Chinese Currency), because the low currency equals a cheaper price in goods for export. However, from another perspective, it would seem illogical, as Chinas account surplus has declined from 10% of GDP from five years ago to under 3% recently with projections of further decline. In addition, the communist regime has allowed the Yuan to appreciate a further 30%. Chinas surpluses are not driving American deficits and that is the truth, because the timings of both countries trade balances are different.

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The U.S. trade gap began increasing in about 1998 and peaked around 2005. Chinas trade surpluses only began increasing around 2005 and peaked in 2008. This suggests that U.S. deficits and Chinas surpluses are not directly related but actually reflect countryspecific circumstances.

Economists have stated that there are three possible explanations to this trade imbalance. 1) Surging American consumption and fiscal deficits (similar to the Eurozone) 2) A Maturing East Asian network centered on China 3) Chinas Savings Rates The network became central to China with the introduction of China to the WTO in 2001. The network strengthened Chinas competitive position with easier access to Western markets. Even with annual wage increases of 12% in China, the rate of productivity rose even more quickly, resulting in overall probability for multinational corporations. This is not only an issue unique to China, but also to the other East Asian nations, such as South Korea, Japan and Hong Kong. All have been strengthened by Chinas booming economy and the East Asian production network has flourished through this relationship creating further trade imbalances with USA. When U.S. President Barack Obama welcomed Lee Myung Bak, his counterpart from South Korea, to Washington last year, he commented

approvingly that South Koreas trade with the U.S. was in balance -- as it should be. What Obama should have done was congratulate Lee by noting that South Korea, along with several others, has been able to avoid U.S. criticism by hiding its trade surpluses behind the Great Wall of China. Yukon Huang (Bloomberg) The problem should be addressed by all East Asian nations to protect themselves from the insecurities of Americas financial markets and further encourage and strengthen free trade Globally.

Suggested Areas for Research


1. Economic stimulus methods 2. How debt accumulates 3. Global and European economic crisis causes 4. How your country is affected 5. More recent news regarding the issue 6. Trade Imbalances 7. Trade tariffs

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Topic B: Genetically Modified Organisms and Trade

Introduction
Genetically modified organisms (GMO) are defined as organisms in which the genetic material (DNA) itself is altered in a way that when completely made, the organism is completely unnatural. Through various uses of modern technology such as Genetic Engineering, Modern Biotechnology and/or Gene Technology, it allows for certain specific individual genes to be transferred from one organism to the other. When these individual genes are transferred to one another the end result will always be made out to having a GMO being created. Generally, many different GMOs include different genes that are inserted in different ways, which thus leads to an infinite amount of combinations that are possible - this means that the GMOs cannot be

generalized with statements on the safety of GM foods. Although general statements concerning the safety of GM foods are nonexistent, GM foods that are currently available on the international market have all passed through multiple risk assessments and are not likely to present risks for health. Genetically modified crops have been hailed as a way to make agricultural products safer and more affordable, but they have accomplished neither of these goals.

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Things to Consider
Common concerns that arise are the main issues that revolve around human health; Allergenicity, Gene Transfer and Outcrossing. Tendencies that provoke allergic reaction (Allergenicity) such as the transfer of genes that are commonly allergenic are greatly discouraged in the process of genetically modifying the organism unless it can be demonstrated that the product of the transferred gene is not allergenic. Gene Transfer, another issue that pops up can cause concern if the transferred genetic material itself affects human health. This would be problematic if antibiotic resistant genes were also transferred along with the original gene. Although the chance of mixing together is highly unlikely, there is still the small percent probability in the gene being transferred through. There is also the movement of genes from GM foods being crossed into conventional crops or species in the wild (referred to as Outcrossing) - this may have an effect on future resources that are Outcrossed and can result in a negative effect concerning the safety and security of food. As a result of these three main issues, continued surveillance is required to assess the safety of GM foods. Other potential risks that are possible are specific components that have nutritional and/or toxic properties, the stability of the inserted genes and unintended effects that can be resulted from gene insertion. Although there are major concerns on the risk of human health through GM foods, GM foods are regulated nationally through the use of governments by taking into account of health, environmental risks and trade related issues. Internationally, GM foods have been specifically designed by using up to three traits: resistance to insect damage, viral infections and certain herbicides. The genes that are used to modify crops come from microorganisms and through these genes being transferred,

positive or negative effects may appear. One concern, according to the World Health Organization, is the potential for genetically modified foods to cause allergic reactions in humans. Another concern is "outcrossing," or the process of combining non-modified crop genes with genetically modified organisms that are not intended for human consumption. This can result in a food product that contains genes not approved for humans. Widespread interest in GMO is varied across nations dependent on need and political interests regarding the food production. GMO may be beneficial to a nation of corporation through profits and easier agricultural seasons, but may also be harmful for not only the environment but also humans. Therefore it is dependent on your own countries views of how GMO affects your political and agricultural policies and whether there are corporate interests involved.

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History
Since the first introduction on the market in the mid-1990s of a major GM food (herbicide-resistant soybeans), there has been increasing concern about such food among politicians, activists and consumers, especially in Europe. Several factors are involved. In the late 1980s early 1990s, the results of decades of molecular research reached the public domain. Until that time, consumers were generally not very aware of the potential of this research. In the case of food, consumers started to wonder about safety because they perceive that modern biotechnology is leading to the creation of new species. Consumers frequently ask, What is in it for me? Where medicines are concerned, many consumers more readily accept biotechnology as beneficial for their health (e.g. medicines with improved treatment potential). In the case of the first GM foods introduced onto the European market, the products were of no apparent direct benefit to consumers (not cheaper, no increased shelf-life, no better taste). The potential for GM seeds to result in bigger yields per

cultivated area should lead to lower prices. However, public attention has focused on the risk side of the risk-benefit equation. Consumer confidence in the safety of food supplies in Europe has decreased significantly as a result of a number of food scares that took place in the second half of the 1990s that are unrelated to GM foods. This has also had an impact on discussions about the acceptability of GM foods. Consumers have questioned the validity of risk assessments, both with regard to consumer health and environmental risks, focusing in particular on long-term effects. Other topics for debate by consumer organizations have included allergenicity and antimicrobial resistance. Consumer concerns have triggered a discussion on the desirability of labeling GM foods, allowing an informed choice. At the same time, it has proved difficult to detect traces of GMOs in foods: this means that very low concentrations often cannot be detected.

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Trade problems arise when countries have different regulations regarding the testing and approval procedures necessary to place GMOs and their products on the market, or when they disagree about labeling and identification requirements. Some countries ban imports and sales of GMOs and their products altogether. In other countries, a large part of the production of some crops, such as maize or soybeans, is from genetically modified seeds, and is mixed with non-modified varieties during storage, transport and processing. These countries argue it would be unnecessary and very costly to keep GMOs separate, and consider that labeling requirements or import bans are unnecessary trade barriers.

The trading of the GMOs may be invasive as the biodiversity in the certain geographical location could be overtaken by the former species. The publics main concern is safety and this should be echoed by the delegates of WTO. The issue is whether it should be banned or not based on the safety and regulations in place, can it be ensured that GMOs will be safely traded within the WTO regulations and would not interfere with international trade agreements.

Suggested Topics of Study


1. 2. 3. 4. 5. GMO Trading Concern in GMO Benefits of GMO Negatives in GMO Your countrys stance on GMO and GMO trading

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References
Topic A
Huang, Y. (2012, April 19). Don't Blame China's Currency for U.S. Trade Deficit. Retrieved from Bloomberg: http://www.bloomberg.com/news/2012-0419/don-t-blame-china-s-currency-for-u-strade-deficit.html Telegraph. (2012, August 31st). Debt crisis: as it happened. Retrieved from The Telegraph. The Economist. (2012, January 27). At Bursting Point. Retrieved from The Economist: http://www.economist.com/blogs/charlema gne/2012/01/europes-debt-crisis

Topic B
United Nations Conference on Trade and Development. (2000, July). Retrieved from UNCTAD: http://www.wto.org/english/tratop_e/sps_e/ sps_agreement_cbt_e/c8s1p1_e.htm WHO. (n.d.). Retrieved August 31, 2012, from WHO: http://www.who.int/foodsafety/publications/ biotech/20questions/en WTO. (2012, August 31). GMOs. Retrieved from WTO: http://www.wto.org/english/tratop_e/sps_e/ sps_agreement_cbt_e/c8s1p1_e.htm