Global Integration and the Complete Public Goods

I. INTRODUCTION Chris Brummer's article1 offers a refreshing perspective in understanding trade regionalism. Borrowing economic insights, Brummer argues that regional trading within regional integration agreements ("RIAs") or regional trade agreements ("RTAs") is a club good. Analogous to a club membership in a swimming pool, members of RTAs share benefits of liberalization and integration exclusively among members (excludability) and one member's utilization of the benefits does not usually affect that of other members (nonrivalrousness) until an oversize membership structure causes congestion and thus results in disutility of members. Yet Brummer's view is that RTAs produce incomplete club goods for two reasons. First, the disparity among members in size and economic power may lead to different congestion points for different members. This heterogeneous congestion departs from a normal club good which exhibits only a single congestion point. second, the original excludability can be diluted by nonmember freeriding on liberalization and integration benefits. This weak exclusion tends to compromise the exclusive nature of club goods. My response to Brummer's article is more complementary than critical. Concededly, some of his assumptions and methodology are subject to criticism in that they may be challenged normatively or may fail fully to capture realities. For example, an economic approach toward RTAs, which slights many critical noneconomic considerations in forming and operating them, may be criticized as an attempt to commodify regional trade and thereby debase it.2 Furthermore, these regional trades as social goods may be incommensurable among one another: they cannot be quantified and measured by certain metric units to be compared.3 Obviously, the purpose of the European Union ("EU") goes beyond a mere economic integration, and so does that of the Association of South East Asian Nations ("ASEAN"). After all, each member of an RTA may have its own unique reasons for joining the club, not only economic but also socio-political. However, this criticism, albeit legitimate, should not unduly diminish the novel contribution that Drummer's article makes: exploring a new avenue to grapple with RTAs via a microscopic investigation of intra-bloc dynamics. Rather than delving into inevitable weaknesses that are inherent in his methodology, I will take a different yet highly complementary angle, as the tide of this Article may imply. While Brummer's article mostly concerns an inwardlooking analysis of RTAs, my Article takes an outward-looking approach, which his article addresses on a limited scale in its last section. My main concern in this Article is for the negative externalities ("public bads") which self-fulfilling, self-optimizing RTAs may inflict on nonmembers and the global trading system as a whole. RTAs produce negative externalities vis-a-vis nonmembers in that various costs generated by the existence of RTAs, such as trade diversion or fragmentation of the global trading system, are borne not by members of those RTAs but by nonmembers, and more broadly by the global trading system as a whole.4 As each bloc seldom considers and internalizes this serious social cost, this collective action problem eventually harms members and nonmembers alike, since RTA members remain part of the global trading system. The history of interwar economic balkanization precipitated by mercantilist competition among regional trading blocs corroborates this reflection.5 Markedly, the obverse side of RTA externalities is positive externalities ("public goods"), furnished by the global trading system in which RTAs can be constructive building blocks.6 A complementary, symbiotic relationship between the World Trade Organization ("WTO")7 and RTAs is capable of realizing public goods for the global trading system. Diffusive effects of trade creation can expand regional trade to global trade, which can further boost regional trade. …