DEPARTMENT OF STATE Memorandum of Conversation
DATE: April 8, 1952
SUBJECT: Luxembourg Air Transport Agreement
PARTICIPANTS: The Secretary AV - Mr. Deak WE - Mr. McClelland
Mr. Victor Bodson, Luxembourg Minister of Transport Mr. Lambert Dupong, Director, LUXAIR Mr. Hugues Le Gallais, Luxembourg Minister to Washington
COPIES TO: S WE EUR Amembassy, Paris (for Regional Air Attache) RA Amlegation, Luxembourg AV
Mr. Bodson addressed himself without preliminaries to the problem of "our (air) trunk line". He enumerated in chronological order the various notes and memoranda exchanged between the Luxembourg Government and our Government on an air transport agreement prior to his brief talk with me during the Ottawa NAC meeting of September 1951. Coming to the Department's last reply to Luxembourg of November 15, 1951, Mr. Bodson underlined our statement that we did not consider an agreement with Luxembourg justified on economic grounds "for the time being".
Stating that "a lot of new issues have arisen since November 1951", Mr. Bodson launched into the argument of "political discrimination". Luxembourg could not understand, he declared, why the U.S. did not grant them what we had given all the other NATO countries; and not only NATO members, but also such "unimportant" countries as Iceland, Lebanon, and certain Caribbean states. He stressed that Luxembourg was landlocked. If it were a maritime country, and had a harbor, would we deny our ships access to its port? He went on to emphasize the economic importance of Luxembourg. Last year, Luxembourg had produced more than 3 million tons of steel, while the value of its total exports had been from 5 to 600 million dollars.
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Turning to the subject of "equality of opportunity", Mr. Bodson quoted from my Ottawa radio speech and repeated that Luxembourg could not see what obstacle stood in the way of our granting it what we had given the other NATO countries. Luxembourg had done, and was doing its NATO share.
Mr. Bodson drew a parallel between Luxembourg's present situation in the air transport field and the early days of the development of the railroads, remarking that one would not have cut off a country from railroad services in those days. Luxembourg did not now wish to become "an island, stranded in the middle of Europe". Adequate transportation services were not only a national right, but it was an absolute necessity for Luxembourg to be closely linked with the outside world. Luxembourg must therefore have the possibility of flying to the United States. According to their estimates they should be able to fill two planes a week to New York. Just because the U.S. did not appear interested in operating an air service to Luxembourg, why should we prevent them from going ahead with one?
Mr. Bodson said that our refusal to conclude an air agreement created domestic political problems for the Luxembourg Government. They had built an airport at a cost of 2 to 3 million dollars out of their own pocket. This field was well equipped and staffed; and Luxembourg couldn't allow grass to grow on it! It was, moreover, part of its military obligations as a NATO ally to keep this airport in good operating condition. What was he to reply, he inquired, when asked at home why this expensive airport wasn't being adequately used. It was very difficult for him to explain to the opposition--especially the small, but vocal communist group - why the United States apparently considered Luxembourg less important in the aviation field than Iceland or El Salvador.
The Minister said that under the proposed contractual arrangements, he understood Germany would regain control over civil aviation. Were we thinking of giving Germany what we wouldn't grant Luxembourg? He added emphatically that the Luxembourgers didn't like the idea of having to go through the intermediary of another country, particularly Germany, to get to the United States.
I told Mr. Bodson that we wished very much we could do what Luxembourg wanted. The fact was, however, that we simply could not. No question of discrimination was involved. In our considered opinion, reached after thorough study, there was no adequate economic justification for an additional transatlantic service between this country and Luxembourg. This was not just the opinion of the State Department,
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but an overall U.S. Government position in which other agencies, such as the Civil Aeronautics Board and the Department of Commerce, concurred. If the Department were to insist for foreign policy reasons on the conclusion of an air agreement with Luxembourg we would run head on into a powerful Congressional group which had long contested the Department's prerogative of negotiating such agreements as executive agreements. Even a political justification would be difficult to find, I concluded, since there really was none, other than the fact the Luxembourg wanted such an agreement. As far as I could see Luxembourg was not being handicapped for lack of one; it was not being strangled. Furthermore, Luxembourg citizens did not seem to experience the slightest difficulty travelling in or out of the country.
I agreed with Mr. Bodson that Luxembourg was doing its full share in NATO, and said that we sincerely appreciated Luxembourg's role. The United States was also doing its full share; but people don't get rewarded simply for doing their share. None of this, in my view, added up to a justification of the airline they wanted.
I asked Mr. Deak to comment.
He point out that while we found no economic justification for a U.S. air service to Luxembourg, this was not the sole motivating factor in our negative response to their proposal. Mr. Deak noted that the negotiation of air agreements is a function of the Department of State. The granting of permits to foreign carriers designated under such agreements, however, falls within the jurisdiction of the C.A.B., which exercises such jurisdiction according to principles and policies prescribed by statutes. One of the serious problems confronting the C.A.B. in considering such permits was the question of substantial ownership and effective control of an airline. Now, we understood that a U.S. carrier, Seaboard & Western, had a substantial investment in Luxair, and was, in effect, its operating agency. (Mr. Bodson interjected that this interest was about 30%). Mr. Deak went on to explain the problem facing this Government because of the operation of ostensibly foreign flag carriers, in reality owned or controlled by U.S. interests, when such operations competed with U.S. flag services. The diversion of traffic results in a higher subsidy requirement for the U.S. carrier, and at the U.S. taxpayer's expense. This, in turn, is bound to invite Congressional attack on this Government's civil aviation policy.
Mr. Bodson broke in to ask whether we thought a Luxembourg airline would offer us very serious competition, so as to imperil PANAM or
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TWA's position.
Mr. Deak replied that in itself Luxair would not endanger U.S. carriers; but if such a service were to carry a disproportionate share of Fifth Freedom traffic, as we anticipated it would, this would be contrary to the Bermuda principles which are basic to all air agreements the U.S. has concluded. He emphasized that this Government could negotiate only Bermuda- type agreements.
Mr. Deak observed that just as Mr. Bodson had the problem of dealing with his parliament, so this Government had to face our Congress. For this reason we were sometimes compelled to deny our friends things which they wanted. Very recently, for example, we had been forced to impose restrictions on a permit sought by our next-door neighbor, Cuba, because a U.S. carrier had substantial ownership in the Cuban carrier. Citing another instance, Mr. Deak referred to our inability to grant the Philippines a route which they very much desired because this route could have been operated only by the carriage of an excessive amount of Fifth Freedom traffic, contrary to Bermuda principles.
Reverting to the subject of "substantial ownership", Mr. Dupong asked about the extent of Transocean's ownership in the Philippine Airline. Why did we hold the matter of substantial ownership against Luxair when we apparently did not hold it against the Filipinos? It was his understanding that it had always been the policy of the U.S. government, through ECA aid for example, to assist in the development of the transportation services of our Allies. Our whole attitude struck them as inconsistent. In the case of Luxembourg it was tantamount to dictating to U.S. citizens how they could enter Europe, and by saying: You can go to Europe via France or Belgium, but you can't enter Europe by Luxembourg.
Mr. Deak said that this was not strictly correct. He reiterated that the State Department could negotiate air agreements with anybody it wanted to. This was clearly the Secretary's prerogative. Once an agreement had been signed, however, the question of its implementation was up to the C.A.B., which had to pass on the applicant's qualifications, technical and otherwise, to operate a given route.
Emphasizing that we had gone over the Luxembourg proposal very thoroughly with the C.A.B., Mr. Deak said that we had been asked a number of pointed questions such as: What equipment does Luxair have to operate a transatlantic route?
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Both Bodson and Dupong asserted that this question was irrelevant, and that it was not necessary to know what equipment a country had prior to negotiating an air agreement with it. No other country with which Luxembourg had negotiated agreements had raised this point. Could you imagine Luxembourg, Mr. Bodson declared, buying DC 6's which might then stand around and rust because of the failure to get an air agreement?
Mr. Deak continued with another question asked by C.A.B: What services is Luxair now operating?
Mr. Bodson said they had originally had services to Belgium, France, and Switzerland, but had been forced to abandon them. Europe is small and such short hauls don't pay. What they really needed was an overseas trunk line. For lack of rapid access to America, for example, Luxembourg's steel exports had "fallen flat" during recent months. In substance, Luxembourg felt strangled and confined on the Continent.
The Minister went into the potential traffic available to a Luxembourg airline at some length. He brought up the Flying Tiger case of a year ago, when, he asserted, the C.A.B. had permitted only 14 out of 56 flights scheduled by this carrier from the U.S. to Luxembourg. Was this not an indication of the number of people who might fly to Luxembourg directly, if they had the opportunity? There were many U.S. citizens who had only short vacations and didn't want to waste time on crowded boats. The new tourist rates would open up an untapped market to air travel. There was also the American Military cemetery at Ham, outside of Luxembourg City, where 7,000 American soldiers lay buried, General Patton the most distinguished among them. Luxembourg had made a gift of this ground; and certainly hundreds of visitors would like to visit it each year. Just because Luxembourg had a population of only 300,000 didn't mean that it could generate only some fixed statistical percentage thereof, such as 1%, or 300, as passengers. Iceland's population, which was made up mainly of fishermen and farmers, was half Luxembourg's; and its total yearly exports amounted to only $2 million. How could the U.S., in the face of these facts, justify an air agreement with Iceland and refuse one to Luxembourg?
The U.S. should follow, the Minister went on, what was called in French a "ligne de conduite". Our air agreement with Israel, for example, simply didn't make sense. Last year the Israel airline had carried only 300 passengers to the United States. Mr. Bodson remarked that in the final analysis it was Luxembourg's own money which would be involved; and it was their own concern what happened to it. Their's was a pioneering enterprise; it was also a public service, and as such
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did not necessarily need to be self-sustaining. Perhaps certain subsidies from the state would be required, a contribution, say, of 20% during the first year, and 10% for the second. But it would be worth it in terms of the national interest. Why should the U.S. wish to discourage Luxembourg's initiative in this respect?
Mr. Dupong developed the argument that the United States' position seemed to be that there must be some quid pro quo in aviation agreements. If an agreement contained no advantages for us, which was obviously our stand on Luxembourg's case, then we were unwilling to permit Luxembourg to fly to the United States. He said that the Luxembourg Government had never encountered this argument in negotiating agreements with other countries. The latter had always been willing to conclude agreements without necessarily insisting that they themselves be able to fly profitably into Luxembourg. If a quid pro quo insistence of this kind were to be the basis of aviation agreements, it raised the question of why Luxembourg had signed the Chicago Convention at all. Mr. Dupong was strongly of the opinion that a quid pro quo theory was inconsistent with proclaimed U.S. aviation policy.
I told the Luxembourg representatives that all they had said was very interesting and enlightening to me, and that I would go over their arguments very carefully. I hadn't a great deal of hope, however, that our decision would be any different.
Mr. Bodson asked if he might just add one or two more points. He then quoted a portion of my Ottawa Canadian Broadcasting System speech of September 1951: "We look forward to the day when a citizen from any one of our countries may travel freely and easily anywhere throughout the Atlantic Community…" Why did this freedom to travel by air on their own carrier not apply to Luxembourg? Mr. Bodson asked. The Minister reinforced his point by quoting from a comparable statement made by the late President Roosevelt at the opening of the 1944 Chicago Civil Aviation Conference proclaiming it our aim "to open the sky for everybody".
As his second point, Mr. Bodson referred once more to proposed agreements between the three occupying powers and the German Federal Republic in respect to civil aviation. What equipment did the Germans have; and were we requiring them to show that they had the necessary equipment before concluding an agreement? If we were apparently, willing, Mr. Bodson continued, to accord Germany, an ex-enemy state, the liberal treatment prescribed by the Chicago Convention, then why not to Luxembourg? In the last analysis, Bodson confessed, the only term he could find to describe our attitude toward Luxembourg was "discriminatory". It was an ugly word and he didn't like it, but he could not find another one that
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fitted. Luxembourg was asking only for equality of opportunity, Mr. Bodson continued, it was not asking for equal economic benefits, since it was up to Luxembourg to see that ultimately the service became economically beneficial.
Mr. Bodson asked whether he could hope to have our reply before returning to Luxembourg?
I told the Minister that I really couldn't say. I would have to review the points he had made; and our experts would have to study them.
Mr. Bodson assured me that he would be at our disposal for further talks and would be willing to return at any time even if it meant travelling on another country's airline.
I observed that to refuse to do so would really be excessively nationalistic, and the meeting broke up.
EUR:WE:RDMcClelland:ds TRC:AV:FDeak 4/11/52