The Clayton-Bulwer Treaty was signed on April 19, 1850 by U.S. Secretary of State John M. Clayton, and British diplomat, Sir Henry Bulwer. By 1850, the British had already established significant territorial claims in Belize, the Mosquito Coast and the Bay Islands. However, the treaty sidestepped territorial issues and focused on policy regarding a proposed inter-oceanic canal. Both nations had researched the possibility but neither wanted to assume the costs of the project at that time. Essential passages of the treaty stated that neither power, “will ever obtain or maintain for itself any exclusive control over the said ship canal … that neither will ever erect or maintain any fortifications commanding the same … or occupy, or fortify, or colonize or assume, or exercise any dominion over Nicaragua, Costa Rica, the Mosquito coast, or any part of Central America.” Essentially a canal would be pursued jointly by both nations or not at all. Complete text of the “Convention Between the United States of America and Her Britannic Majesty, April 19, 1850,” can be found at http://academic.brooklyn.cuny.edu/history/johnson/cb.htm
However, the status of pre-existing British claims in Nicaragua and Honduras that might enable Great Britain to assert control over a future canal remained unresolved. The US argued that the convention should be applied retoactively; the British clearly disagreed when they named the Bay Islands a British colony in 1852. A compromise was reached in 1859-60 when Great Britain ceded claims on the Bay Islands and Mosquito coast and was awarded greater latitude with respect to Belize.
The treaty (with respect to its canal policy) came to be seen in the US as a betrayal of the Monroe doctrine and by 1880, US presidents began seeking ways to overturn it. The Hay-Pauncefote Treaty (signed in 1901, ratified in 1902) replaced the Clayton-Bulwer Treaty, and provided the means for the US to build a canal independently. This concession on the part of Great Britain reflects the changing international status of the US following the Spanish American War and growing concerns with the balance of power in Europe, particularly with respect to Germany.