PROPOSED RECIPROCAL AGREEMENT WITH U.S.A. REGARDING AIR TRANSPORT
RIGHTS

The American Legation, Canberra, has submitted to the Department
of External Affairs a proposal that an air transport agreement be
negotiated between the Australian and United States Governments
and has submitted a draft agreement accordingly. This followed
closely on a similar approach made to the New Zealand Government
for a similar agreement between the United States and New Zealand.

2. The Chicago Conference: It is recalled that the International
Civil Aviation Conference held at Chicago in November/December,
1944, drew up two draft multi-lateral agreements covering rights
for international air services, namely:-

(i) the International Air Services Transit Agreement (which
conferred rights of transit and of non-traffic stop), and
(ii) the International Air Transport Agreement (which conferred
further rights of picking up and setting down traffic).

The United States has signed both Agreements but Australia (like
all other British Commonwealth countries) became a signatory to
the Air Transit Agreement only. The position at present,
therefore, is that both Australia and the United States now
possess rights for their respective airlines to operate over and
into the territory of the other, but not to pick up or set down
traffic. For an effective service between the two countries
traffic rights are necessary and it is on this account that the
United States has sought a bilateral agreement. It might be
mentioned that Australia is in a stronger bargaining position than
the United States since, under the provisions of the International
Air Services Transit Agreement passengers to and from the United
States carried on an Australian service could, subject to an
agreement with Canada, be set down and picked up in Canada without
the negotiation of any further agreement with the United States.

3. The refusal of Australia and other British Commonwealth
countries to sign the Air Transport Agreement is due primarily to
the refusal of the United States and certain other countries to
include in that Agreement provisions relating to the regulation of
competition which the British countries consider necessary to
avoid uneconomical operations and to protect the interests of
those countries which, due to war and other causes, would be
severely handicapped if in the immediate post war period there is
allowed to develop an uncontrolled scramble for international air
services.

4. Proposed Bi-lateral Air Transport Agreement: The draft
agreement submitted by the United States Legation is on the
general lines of the pro forma for such bilateral agreement drawn
up at Chicago and provides for the granting reciprocally of all
Five Freedoms, namely, the right of transit and right of non-
traffic stop (both already conferred under the Air Transit
Agreement); the right of picking up passengers for the State of
registration of the aircraft; the right of setting down passengers
from the State of registration, and the right of picking up and
setting down passengers to or from other States served by the
service (in accordance with the Air Transport Agreement).

5. It is of course unthinkable that Australia and the United
States should fail to reach some basis of agreement which will
enable air services to be operated between the two countries but
it is important that in negotiating such agreement Australia
should protect to the fullest possible extent her interests and
those of the other Members of the British Commonwealth. To this
end it is desirable, if practicable, that the American air service
should not be enabled to commence operations in advance of a
British Commonwealth service. It is equally important that we
should endeavour to include in the agreement clauses which will
regulate competition and protect the interests of the British
Commonwealth service in accordance with the principles proposed
unsuccessfully by the British Commonwealth Governments at Chicago-
and since generally confirmed by those Governments.

6. In order to protect the interests of the British Commonwealth
Governments concerned in Pacific operations, it is undesirable
that Australia (and the Governments of the other British
territories in the Pacific) should grant Fifth Freedom rights as
to do so would enable the U.S. service to carry traffic between
such British territories-for instance, between Australia and New
Zealand and between Australia and Fiji. It may be mentioned that
Pan American Airways do not seek to operate between New Zealand
and Australia. Further, we should insist on the inclusion in the
agreement of the standard clauses approved at Montreal in
December, 1944, and drawn up during and immediately after the
C.A.T.C. Meeting in London in June, 1945, which are designed to
avoid uneconomic competition; to reduce and ultimately eliminate
subsidies; to keep the traffic capacities at a reasonable level;

and to ensure reasonable division of such capacity between the
airlines of the various countries concerned.

7. In order to ensure that Canada also secures rights to operate
its proposed parallel service from Canada through the United
States to Australia and New Zealand, it was agreed during the
various British Commonwealth talks that Australia in negotiating a
reciprocal agreement with the United States should endeavour to
secure rights not only for itself but also for the other British
Commonwealth countries who may be interested in operating similar
services in a partnership arrangement whether through a joint
organization or by separate organizations operating in parallel
partnership. It is therefore proposed that in the negotiations
with the United States, Australia should seek to have appropriate
provision to this effect included in the agreement.

8. Recommendations: It is recommended that Cabinet approve in
principle that Australia should negotiate with the U.S.A. a
reciprocal Air Transport Agreement (but excluding Fifth Freedom
Rights) with the inclusion of appropriate clauses to safeguard our
interests, and those of the other British Governments concerned,
on the lines indicated herein. Other Member Governments of the
C.A.T.C. could then be informed and supplied with a copy of the
proposed agreement (referred to hereunder), and, subject to any
comments that those Governments may make, negotiations would then
be undertaken with the American Government. A draft agreement
embodying the safeguards proposed would be drawn up by the Civil
Aviation, External Affairs and Attorney-General's Departments in
collaboration, and, subject to the approval of the Ministers of
those Departments, would be submitted to the American Government.

In all these negotiations it would be the aim to ensure, if
practicable and without offence to the United States Government,
that the U.S. service should not be enabled to commence operations
prior to the institution of a British service (which is the
subject of a separate Cabinet submission [1]).