Addressed to the Acting Prime Minister, Mr. Forde.

Reference my No. 17 of 16th May. [1] CIVIL AVIATION.

Advantage was taken of McVey's presence in London to have him
present at the discussion on Civil Aviation.

2. The Lord Privy Seal (Lord Beaverbrook) reviewed developments in
relation to Post-war arrangements for Civil Aviation and in
particular gave an account of the recent discussions with Mr.

Berle of the United States State Department. Three main points had
been under consideration in these discussions, the first
international control of trunk routes, the second bases and the
third cabotage.

3. It was clear from those discussions that the United States
Government would not accept any plan for the international
operation of trunk routes. Further they were not prepared to
subscribe to the principle of international control of air
services by an International Air authority on the lines of the
plan worked out in the Draft Convention recently prepared by the
Canadian Government. Mr. Berle had agreed that the outline plan
adopted at the British Commonwealth discussions last autumn [2]
would be used as the basis for future international discussions
but it seemed clear that the United States would wish to interpret
that plan in the sense of securing the greatest possible measure
of freedom from control.

4. As regards bases Lord Beaverbrook had in his discussions
adopted the formula proposed by the Australian and the New Zealand
Governments which was supported by His Majesty's Government in the
United Kingdom. [3] He had been at pains to handle the discussions
in a non-challenging, though in a fair and determined, manner. The
effect was that we should hold firmly to our bases until we could
reach a satisfactory International Agreement for control, and he
had secured acceptance of this point of view by the American
negotiators. [4]

5. Mr. Berle had also accepted the principle that cabotage traffic
between the United Kingdom and the Crown Colonies and the Empire
excluding the self-governing Dominions and India could be
reserved. Nor had he contested that in the self-governing
Dominions and India the Governments of those countries could claim
cabotage.

6. Lord Beaverbrook suggested that in the light of his
conversations with Mr. Berle the next steps should be to pursue
the course of international discussions in the hope of securing
general agreement to some form of international control and at the
same time to prepare in technical discussions between competent
authorities a plan for the establishment of a British Commonwealth
air route. He considered that at the International Conference in
which we should base ourselves on the findings at the Commonwealth
Conversations for the international handling of Civil Aviation,
the wisest course would be to reach an agreement with Americans
even at the cost of some concession, but to build up a
Commonwealth and Empire organisation in addition to what we
arrange with the United States. There was complete understanding
with the United States and the proposed Commonwealth and Empire
line would not be an alternative but a parallel to the line which
it was hoped to negotiate with them.

7. I expressed general agreement with Lord Beaverbrook's statement
but added that I [should] [5] like a chosen instrument for Civil
Aviation. I concurred in the idea of a British Commonwealth line
and said that the Australian Government thought there should be
two routes and would be glad to see British air interests in the
Pacific expanded. We would do our best to support, though the
question of subsidy would present difficulty in view of the heavy
demands of expenditure to continue essential International Air
Services. I said we were anxious also for a British route to Great
Britain, possibly via Darwin.

8. The following are the main points made during the discussion.

i. It was important for Australia and New Zealand that a British
air route should be opened across the Pacific. For this purpose,
an effort should be made to reach an agreement with the United
States for landing rights etc. at Honolulu on a basis of
reciprocity with the United States services to Australia and New
Zealand. Alternative routes could be explored, but the stage
involved appeared to be so long as to prevent the carriage of an
adequate pay load.

ii. Plans should also be made for the reopening when practicable
of the pre-war route via Singapore in which India would wish to
participate on equal terms.

iii. The Canadian Government were still engaged in examining the
various possibilities. They would wish to participate in the
International Air Services through the medium of their chosen
instrument-Trans-Canada Airways. They had agreed that each country
or group of countries in the Commonwealth should take the
responsibility for developing the air routes important to them,
they had not contemplated handing over such routes in which they
were interested to a joint operating body.

iv. It would be necessary to pay attention to the subsidy costs
involved, since at any rate as far as Australia was concerned the
cost of the essential International Air Services would not leave
any substantial margin available for subsidising external
services.

9. It was agreed that the next step would be to endeavour by
international discussions to secure an agreement for as
substantial a measure of international control as appeared
practicable. Meanwhile, arrangements should be made for
discussions between experts for drawing up plans for the British
Commonwealth and Empire air routes.

CURTIN