The issues before the Conference [2] are now reasonably clear but
the position has been so confused during the last ten days and has
so changed even from hour to hour that no clear picture could have
been given you.

2. There have been constant discussions outside the Conference
between the United States and the United Kingdom Delegations while
all technical work was continuing and members of the Commonwealth
with the exception of Canada conferred practically every night.

Canada, as at Montreal, has been difficult but last night when it
became evident that the Latin American countries were not prepared
to grant the 'freedoms' [3] and in consequence there would be
little chance of any air transport convention being adopted Canada
told the British Commonwealth that she would not grant even the
first two freedoms if the . International authority has no
regulatory powers.

3. Much of the trouble has arisen over a new element introduced by
the United States namely, insistence on a fifth freedom or right
to take on passenger mail and freight from any country to any
other country along the route not necessarily being the country of
origin of the aircraft. In effect so far as Australia is concerned
this would mean open competition with the Tasman service and a
continuation right [4] through to England along the Indian route
without any corresponding benefit to Australia.

Attempts to regulate this traffic by means of quotas and various
formula have not so far been successful.

4. At the moment the main points in dispute are-
(1) The maintenance of equilibrium by regulation of frequencies of
services to traffic offering between any two countries. For
example, the United States insisted at the outset on the right to
place an unlimited number of aircraft on an international route
irrespective of the traffic.

(2) A fair division of traffic offering between terminal points of
international air routes. For example, the United States would
operate a service to London and then on to Australia using the
four freedoms. Say the London section carried five planes a day;

the United States wanted the right to carry on the whole number
right out to Australia picking up anywhere en route. This attitude
has been modified but the issue has not been satisfactorily
settled.

(3) Complete refusal by the United States and Latin American block
to have any international authority except of a purely advisory
and technical nature. It can recommend but has no power to
regulate.

5. Thus [5] position is that the conference will produce-
(a) An air navigation convention with technical annexes which will
supersede the Paris [6] and Havana conventions [7] on
ratification.

(b) Some form of interim council with limited functions to cover
the transitional period between the present time and the end of
the war. We have been enabled to get clause in to the effect that
this will be for three years after the end of the European war and
for Australia, New Zealand and India three years after the
termination of the Japanese war.

This gives us reasonable time to develop and obtain aircraft and
to organise our international services. We have also submitted
strong claim for representation on the Council based on any
criteria which can possibly be proposed such as an operator, a
user or consumer, a provider of air facilities or main
geographical region.

6. General. I feel I have been too long here and it is clear that
the Conference will last another week at least, but I think I
should now remain to the end as the technical people have gone and
only McVey and I remain to do all the work. In the meantime there
has not yet been debate on the questions in dispute mentioned in
this above [8] and this is sure to take time. I am also with six
others on the main drafting Committee which apart from day to day
work will put the agreed conventions and annexes in the final
form.