"GFJ Commentary" introduces news analyses andopinions in Japan on the relations of Japan with therest of the world, but they do not represent the views ofGFJ as an institution.

June 19, 2013

World Economy Divided into Blocs?
By OGATA Rintaro
Given the fact that Japan has finally turned to such a variety of free trade
networks, including TPP, Japan-Europe, and Japanese-China-South Korea frameworks,
I would like to give it some thought from a somewhat different perspective. The
question is whether or not the world economy is being divided into blocs, and to whatextent. This is the topic I discussed with two of my fellow members of the Diet when I
was an active member. In my view, the most ideal form of free-trade system is theWTO/GATT system. It is most desirable to promote free trade on a global scale undercommon rules.
It is so for a variety of reasons including the one that it would yield increasing
benefits to the world at large as long as it sticks to the principle of themost-favored-nation treatment. Free trade agreements composed only of volunteer
countries are not accessible to small countries or not quite effective without super
powers and thus virtually excluding least less-developed countries to a certain extent.
However, the WTO Doha Negotiations, already twelve years since its launch, have now
reached a complete deadlock. WTO is currently functioning merely as an executive
organ of the current rules and as a dispute resolution mechanism. And, a variety offrameworks of free trade agreements are stretching in a finely meshed pattern acrossthe globe.
Under the circumstances, future trading system of the world is expected to be
separating itself into trading blocs to a certain degree, though only highly gradually.
Needless to say, the world is being so globalized and information networks are
established worldwide through the Internet, but under such globalized trading systems,
blocs or groups of economies seem to be emerging to a certain degree though only
"highly gradually." I repeat "highly gradually." The globalized world is the initial
premise, and inside such a world, it is necessary for us to pay attention to theemergence of blocs as a big picture, though I have no idea in what form, how fast, or towhat extent it should proceed.
Europe has already consolidated itself as a single market by way of forming acustoms union, and this, too, can be considered a sort of trading bloc. For, a customs
union not only liberalizes intra-regional trade but also takes on an advanced way ofapplying a uniform tariff externally. NAFTA of North America has a similar feature.
They are, in this way, considered to be gaining footholds by themselves and at the sametime venturing into the globalized world. I think "blocs" in this context are not purely ageographical element but are largely so. For Japan, it could be "Japanese-China-South
Korea," "Pan-Pacific," or "East Asia at large." I do not mean to say that we should
withdraw into a region, whatever it may be, excluding some other countries. I am
merely giving my vague impression of the world gradually separating itself into somegroups as a long-term trend.
(This is the English translation of an article written by Mr. OGATA Rintaro, former
member of the House of Representatives, which originally appeared on the BBS ʺGiron‐Hyakushutsuʺ of GFJ on April 10, 2013.)