Second, the trend toward globalization will favor nations that have reduced government and commercial barriers to trade. Third, during the seven rounds of multilateral trade negotiations conducted by GATT, integrated blocs played an important role in enhancing the development of the international trading system. The three belong to the Asia Pacific Economic Cooperation forum, but this organization is characterized by voluntary action and nonbinding decisionmaking. In the past, Japan distanced itself from countries that sought regional free-trade agreements, believing that pacts of this nature could arouse a protectionist backlash among outsiders. More importantly, Tokyo worried that this movement could lead to the formation of a series of mutually exclusive trading groups at the expense of the growth of the international trading system.
Japan is the biggest foreign direct investor in most regional economies.
It also is the number-two trading partner of many of these countries, often ranking just behind the United States. Collectively, the region buys more from Japan than either the United States or the European Union. FKI's position is that China should not be excluded from any regional trade grouping. As a WTO outsider, it might not be a viable partner today, but its future prospects are unknown. Japanese and South Korean diplomats already have broached the idea of negotiating a mutual tariff reduction agreement.