Historical Documents - Office of the Historian

[Enclosure 1]4

Memorandum by the Assistant Secretary of State (Berle) and Mr. Paul T. David, of the Bureau of the Budget

[Washington,] August 31, 1943.

Methods of Procedure

The following are possible methods of procedure in arranging international civil air rights:

(1) Preliminary discussions between the United States, Great Britain, Canada, Australia, South Africa and New Zealand. Great Britain will be understood to represent all British territory outside of the self-governing dominions.

The United States has an understanding with Great Britain that neither country will attempt to obtain advantages discriminatory against the other during the war, but that “at an opportune time” they will discuss the matter. This does not apply to the dominions but could be easily extended to them.

The advantage is that an agreement here would lay a powerful foundation for all future work; in the absence of such an agreement, future arrangements must necessarily be difficult and haphazard.

This procedure also has the advantage of intiating discussions with the only countries presently in the air to any extent and at the same time possibly working towards an understanding with the group of countries whose geography best complements our own.

The disadvantage is that this collective group might prove harder to bargain with than if we dealt with Britain alone and then with the dominions. However, it seems likely that Britain and the dominions will insist on separate interests, in any event. A more important disadvantage [Page 1321] is that an arrangement with the British Commonwealth might lead to suspicion on the part of our other Allies and the rest of the world: this will depend largely on how it is handled.

(2) Preliminary air conversations between the United States, Canada, and Britain alone.

The advantage of this is that discussions could be concentrated on the difficult problems of the North Atlantic area; the disadvantage, that it only goes part of the way, leaving the major questions of the Middle East, India, Australia and the Pacific unsolved.

(3) A United Nations conference.

The advantage of this is that it creates a feeling of trust and that it would facilitate general discussion and the creation on an interim basis of a new international organization for civil aviation; the disadvantage, that (unless there is, in substance, a prior agreement between the British nations and ourselves), the great majority of participants might advance claims, although at present they have no substantial participation in international aviation.

Commercial rights probably must continue to be negotiated bilaterally, and our problem of securing rights would not necessarily be simplified by holding a conference which would be intended mainly for other purposes.

A possible variant might be a conference with those of the United Nations who presently were active in aviation, which in practice would be the British Empire group, plus the Netherlands, the French, the Russians, the Chinese, and the Brazilians.

(4) No conference at all, but a cautious initiation of bilateral conversations, country by country, presumably beginning with Britain, Canada, Russia, and Brazil, and working out from there.

Advantages: Each country could be the subject of bargaining by itself, and the aggregate of these bargains might be more advantageous than any more generalized agreements.

The disadvantage would be that no common cooperative machinery would evolve, though it appears certainly necessary as aviation expands.

(5) No governmental conversations, leaving private companies to do what they can, securing by private concession the air rights they wish.

The advantages are that in certain instances, aggressive American concerns (say, Pan American Airways) will secure favorable rights and conceivably might make a favorable cartel trade with the British Overseas Airways Company.

The disadvantages are that the British can probably beat us at this game and establish discriminatory treatment in a great part of the [Page 1322] world. It also seems certain that some of the major powers will refuse to deal with the companies until there has been prior intergovernmental discussion and agreement. Delay in beginning such discussion, while commercial interests muddy the water, could be very disadvantageous.

Through these various possible courses of action, it is to be noted that we have in general two different kinds of task to accomplish: (1) to negotiate arrangements for commercial air rights, and (2) to develop international sentiment for the changes in international practice and organization which may be made necessary by the development of civil aviation.

To accomplish the first task, it would seem most desirable to begin with discussions with the British countries; and it would be wise to keep the Russians and Chinese simultaneously informed, so that they could be drawn into the discussion as need arose, to avoid suspicion. Conferences with other countries would follow, and eventually our commercial aviation arrangements would be completed for the immediate postwar period.

To accomplish the second task, the development of international sentiment along desirable lines, there is probably no substitute for an early United Nations Aviation Conference, followed by the establishment of an interim international commission looking toward an eventual permanent organization.

[Enclosure 2]

Memorandum by Mr. Paul T. David, of the Bureau of the Budget

[Washington,] September 1, 1943.

Rights To Engage in Air Commerce

Rights to engage in air commerce which would be of mutual interest to the British and ourselves include (1) rights for operations between United States and British Commonwealth territory, and (2) rights for operations into the territory of third countries throughout the world.

Rights which had been negotiated prior to the war for operations on routes between United States and British territory were very limited in character. In the United Kingdom we were restricted to two landings per week. Our Canadian arrangements were satisfactory for trans-border operations, but no satisfactory permanent agreements had been reached with respect to Alaskan or trans-Atlantic operations. We had no rights in Australia, South Africa, or India. Rights for New [Page 1323] Zealand were obtained by Pan American Airways and were restricted to use by it.

It is obvious that new agreements are needed to govern postwar air commerce between United States and British Commonwealth territory. Arrangements for present operations are limited to the war period; all prewar restrictions will again be in effect when the war is over unless new agreements are made.

The first major question is whether to deal individually with the major members of the British Commonwealth, or instead to attempt to deal with them collectively and simultaneously. The latter course seems preferable; if we deal with them individually, negotiations will be delayed and we shall be in danger of being whipsawed. The geographic relationships are such that two or more units of the British Commonwealth are interested in every major route; multiple discussions are necessary in order to solve all of the equations. Possibly most important is the fact that access to the rich market of the United States is our greatest trading point; we ought not to give that access for anything less than access to all parts of the British Commonwealth.

The second major question is that of the kind of deal which in general we wish to make. The question is whether to continue bargaining on a highly restricted basis, perhaps trading schedule for schedule on particular routes, or instead to seek reciprocity on a broadly liberal basis which will permit the development of international air commerce in relative freedom at least throughout the English-speaking world.

For example, those favoring the liberal aproach would like to obtain unlimited landing rights at suitable airports in the British Isles and might offer the United Kingdom similar unlimited landing rights for airports serving, say, Boston, New York and Washington. From Canada, they would like unlimited rights to pick-up traffic for the United Kingdom at Toronto and Montreal, and in exchange would offer Canada the right to pick-up United States traffic for the United Kingdom at, say, Chicago and Detroit.

The advantage of the restricted approach is that we take few risks of being out-traded and can make certain of getting full consideration for every concession; the disadvantage is that the whole development is throttled and postponed in an industry where it will be urgent to expand employment as soon as demobilization begins.

The advantage of the liberal approach is the opportunity it provides; the disadvantage is the risk that me may muff the opportunity and also the certainty that measures for the control of cutthroat competition will be necessary.

[Page 1324]

The American airline industry, with the exception of the Pan American interests, advocates a relatively liberal approach, favors regulated competition, and exhibits confidence in the ability of United States operators to hold their own in international competition and to take advantage of any opportunities that offer. The Interdepartmental Committee on International Aviation appears to hold a similar opinion.

British commercial interests appear to have a less optimistic outlook and show more concern for the prevention of cutthroat competition. The British governmental approach to bargaining for air rights was consistently conservative before the war, and may continue so.

The question of rights for operations into third countries has already been the subject of preliminary discussion, at which it was agreed that neither the United Kingdom nor the United States would negotiate agreements with third countries exclusive of or discriminatory against the other, pending further discussions of this problem at “an opportune time”.

It has been generally assumed in this country that our postwar objectives would include rights of commercial air entry into substantially all of the major nations of the world, and that in any event we shall wish to be able to operate at least one round-the-world commercial air transport service. Such a service would not be politically, economically, or technically feasible without commercial entry and transit rights for the countries of the Middle East. Rights in Africa are also desired. But large sections of Africa and the Middle East must be regarded as zones of British influence, in which we shall not readily obtain rights unless the British feel free to extend their operations throughout this hemisphere. What position the British will take in actual negotiations cannot readily be predicted, but in the past there has been considerable British sentiment for zoning schemes, by which we might agree to stay out of the Middle East and Africa in exchange for a British agreement to stay out of South America.

As our objective it seems clear that we should seek a permanent agreement, for the Dominions as well as the United Kingdom, that neither group will negotiate exclusive or discriminatory agreements with third countries.

This has the advantage of establishing a defensible policy on the basis of high principle, one much needed for the future development of the world’s air commerce; it is not to our disadvantage, since the British are likely to outdistance us in any race for discriminatory arrangements, and are very unlikely to give up their aviation interests in this hemisphere . . . .

Empire cabotage is a subject to be avoided as long as possible in any discussions with the British, but one which they may nonetheless bring [Page 1325] up, since some Britishers apparently have strong views on the subject. Empire cabotage is an attempt to eat their cake and have it too, to treat the dominions as sovereign states and at the same time as political subdivisions. It has no advantage from our point of view; aside from the obvious general disadvantages, it has the specific disadvantage of shutting us out of the United Kingdom traffic originating in Canada, although there is no practical way by which we can exclude Canada from the United Kingdom traffic originating in the United States.

[Enclosure 3]

Memorandum by Mr. Paul T. David, of the Bureau of the Budget

[Washington,] September 1, 1943.

Rights of Transit and Technical Stop

In negotiating in regard to air transport, rights; to fly over the territory of another state and to stop for refueling and other technical purposes are distinguished from the right to pick up and discharge traffic. Private aircraft are commonly accorded the right of transit (“innocent passage”) and technical stop, but corresponding rights for commercial air transport operations have been closely guarded.

We have two general problems to discuss with the British with reference to rights of transit and technical stop: (1) an exchange of such rights for United States and British Commonwealth territory, and (2) the question of whether any attitude shall be jointly taken with respect to the modification of prewar international practice on general privileges of transit and technical stop. There is also the question of British influence when we seek rights from third countries, notably Portugal, Egypt, etc.

The British need certain specific transit rights from us, and we need certain rights from them. If the British, the Canadians, the Australians, the New Zealanders, or some of them jointly, are to operate from England and Canada to Australia and New Zealand, they need transit and technical stop rights for Hawaii and the West Coast of the United States. If they are to operate from Canada to Siberia or over any north Pacific great circle course, they need rights for Alaska.

Conversely, we urgently need transit and technical stop rights on an unlimited basis for Newfoundland and Eire, and they would be highly desirable for Bermuda. We need them badly for Canada and Labrador, together with similar rights for Greenland and Iceland, if we are to fly the far northern great circle courses across the Atlantic. There is technical argument as to the merit of those routes, particularly [Page 1326] in winter, but their potential importance is indicated, among other things, by the expenditures we have made for airport facilities to serve them.

Unless very extensive rights can be obtained from the Soviet Union, our best route for a round-the-world air transport service will largely parallel the British Empire route between Suez and Singapore. There would be no point in trying to operate in this area unless we have satisfactory rights of commercial entry for India, but we also need rights of transit and technical stop across India, as well as for the various British-controlled political units along the Empire route. Rights for British territory in Africa, for British Guiana, and for the British West Indies will all be desired.

In view of the extent of our needs and the fact that Hawaii and Alaska are our major trading assets so far as rights of transit and technical stop are concerned, it is clear that we shall not do well if trading on this subject is handled separately from other air right negotiations. However, there is no reason to assume that the British will wish to handle it separately. For our part, it has been anticipated that any satisfactory comprehensive agreement with the British for an exchange of rights of commercial entry throughout our respective territories would also provide for a general exchange of rights of transit and technical stop, subject in each case to the exclusion of reasonable prohibited areas.

The advantage of such a general exchange is that it would clear up the problem completely for us on a basis which might be acceptable to the British if they are getting satisfactory commercial entry rights from us. The disadvantage is the fact that if the British are allowed rights for Hawaii, it will probably not be possible to treat that Territory in its entirety as a prohibited area for the airlines of other countries, although for reasons of security we might wish to do so in the case of some other country. Just what country or countries this would be is not clear if Japan is forbidden to engage in international air transport for a long period after the war.

The question of liberalizing general international practice with reference to transit and technical stop is of some immediate importance because of its bearing on the question of whether to hold a United Nations Aviation Conference. Presumably the future air transport operations of both the British and ourselves with reference to third countries would be greatly simplified if it is possible to negotiate a multilateral agreement by which there would be general recognition of a rule to the effect that aircraft in commercial air transport shall be permitted to fly over the territory of any nation, except over reasonable prohibited areas, and to land at apppropriate airports for refueling [Page 1327] and repairs, without the right to discharge or take on traffic. In drafting such an agreement, it would be appropriate to provide that any nation may exclude from its air space the aircraft of any nation which fails to comply with the rule of freedom of transit and technical stop for its own territory.

A United Nations conference would probably be necessary to secure the adoption of any general principle on the subject of transit and technical stop and might be successful in achieving general adoption of the principle only while the unifying influence of the war is being felt, if success is possible at all.

The Interdepartmental Committee on International Aviation has recommended that international practice be modified by the negotiation of a multilateral agreement along the lines suggested above. This recommendation was questioned by the Subcommittee on Security; it is understood, however, that the representative of the Army Air Forces on the Subcommittee was not present during the discussion of the problem of air transit rights.

The only disadvantage of general freedom of transit which has been raised in any quarter is on the question of security, on which the experts are evidently in disagreement. The advantage arises out of the fact that if transit and technical stop are put on a liberal basis as a matter of principle and of general international practice, many countries will feel constrained to accept the principle, although in bilateral negotiations they might hold out a long time because they have little interest in securing transit rights elsewhere for their own nationals.

British influence has apparently increased our difficulties in securing rights of transit and technical stop from Portugal, and the same influence could be exerted to our disadvantage in many other quarters. Adoption of the general principle would lessen our dependence upon the British in dealing with various countries. Meanwhile, it would be desirable, if possible, to secure British agreement to cooperate with us on the problem.

[Enclosure 4]

Memorandum by Mr. Paul T. David, of the Bureau of the Budget

[Washington,] September 1, 1943.

Prevention of Cutthroat Competition

Preliminary conversations with British officials, the content of Parliamentary debates, and discussions in the British press alike indicate that it will be necessary to deal in some way satisfactory to the British with the control of competition in air transport. According [Page 1328] to a recent article in the London Economist, it appears “to be the universal assumption of the House of Commons that British civil aviation would require some form of protection if it was to exist at all.”

The fact that the United States has a statutory policy of competition under which its domestic aviation has grown great is viewed in England with considerable fear, although some strong voices now advocate a similar policy for British aviation. Considerable misinformation or lack of information as to the policy of this Government with respect to subsidies is also reported by American observers, and it appears to be generally assumed in England that if several United States companies are permitted to operate internationally after the war, all will be heavily subsidized.

Various plans or proposals may be brought forward in whole or in part with the objective of limiting and controlling competition and thereby affording protection to British interests.

1. Internationalization of operations on principal international routes appears to be favored by some groups, including elements in the present British Government. This would mean, for example, that a public corporation might be created to operate air transport services across the North Atlantic, which corporation would be jointly owned by, say, the United Kingdom, Eire, Canada, the United States, France, the Netherlands, Portugal, and possibly other countries.

This would have the advantage, at least from the British point of view, of avoiding competition. International friction might be reduced, with some increase in military security and international cooperation. The disadvantages would probably include a low rate of technical progress, relatively high operating costs, high fares, and consequent limitations on the amount of travel. A specific disadvantage from our point of view would be the fact that at best we would probably be in a minority position in the control of any such corporation.

2. Zoning of the world into zones of influence in which each major power would have a relatively free hand in the field of air transport is another alternative which may appeal to certain British groups. Under such a plan we would probably be kept entirely out of Africa, the Middle East, and India, while the British might agree to stay out of South America.

Zoning would seem disadvantageous from our point of view, for reasons indicated in the statement entitled “Rights To Engage in Air Commerce.” Moreover, zoning plans fail to solve the competitive problems of the inter-zone routes such as those across the North Atlantic, where competition is likely to be most acute.

3. Trading schedule for schedule, accompanied by low limits on the total number of schedules, is the device to limit competition which resulted from our prewar negotiations over the North Atlantic route.

[Page 1329]

The advantage of this scheme is the restriction of the total amount of service to an amount unlikely to be much greater than that needed to serve the traffic. The disadvantage is the fact that this retards traffic development. Since we shall probably originate the greater part of the traffic, partly through the traffic promotional efforts of the American airline industry, the limitation of schedules is especially objectionable to the United States companies. It would seem that on thorough consideration the British would also find the plan disadvantageous, in view of their obvious need for the encouragement of American postwar tourist travel to England and other parts of the Commonwealth as a means of redressing their postwar balance of international payments.

4. Pooling traffic is another device to limit competition which found much favor in the prewar organization of European air transport. The advantage is the partial achievement of the economies and efficiencies which can sometimes attend monopoly. The disadvantage is the inhibiting influence common to all devices in restraint of trade.

5. Conferences of air transport operators, similar to the conferences which have long been a familiar feature of the shipping industry, are another related device. Traffic pools are usually operated by conferences; they may also concern themselves with the adjustment of rates and the prevention of rate-cutting, with the allocation of routes, services, and equipment, and with the prevention of new competition.

The conference system readily becomes a device in restraint of trade unless closely and effectively supervised in the public interest by public regulatory agencies. Resort to the conference system may be necessary in the absence of other effective means of preventing cutthroat competition.

6. Cooperation among national regulatory agencies would seem essential if competing air transport operators are allowed to restrict competition through the conference system. The advantage of such cooperation is that it does not necessarily require new international machinery, and it avoids any restriction of national sovereignty and authority. The disadvantage is that national agencies are not always able or willing to take parallel or cooperative action. They are organized on different bases and with differing powers. Many countries, including some of the major powers, have no adequately organized governmental agency for the economic supervision of civil aviation.

7. An international regulatory agency with powers for international air commerce similar to those vested in the Civil Aeronautics Board for the domestic air commerce of the United States would perhaps be an ideal solution if it could be created. Major questions as to feasibility are involved, as indicated in the statement entitled “Replacement of International Commission on Aerial Navigation.”

[Page 1330]

In the light of these possible alternatives and the difficulties of each, it is apparent that it will probably take much time and negotiation to achieve any satisfactory solution.

For the present it would seem desirable to reassure the British as to the outlook with respect to subsidies and comparative costs. It can readily be demonstrated that the past subsidy policy of this Government in the field of air transport has been moderate, and there is no reason to assume a desire on our part to initiate a subsidy race.

So far as operating costs are concerned, the British should overcome their inferiority complex and face the future with confidence. As is pointed out in the article in the London Economist of June 5, 1943, previously referred to, “On labour and personnel costs, which amount to a third of the total, British lines should have a distinct advantage over the American,” while there is no reason to assume that British costs will be higher for other items, particularly in view of the magnificent record of the British aircraft manufacturing industry during the war. Indeed, over the longer future, we shall eventually be the ones to face a cost disadvantage unless we can maintain our present lead in operating “know-how” and in transport airplane design.

Fortunately, the economic characteristics of aviation are sufficiently different from those of shipping to indicate that it will be a long time before we face a cost disadvantage in international air transport at all comparable in magnitude to our cost disadvantage in merchant shipping on world routes.

[Enclosure 6]

Memorandum by Mr. Paul T. David, of the Bureau of the Budget

confidential

[Washington,] September 2, 1943.

Airport Problems of Mutual Interest

. . . . . . . . . . . . . .

The question of airport expenditures in third countries of mutual interest may bear examination with the British. Airports in Greenland and Iceland are obviously subjects of mutual interest for military and commercial reasons. Our expenditures for these installations amount to about $53,000,000 in Greenland and $22,000,000 in Iceland. Presumably full control will revert at the end of the war to the government having jurisdiction unless some other arrangement is made.

Internationalization of such airports is a solution which appears to merit study and international discussion. Internationalization could be achieved by turning the airports over to an international agency with corporate powers, which would maintain and operate them for [Page 1331] commercial air transport use, and for such military use as might be agreed upon. The advantage of this plan is that the airports would probably be adequately maintained and competently operated. Moreover, through participation in the international agency, we would retain some degree of control based on international ownership, whereas we shall lose all ownership control if the airports revert to the respective national jurisdictions. The disadvantage is the difficulty of securing agreement in the organization of a suitable international agency, including the agreement of the governments having jurisdiction. From our point of view, it might be more satisfactory to seek arrangements by which the airports are permanently retained as military bases; but this may not be possible.

[Enclosure 9]

Memorandum, by Miss Virginia C. Little and Mr. Paul T. David, of the Bureau of the Budget

[Washington,] September 1, 1943.

Need for a United Nations Aviation Conference

Great Britain and the United States have a mutual interest in convening an United Nations Aviation Conference. The United States is interested in such a conference for several reasons: (1) because of the contribution it can make towards securing more liberal rules of transit and technical stop, and (2) because it can lay the groundwork for an international commission to replace the I.C.A.N. Great Britain would also seem anxious to relax prewar restrictions on transit over countries situated along Empire routes, and is even more anxious than we are that an international organization be set up to deal with problems such as cutthroat competition. Furthermore, because of Britain’s closer ties with the smaller nations of Europe, and particularly with the governments in exile, the British are likely to insist that these countries be represented in any international discussions on postwar European aviation.

It would therefore be desirable to convene a conference, but rather than a full dress international conference, at which binding agreements are concluded, such a conference might be organized in a manner similar to the organization of the Food Conference at Hot Springs.5 The chief advantage of such a set-up is that it would permit an extensive exchange of views, without the necessity for making commitments before the nature of the general political and security arrangements [Page 1332] for the postwar world is clear. A possible disadvantage is that many countries might be stimulated to assert claims which they could not sustain and to demand that the United States and other major aviation powers pursue a course somewhat more liberal than may be feasible in the immediate postwar period. These difficulties might be avoided by a careful handling of the agenda and by making it clear that the conference must be largely confined to preparatory discussion.

Prior to the time when definitive arrangements can be made for international aviation, there is need for an immense amount of continuing preparatory work which could well be carried on by an interim international commission designated by the countries represented at the conference. Such a commission might perform the following functions:

(1): It could prepare plans for the eventual permanent organization;
(2): It could prepare plans for other aspects of the peace settlement affecting civil aviation;
(3): It could carry on the informational and advisory functions of a permanent organization to the extent feasible during the war.

The establishment of a suitable interim commission would be a major objective of a United Nations Aviation Conference of the kind advocated by the Interdepartmental Committee on International Aviation. The need for early organization of an interim commission is a major reason for holding the proposed conference in the near future.

Foreign Relations of the United States, Conferences at Washington and Quebec, 1943

Memorandum1

Memorandum by the Assistant Secretary of State (Berle) and Mr. Paul T. David, of the Bureau of the Budget

Memorandum by Mr. Paul T. David, of the Bureau of the Budget

Memorandum by Mr. Paul T. David, of the Bureau of the Budget

Memorandum by Mr. Paul T. David, of the Bureau of the Budget

Memorandum by Mr. Paul T. David, of the Bureau of the Budget

Memorandum, by Miss Virginia C. Little and Mr. Paul T. David, of the Bureau of the Budget