Ideas, economic globalization and the evolution of liberal international economic regions: Contrasting national preferences to trade and investment regimes during the second half of the twentieth century

Trade and foreign direct investment (FDI) are the two sides of the same coin, at least economically. Through trade, a firm can engage in a cross boarder transaction of goods that it produces. Through FDI, the same firm can engage in a cross boarder transaction of its production process. They constitute as the two fundamental modes of international economic activities.; International economic activities have been recognized as an important engine of economic growth and development. Many observers credit the sustained economic prosperity of the postwar period to robust international economic activities. They also recognize the liberal international economic system as the critical underlying infrastructure for economic activities. They see the United States and a number of liberal participants as the key contributors to the creation and the evolution of the liberal international economic system.; The postwar development of the liberal international economic system, however, has been highly uneven. While the trade part of the system was successfully established as GATT and evolved to WTO, its investment part is still defined by a network of bilateral treaties. The development of the two regimes demonstrates a stark contrast. What accounts for the contrasting regime developments between trade and investment?; The present study employs the case study method to explore the question. It applies the three major theoretical approaches, namely the system level approach, the unit level approach and the social construction approach with the primarily focus upon the state level, to the formation and the establishment of the postwar system. It uses two cases. One of them is the process of postwar planning in the United States. Another is the process of participation by Japan. The United States played the decisive role in planning the postwar system. Japan represented one of best beneficiaries of the system.; By examining these cases, I hope to highlight that a national preference is not solely shaped by system level factors. Domestic factors matter. However, they may not represent a mere distribution of interests. A socially constructed consensus about state-market relations reveals the existence of an underlying ideational framework that a society shares. Policy participants define their interests by this socially held idea. With the process of learning, the framework changes. With this transformation, a national preference changes. Contrasting preferences of a state on trade and FDI, and their transformation, highlight this social construction process.