Many of the current theoretical debates in international relations focus on the connection between economics and security policies. Most traditional North American textbooks have considered the two policy areas as separate domains. Some scholars view the major economic trends and events of the 1970s as intertwined, whereas others argue that “state” interests properly should prevail when the two sets of values conflict. The traditional liberal, mercantilist, and neo-Marxist literatures shed some light on the nexus between politics and economics in foreign policy, but they offer very general statements that reflect only the conditions of the major powers. Two case studies of Japan and Finland in the postwar period suggest that generalizations must be applied cautiously, that some states are compelled to follow mercantilist policies to protect their political independence and autonomy, and that policies of welfare maximization often have to be subordinated to security concerns. The cases also reveal that the connection between economic and security concerns changes over time. A dynamic model of foreign policy will thus have to be sensitive both to the peculiar circumstances of a variety of states and to the sources of foreign-policy change.

Preceding essays have documented the dramatic growth of transnational relations between Canadians and Americans and have emphasized the development of new issue areas—private, local, regional, and national—between the two countries. As these relations expand in scope, complexity, and occasionally conflict, we would expect to see a corresponding growth in Canadian-American institutions to provide mechanisms for policy coordination, bargaining, and conflict resolution. The increase in formal governmental institutions between Ottawa and Washington has indeed been notable, but we must not conclude that these institutions constitute the core of the intergovernmental relationship. The informal and formal communications between federal government bureaucracies and between officials of the states and provinces are no less important; hence, the essay will focus not only on the bilateral institutions but also on the phenomenon that Nye and Keohane have called transgovernmental relations, that is, the non institutionalized relationships between subunits of governments and the activities they undertake that remain reasonably immune from central control (see their preceding essay in this volume).