US Friendship, Commerce and Navigation Treaties I

UNIVERSITY OF CALIFORNIA, SAN DIEGO The First Bilateral Investment Treaties: U.S. Friendship, Commerce and Navigation Treaties in the Truman Administration A dissertation submitted in partial satisfaction of the requirements for the degree Doctor of Philosophy in History by Kenneth J. Vandevelde Committee in Charge: Professor Michael E. Parrish, Chair Professor Richard Feinberg Professor Mark Hendrickson Professor David A. Lake Professor Rebecca Jo Plant 2012 Copyright Kenneth J. Vandevelde, 2012 All rights reserved. The dissertation of Kenneth J. Vandevelde is approved, and it is acceptable in quality and form for publication in microfilm and electronically: _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ Chair University of California, San Diego 2012 iii DEDICATION For Lidia, Jenny and Shelly iv TABLE OF CONTENTS Signature Page…………………………………………………………………..iii Dedication………………………………………………………………………iv Table of Contents………………………………………………………………..v Acknowledgments………………………………………………………………vi Vita……………………………………………………………………………..viii Abstract………………………………………………………………………….ix Introduction………………………………………………………………………1 Chapter One: U.S. Postwar Investment Policy………………………………….37 Chapter Two: Launching the U.S. Postwar FCN Treaty Program………………84 Chapter Three: Seeking a Multilateral Treaty on Investment: The International Trade Organization………………………………….152 Chapter Four: Abandoning the International Trade Organization……………..224 Chapter Five: The FCN Treaties Become Investment Treaties………………..264 Chapter Six: Negotiating the First Investment Treaties………………………..320 Epilogue: Investment Treaties at the End of the Truman Administration……..370 Bibliography……………………………………………………………………392 v ACKNOWLEDGMENTS I was blessed with an extraordinary experience in the UCSD Department of History, all because of the tremendous support that I received from so many of the history faculty, most especially the three historians on my committee, Michael Parrish, Rebecca Plant and Mark Hendrickson. Each of these wonderful people in different ways contributed immeasurably to my education and I came to regard each of them as a friend. It would be tiresome to try to list the many kindnesses that they extended to me or the countless lessons about the craft of history that I learned from them and any attempt to do so no doubt would result in egregious omissions on my part, but I hope that they know that I will always be profoundly grateful to them. Michael served as my advisor, at which he was perfect, and supervised me in both a minor field on U.S. constitutional and legal history and a directed reading on U.S. political history, while Rebecca and Mark supervised me in directed readings on, respectively, intellectual history and political economy. All three of them will recognize some of our work together in these pages. I also owe a deep debt of gratitude to Richard Feinberg and David Lake, the two outside members of my committee, who have so generously assisted me. I met both of them during my first week at UCSD, was already familiar with their work in, respectively, international relations and international political economy, and knew immediately that I wanted both of these men on my committee. I was delighted when both accepted my invitation and, as in the case of the historians on my committee, am immensely proud to have them associated with my work. vi I had terrific experiences in my coursework with other members of the history department, most notably Mark Hanna, Rachel Klein and Nancy Kwak, all of whom taught me a great deal about reading, teaching and writing history. I owe a special thanks to Emily Rosenberg of the UCI history department, who, at the urging of Rebecca Plant, agreed to supervise me in a directed reading on international economic history that provided an invaluable foundation for this dissertation. My path through the doctoral program was enormously easier because of the assistance I received from several of those with administrative responsibilities, most notably John Marino and Pamela Radcliff, who served as department chairs, and Tom Gallant and Rebecca Plant, who served as directors of the graduate program. Each of them, very often entirely on their own initiative, found ways to make my experience far better than it would have been without them. Maureen McCormack, the graduate advisor, was a flawless gem. The always wonderful Kay Henley at Thomas Jefferson School of Law ensured that my teaching schedule there never conflicted with my course schedule at UCSD. I am also grateful to the three history graduate students who started the program with me in the fall of 2009, David Kaahaainia, Maki Smith and Rich Smith, for their abundant warmth, kindness and collegiality. Finally, I offer my thanks and fond appreciation to fellow graduate student Kristen Raizada for her wit, her wisdom, and her friendship, which made a great experience incalculably better. vii VITA 1975 Bachelor of Arts, University of Louisville 1979 Juris Doctor, Harvard University 2011 Master of Arts, University of California, San Diego 2012 Doctor of Philosophy, University of California, San Diego FIELDS OF STUDY Major Field: United States History Minor Field: United States Constitutional and Legal History Professor Michael E. Parrish viii ABSTRACT OF THE DISSERTATION The First Bilateral Investment Treaties: U.S. Friendship, Commerce and Navigation Treaties in the Truman Administration by Kenneth J. Vandevelde Doctor of Philosophy in History University of California, San Diego, 2012 Professor Michael E. Parrish, Chair 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 ix 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. x Introduction During the years of the Truman administration, the United States of America, the world’s preeminent military, economic and political power, endeavored to negotiate a new series of friendship, commerce and navigation (FCN) treaties with countries in every part of the globe. After approaching at least 70 different countries to explore the possibility of negotiating a treaty, the United States successfully concluded in that period and would bring into force only eight treaties. Yet, as inauspicious as this effort may have seemed at the time, those eight treaties introduced a mixture of investment related provisions that eventually would gain widespread acceptance and, by the end of the century, would form a network of some 3000 treaties establishing a legal framework for global capitalism.1 The negotiation of the U.S. postwar FCN treaties is the birthing moment of one of the most important developments in international economic law in the twentieth century. This account of the U.S. postwar FCN treaty program poses three questions about the origins of these investment related provisions. First, what prompted the 1 Extensive discussion of the scope and content of modern bilateral investment treaties may be found in Jeswald Salacuse, The Law of Investment Treaties (Oxford: Oxford University Press, 2010); Kenneth J. Vandevelde, Bilateral Investment Treaties: History, Theory and Interpretation (New York: Oxford University Press, 2010); Andrew Newcombe and Lluis Paradell, Law and Practice of Investment Treaties: Standards of Treatment (Alphen aan den Rijn: Kluwer Law International,

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