The first part of this chapter considers some implications of the emergence and growth of the globalization of markets and production on one of the longest and most enduring cross-border direct investment relationships: that between the USA and UK. It argues that the increasing tendency for large MNEs-particularly in technology-intensive producer industries and in consumer good sectors supplying branded products-to integrate their marketing and production activities on a worldwide basis, is having a far reaching effect on the bilateral trade and investment flows between countries. It is postulated that whatever special economic relationship the USA and UK may have had with each other in the past, this has been largely eroded by the harsh realities of the latter part of the twentieth century. Such realities include an intensification of international competition, particularly from Japan and the newly industrialized economies of the Pacific Rim; the emergence of new forms of protectionism; the emphasis on 'created' or 'engineered' comparative advantage; and, despite the movement towards liberalization and deregulation, the growing significance of government as a co-ordinator and controller of economic activity. In particular, as part of the EEC, the UK is in competition with other member states, not only for direct investment from the USA but for all forms of technological and organizational assistance; while at the same time the UK is increasingly looking to Europe and Japan for its markets and to set up co-operative alliances.