RESOLUTION EC 312

FORUM: ECONOMIC COMMITTEE

QUESTION OF: Diversifying Supply Chains

SUBMITTED BY: Malta

CO-SUBMITTERS:Australia, Azerbaijan, Ecuador, India, Kazakhstan, Mauritania, Mexico, Peru, Russian Federation, Republic of Korea, Zimbabwe, Yemen.

STATUSPassed

THE ECONOMIC COMMITTEE,

 

Aware that the diversification of supply chains in order to benefit national economies and the corresponding governments in a holistic approach which would contribute to a positive impact on the global economy is not easy,

 

Noting that diversification would mark the involvement of Less Economically Developed Countries (LEDCs) role in trades and therefore increase the alternatives for both exporting and importing countries, 

 

Fully believing that innovation, trade efficiency, and stabilization are among the very beneficial outcomes of diversification,

 

Bearing in mind that trade wars are harmful to both parties and their economies, and that restrictions prevent diversification, 

 

Further aware of the diversification of a supply chain doesn’t only refer to the change in the type of product, rather it indicates the variation in manufacturer, consumer, supply, and demand sense, as well as the response modality,

 

Fully alarmed that due to COVID-19 businesses face possible shut down and losses which can be healed through diversifying their supply chains,

 

  1. Calls for the creation of a set of principles that define what a resilient supply chain looks wherein:
    1. the goal of these principles is to Supply Economic Need through Durable International Trade (SENDIT), meaning supply chains must:
      1. meet local fluctuations in production capacity do not affect the rest of the supply chain, meaning the supply chain is resilient
      2. create efficient markets, meaning the supply chain network is distributed
      3. supplies flow through the most efficient route, quantified as a function of shipping price and speed
      4. diversify their source of pharmaceutical supplies as to not rely heavily on one country in the event a catastrophe such as the COVID-19 pandemic
    2. to incentivize SENDIT, industry leaders and member-states must focus on:
      1. supply chain Resilience through government subsidies targeting small supply-chain-dependent businesses in times of downturn to sustain a steady throughput
      2. supply chain Distribution, through free-trade agreements with other member states and blocks and the creation of efficient    markets for the buying and selling of goods
      3. supply chain Locality, through the subsidization of locally-produced goods;
  2. Encourages the establishment of a training program, with experts who have the necessary educational background, for domestic legacy suppliers of the Member States who will sign up for this training via the website of the World Trade Organization (WTO) and found qualified enough to be a legacy supplier, which will be done as a subprogram of the International Trade Center (ITC) by:
    1. using reliable online video-chat platforms so that more major companies may join and not miss out on the opportunity to acquire vital information regarding diversifying the supply chains that will both uplift their country and them
    2. urging member states provide training schemes to domestic private businesses as to the benefits of diversifying their supply  chains
    3. educating legacy suppliers on the most manageable economic strategies and pushing them to think more innovatively;
  3. Urges member states to diversify supply chains outside of the remit of their ally blocs, in order to not further entrench divisions by:
    1. encouraging Intergovernmental Organisations (IGOs), including Association of Southeast Asian Nations (ASEAN), the European Union (EU) and the G20 to take a greater role in facilitating international trade and improving cooperation
    2. suggesting that member states work towards providing capital machinery and communication channels between one another to facilitate the diversification of supply chains;
  4. Requests Member Nations to work together  with the Organization for Economic Co-operation and Development (OECD) to create a joint report between the United Nations and the OECD bi-annually that covers the following aspects:
    1. presenting a comprehensive description of the progress that has been made in the months that occur between subsequent records to evaluate the effectiveness of the report and to gauge which nations are geared towards addressing consequences in a more economically effective fashion for the first report, the initial section would address the aims and aspirations of the Member Nations to reduce economic dependence
    2. developing and scoring nations on an indicator called the “Dependency Indicator” that is an aggregation of several economic policies and current economic development of nations based on the following parameters:
      1. the inflation rate, the Keynesian Multiplier, and the causation for its values
      2. the level of foreign aid inflow or outflow from the nation
      3. number of monopolies and patents issued in each of the Member Nations
      4. raw materials imported and exported and in what quantities
      5. rates of protectionist policies
      6. price volatility of goods that are sourced from other nations through elasticities of the world supply market
    3. establish targets to diversify supply chains with isolated and developed goals through the following action points:
      1. degree of privatization and nationalization in a nation’s industry
      2. consequences on involved stakeholders such as but not limited to the government, private firms, consumers and trading       partners
      3. Market share on the international trade market;
  5. Suggests that Member Nations adopt the following six-step policy measure to determine the resilience that their industries have within supply chains to identify the effects that any disruption may have on specific industry or which industries will suffer the greatest economic consequences through:
    1. carrying out a detailed risk assessment procedure to determine the level of risk organizations can absorb in case of disruptions to their supply chain by evaluating aspects such as market concentration ratios and demand/supply
    2. evaluating the reliability of the critical partners and firms at different parts of the process along the supply chain to comprehend the consequences of supply chain failure via making judgements whether partners are operating at carrying capacity or are working with unused capacity
      1. determining whether their current revenue streams would be sustained, if not weakened, by diversification of the current supply chain
      2. considering implementing supportive or restrictive action if necessary
    3. determining the level of the protectionism policies that are imposed on the good using the MAST Team’s Taxonomy of Non-Tariff     Protectionist Measures in addition to finding out tariff rates in the nations where the supply chain occurs;
  6. Supports the reduction and elimination of economic over-dependence on More Economically Developed Countries (MEDCs) by suggesting the implementation of the following measures:
    1. directing the World Trade Organization (WTO), in collaboration with the United Nations Conference on Trade and Development (UNCTAD), to create a report on effects of price control methods on primary and secondary sector commodities, at the earliest possible convenience
    2. in case of a unilateral decision by a member state to cut off or reduce trade with another member state, a statement delineating the reason and the extent of the trade reduction must be sent by the former to the latter, at least six months before the changes are     intended to take place;
  7. Encourages diversification of LEDCs and recommends the following methods to diversify supply chains internationally as well as internationally:
    1. launching awareness programs for Small and Medium Sized Enterprises (SMEs) to explain the benefits of supply chain diversification, wherein:
      1. social media, print media and digital media will only be made available to
      2. economic nudges may be used to promote supply chain diversification
    2. providing incentives to SMEs for diversifying their supply chain;
  8. Proposes that all countries define the terms and conditions governing their supply chains in a fair and transparent manner through drafting a new Service Provisional System (SPS) which will ensure a fair and transparent playing field for both the legacy suppliers and the newly added suppliers:
    1. ensuring appropriate price control methods set in place in national economic markets
    2. ensuring all acceptable and prohibited environmental practices used in the manufacturing process by suppliers are clearly defined from the outset thereby having a positive environmental impact throughout the supply chain going forward
    3. ensuring that prohibited waste practices that cause pollution or threaten natural habitats are clearly identified and prohibited within the terms of the SPS;
  9. Encourages the World Trade Organisation to create a diversification system called the Supply Chain Diversification System (SCDS) for all willing countries to work together and help residing companies along with foreign companies that may be in need, this system would: Provide a list of companies and importing countries who can supply alternative resources instead of coming directly from MEDC’s, but not requiring they import from them Be in support of LEDCs to seek more trade partners among neighboring nations and members of existing participating economic communities aside from large global exporters to reduce dependence on few certain nations: Aid specifically towards Non-aligned countries that are not part of trading blocs and would also increase South-South cooperation to overall decrease LEDCs dependency on economic monopolies;
  10. Urges for the development of risk mitigation policies in agricultural supply chains by means such establishing operational management grievance processes as preemptive programs to provide local, simple, and mutually advantageous means to address problems between all stakeholders that would:
    1. Serve as warning that there are significant issues and indicate future improvements to ensure grievances do not persist
    2. Collect perspectives from stakeholders demonstrating prospective changes of business or management.