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Rome. It affects the rate to Frankfurt which often is New York,
London, Frankfurt, and possibly on to Rome.

You follow that course, and you obviously, with respect to any rate structure, involve not merely two governments but many gov

PO ernments, so that essentially the ratemaking process in the international field is and has to be a multilateral problem. So, when you take that fact of life into account, it becomes rea

ha sonably clear that neither the United States nor any foreign gov

do ernment can fix international rates.

International rates by their very nature are the product of negotiation. There is no way that anyone can get around that. This com

the mittee cannot legislate for the United Kingdom, and our Congress

qul cannot legislate for the United Kingdom.

The House of Commons cannot legislate for the United States. So, that when you come right down to it, what we are talking about is a

IL subject which only yields in its solution to international negotiation. That is the No. 1 reason why this proposed legislation, H.R. 6700 is unsound, or to put it possibly more precisely, unrealistic.

Second reason: If the Board purports to exercise this power, inevitably the exercise of this power will become fashionable. Other governments seeing the United States attempt to exercise its sovereignty in this fashion necessarily leads to their doing the same thing.

The result of that also necessarily is that the fixing, the establishment of rates in the international field, becomes constantly a subject of governmental dealing.

It At the present time, as you know, the basic method of establishing

TO rates in the international field is through a conference of carriers who work out these highly complex problems, subject to approral by governments.

If we change that to a governmental process, as this legislation inevitably would do, rates would be fixed not by a conference of carriers but by a conference of governments.

Now, the difficulty with that is manifold. In the first place, the fixing of rates should be a managerial function of the carriers who charge them and who are responsible, in our case, in the case of U.S. carriers, at least, who are responsible to their stockholders and directors for success.

In addition, if governments undertake this responsibility inevitably it becomes in part political, because these governments, among themselves, have endless axes to grind with each other, and it would be impossible to exclude these extraneous matters from these rate discussions. It would be impossible and it wouldn't be done.

The United States in order to achieve a rate objective would probably be--would probably find itself having introduced into the discussions such things as foreign aid problems or problems of military bases. Inevitably that would happen.

So that it is definitely in the U.S. interest to keep this away from intergovernmental responsibility to the major extent that we can. This bill moves in the direction of transferring it to governments; and that is the second reason why it is unsound.

It has been said here several times that other governments have this same power to fix international rates and thus the United State should have it. Those statements, I believe, have been based upon me

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an inadequate review of the actual laws of the foreign countries. We have so reviewed them as best we can. It is difficult. But we can find only a very few governments, four to be exact, that have this power to fix international rates. Other governments do not have it.

For example, the United Kingdom does not have it. So that we mustn't proceed on the basis that it is settled that other governments have this power. They have powers of a variety of sorts, but they don't have this power to fix rates.

That is the second reason why we think this legislation is unsound.

The third reason: Inevitably when you start out to provide for the fixing of rates our form of government and our legal process requires hearings, notice, hearings, proceedings before you can fix a carrier's rate.

Now, let us take an example, the North Atlantic where we have 19, I think, foreign carriers as well as 3 of our own.

There you have a major rate proceeding. If the United States were to start exercising its power under this bill to fix a rate, they would be starting a hearing which would involve these many carriers backed by their many governments, and I don't know when the hearing would ever end. We had a relatively simple problem here some years ago when the Civil Aeronautics Board decided to investigate and fix the rates for our domestic system for they weren't involved with other governments, they weren't involved with any conflicting things of that sort.

It took 412 yars to get the proceeding over with.
The CHAIRMAN. What was that, I didn't get that?

Mr. Tirton. That was the general passenger fare investigation of some years ago. I was making the point that it took us 412 years to run through a domestic rate proceeding.

Under this legislation, it provides for an international rate proceeding of far more complication than that, so that you could expect those proceedings to go on a very long time.

Now, in the international rate field where rates have been changing annually over the past 18, 20 years, it would be quite impracticable to utilize this rate fixing machinery, and the machinery, if you are going to fix rates surely our carriers would insist that they were entitled to a hearing, and so that the procedure here provided an essential procedure if rates are to be fixed, is so clumsy and awkward that it cannot be applied in the international field.

The CHAIRMAN. I raised that question with Chairman Boyd yesterday, Mr. Tipton, and I believe the record shows that he indicated there would not be these long, drawn-out hearings and proceedings.

Mr. Tipton. I only refer to what the statute provides. It provides for hearings, as it must, and, of course, there is a provision in this statute as well as the provision of the domestic law on the same subject that they must complete the proceeding in 6 months.

But no proceeding has ever been completed in 6 months. The proceeding goes on and on as I have said. The general passenger fare investigation went on 4 years, I think Mr. Boyd was taking an unrealistic point of view.

The CHAIRMAN. Mr. Boyd said vesterday he thought their limitation would be suspension authority for 6 months, 180 days. He did try to explain it some, and I wasn't altogether sure that it was clear,

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but do you agree with him that 6 months would be the maximum authority of suspension?

Mr. Tipton. Under the bill as proposed, and under the domestic, corresponding domestic statute, the Board can suspend the rate proposed for 6 months, but in the Board's reviews of these rates, they have never managed to get the proceeding done in 6 months that I recall

, and the carrier then comes forward and "voluntarily" extends the time of suspension. It just seems to me quite clear that the procedure here is far more complex than the chairman thought.

Now, to go to the fourth reason, and this reason gets a little complicated.

A basic difficulty with this legislation is that while it purports to give the Board the right to fix and regulate the rates of foreign-flag carriers as well as American-flag carriers, the net effect of legislation when combined with the Bermuda agreement has the result of taking away from the Board their power to regulate the rates of foreign-flag carriers.

Now, the reason I say it gets a little complicated is because of the relationship between this legislation and the Bermuda agreement.

In the Bermuda agreement, and I will try to cover this quickly because it has been covered before, in the Bermuda agreement, it was anticipated when that agreement was written that there would be disputes among governments and carriers on rates.

It was obvious, and they provided for it. It provided that in the event of a dispute the governments would get together, discuss the matter, if they couldn't agree in discussion, then they would submit it to arbitration, the issue to arbitration, and when the arbitration was over, they would do their best to use their powers to carry into effect the arbitral award.

That is the way these disputes were supposed to be settled. Well, obviously, there was going to be a considerable period during which this arbitration was going on. One just took place over a route problem and it took 18 months to finish. Å rate arbitration problem would take longer than that. So, there was a long period, and the fellows who were drafting the agreement had to make arrangements for what was going to happen to the disputed rate while all of this talking was going on.

So, they provided two different ways of dealing with it.

If the Board had rate-fixing authority the disputed rate would continue in effect all during the talking. If the Board did not have ratefixing authority the government that was objecting to the rate could insist upon its suspension during this argument.

Now, at the present time, since the Board does not have rate-fixing authority the disputing government does have the power to insist that the rate be suspended.

If this bill is passed, however, the other provision comes into effect, and the complaining government is bound--the carrier offering the disputed rate can continue that in effect.

Well, we regard that effect as a very bad one from the standpoint of this legislation.

Chairman Boyd yesterday—I have reviewed his statement-he thought that it was a very good effect in that we are fundamentally in conflict with the chairman's position.

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The reason that the Board thinks that it would be good to be able to continue a disputed rate in effect during the discussion is that this sort of thing could happen. They could fix an American-flag carrier's rate at a level lower than that desired by foreign governments, and then insist that those foreign governments that didn't like it nevertheless permit it to continue. That is the reason that Mr. Boyd thought that this bill was good.

In other words, what he was saying was under that provision we can shove a low rate down the throats of complaining governments abroad.

Now, I think before accepting that conclusion we had better analyze it a little bit because in the first place, I don't believe that the United States is really going to shove these rates down the throats of foreign governments.

A great international ruckus would result, negotiation would take place, we would be right in the same position we are right now.

Mr. Moss. Mr. Chairman, I wonder if I might ask a question at this point?

The CHAIRMAN. Mr. Moss?
Mr. TIPTON. Certainly.

Mr. Moss. Isn't the assumption that we would have the right to do that which you call “shoving down the throat" very precisely spelled out in the Bermuda agreement ?

Mr. TIPTON. Yes, sir.

Mr. Moss. And contrariwise, is not the action taken by Britain contemplated and authorized in the Bermuda agreement, because in section (f) it expressly states that the government objecting to the contracting party may take such steps as it may consider necessary; it is very broad, and they are all sanctioned by the agreement.

And certainly we must assume we are going to operate under some form of agreement, and if, as was contemplated at the time of the Bermuda

agreement, the authority here sought is given to the CAB, then the right to have the new rate in effect provisionally is also provided. So the question you raise then would go to the question of abrogation of the agreement by the governments now signatory to them, or agreeing to international air commerce under the terms of that agreement. If we reach that point, of course, we have no kind of agreement, and it is a matter then of governments attempting to undertake to reach new agreements.

But if we are to proceed under international law, as agreed to by the contracting parties, then the position of the Chairman of the CAĎ is well founded on the agreement itself, and what you contemplate is a course of action abridging the agreement rather than adhering to it.

Isn't that true?
Mr. TIPTON. No.

Mr. Moss. Well, you say, the next step: would a government agree? Would a government permit? The governments have agreed, would they permit it? Would they then honor their agreement? If they didn't then we would have an abridgement of the agreement.

Mr. TIPTON. That is right.

Now, there is no question that what Mr. Moss has said is true with respect to those governments that have signed this rate provision and a very large number of them have. They have agreed if this legisla

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tion is passed they would permit a low rate offered by an American carrier, even though disputed, to continue in effect. The question I raise at this time is whether or not this result would actually be accepted without substantial international controversy, even though presently provided, whether it would be accepted without international controversy, and I think that, in my judgment, it would not.

Mr. Moss. Mr. Tipton, we accepted it very reluctantly, last year. I know that I as an American felt rather embarrassed that the British Government would threaten to confiscate our property, but she made the threat, and we finally backed down because really we had agreed to back down.

It was provided for in the agreement.

We didn't like it but we did it, and if these governments have entered into the agreement in good faith, and we should assume that most of them have, there are governments I wouldn't concede gooi faith to under any conditions, but most of those of concern to us I feel would honor in good faith as we have the agreement we entered into.

Mr. TIPTON. I think that my point is not directly in conflict with Mr. Moss,

My point is not that they would ignore or violate the agreement. My point is that it would not be accepted without controversy, the action of the United States in effect in insisting they accept this fixed rate and abide by it, and would create international controversy that we would find difficult to deal with, possibly leading to the abrogation or denunciation of agreements, the insistence upon change.

It would induce controversy that need not be had. That is my point here, that when you fix rates, without regard to what the agreement provides—20 years have passed since that agreement was signed--that is a pretty hard blow to strike under these circumstances.

The question I am raising is, first, would our Government erer do it, and second, would our Government be prepared to meet the international controversy which I am confident would arise, because feelings were strong during this discussion the various governments had with respect to rates a year ago, and they would be equally strong in the event that we sought, our Government sought, to utilize this power.

I am confident that, and here I am not charging and government

Mr. Moss. I would just like to see our Government have occasion to be a little more insistent at times.

Mr. Tipton. They can be insistent. They can be insistent without utilizing power of this kind, because this raises what I regard as a serond major objection to this conclusion. It has been pointed out that if this law is passed a foreign government will not be able to interfere with a U.S. carrier's rate proposal.

But let's look at it from the other side. The U.S. Government will not be able to interfere with a foreign-flag carrier's proposal either.

Now, I think that we have to consider the problem from a relatively long-range basis and consider all facets of it, and not just one.

At the present time the problem is getting the U.S.-carrier's objectives of lower rates across against foreign-flag carrier opposition. That is the present situation, and the bill looks good from that standpoint.

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