UC San Diego

The first bilateral investment treaties addresses the processes by which, and the purposes for which, the State Department, during the years of the Truman administration, reconceptualized as bilateral investment treaties the friendship, commerce and navigation (FCN) treaties that the United States had negotiated since its independence, originally as treaties to establish trade and maritime relations. It argues that, at the end of the Second World War, to ensure peace and prosperity the United States sought to project New Deal liberalism onto the international plane and for that reason urged the creation of multilateral institutions to foster full employment worldwide. U.S. officials believed that full employment required the promotion, but also the regulation, of international capital movements. To promote capital movements, State Department officials acceded to the demands of the business community that it seek treaty protection for U.S. foreign investment. After efforts to incorporate investment protections into a multilateral International Trade Organization failed, the State Department turned to bilateral FCN treaties to obtain the protections it sought. In devising these treaty protections, U.S. officials incorporated into the FCN treaties four U.S. constitutional law principles - security, reasonableness, nondiscrimination and due process -- largely as these principles were understood by the New Deal Supreme Court, thereby providing U.S. investors abroad with protections similar to those enjoyed in the United States. Other FCN treaty provisions sought to facilitate the movement of capital across borders, while permitting host states to regulate such movements. This account uncovers the origins and purposes of a set of provisions that would create a legal framework for global capitalism in the late twentieth century. It demonstrates that U.S. foreign investment policy during the Truman years is best understood as a projection of New Deal liberalism, including ideas of liberal legality, onto the international plane, rather than as an instrument of Cold War containment or a capitulation to the demands of U.S. capitalists