The CHAIRMAN. We have had what has been to me a very interesting discussion, and I don't think there is any necessity for apologies, but we have these gentlemen from the State Department and it is nearly 1 o'clock now. Did you have something more to say, Mr. Baker?

Mr. BAKER. No, sir.

The CHAIRMAN. Or Mr. Miller?

Mr. MILLER. No, Mr. Chairman.

The CHAIRMAN. I have a series of questions here propounded by Senator McCarran who is engaged in other duties with the Appropriations Committee this morning and could not be here, and I wish you gentlemen would take those questions, look them over, and if you care to undertake to answer them now that will be all right, but if not you can answer them at the time of our next meeting.

Mr. BRANCH. Could I make one point here, Mr. Chairman, while they are looking those over?

The CHAIRMAN. Yes.

Mr. BRANCH. I simply want to correct the record here in one respect. I think something that has been said here implies that the Civil Aeronautics Board sponsored the Chicago agreements. Speaking for myself, that isn't correct. I have never favored the multilateral agreement that was adopted at Chicago. I have always, in season and out of season-I came to see you months ago, about it, before Chicago, and I went to Secretary Hull-opposed anything but a bilateral agreement, and I don't think the CAB ever went on record as favoring the multilateral agreement, and I don't think this record ought to imply that.

I would like to add, before I sit down, that I think we are by way of getting bilateral agreements with all the world. I think that those nations, which are very few and most of them unimportant, which have signed the multilateral agreement, will speedily come in on bilateral agreements. I don't anticipate any trouble on that.

The CHAIRMAN. And the bilateral will supercede the multilateral? Mr. BRANCH. Yes, sir.

The CHAIRMAN. That is what I was saying just now. The CAB was represented at Chicago by two very able men, Mr. Pogue and Mr. Warner, who were delegates. I sat with them and Senator Brewster sat with them. I wouldn't be willing to say just how they stood but my impression was that they were working for the multilateral idea. Senator BREWSTER. There is no doubt about that, but they of course no more bound their Board than we bound the Senate; they were there as individual delegates.

The CHAIRMAN. I am not blaming Mr. Berle. He went there to get some bacon and he had to have some bacon. But he is the most responsible man in the whole matter, and let's say in his behalf that he did the very best he could with the circumstances as they were. I don't know that Senator Brewster and I could have done any better. Senator BREWSTER. Well, I think we both declined to commit ourselves to his conclusions. This is the most reassuring statement I have heard in 2 or 3 years, that the Civil Aeronautics Board was not responsible for approving this Chicago multilateral arrangement. That is to me very encouraging, and I think we can see a rift in the clouds and a hope of dawn. That is the first time that has ever been said to us as far as I know.

The CHAIRMAN. Yes, but on the other hand nothing was said at Chicago to convince us that the Board as a board was having anything to do with it. We had the Chairman of the Board there-

Senator BREWSTER (interposing): And the Vice Chairman.
The CHAIRMAN. Yes.

Senator BREWSTER. I think we did assume that it represented concurrence. In fact you and I rather thought we were skunks at the lawn party in challenging the conclusion, and we are glad to find, may I say, some other skunks with us. [Laughter.]

The CHAIRMAN. I think, Mr. Berle was very much for it but I give him credit for the very best of faith and a great deal of hard work. Senator BREWSTER. I will give him credit for great zeal.

Mr. BAKER. Would you like me to take a shot at these now?

The CHAIRMAN. I don't think you can answer those within reasonable time limits. It is 1 o'clock now. I am not insisting that that be done now. However, I would like to have them answered today in the record because Senator McCarran, if he had been here, certainly would have asked those questions.

Mr. BAKER. Would you like to have me take a try at them now or send the answers up this afternoon?

The CHAIRMAN. Well, it will take you an hour to answer all those questions, won't it?

Mr. BAKER. I am not sure, sir.

The CHAIRMAN. I don't want to stay here until 2 o'clock.

Mr. BAKER. The simplest thing would be to send up a memorandum during the afternoon, giving the answers. Would that be satisfactory? Senator BREWSTER. When do you contemplate the next meeting? The CHAIRMAN. I was going to take that matter up with you and and others.

Senator BREWSTER. I think it would be more fruitful if Senator McCarran were here when the answers were made.

(Discussion off the record.)

The CHAIRMAN. Then we will adjourn now until 2:30 this afternoon at which time Mr. Baker will give the answers to these questions of Senator McCarran.

Mr. MILLER. Will you want me back here this afternoon, Senator Bailey?

The CHAIRMAN. Not unless you are needed to answer these questions.

Mr. BAKER. I think I would like to have Mr. Miller along.
Senator BREWSTER. Legal advice is very helpful.

(Whereupon, at 1:05 p. m., the hearing was recessed until 2:30 p. m., of the same day.)

AFTERNOON SESSION

Present: The same as heretofore noted, with the following additions: Senators McCarran, Mead, and Gossett.

Also present: The same as heretofore noted, with the following addition: George C. Neal, general counsel, C. A. B. Senator BREWSTER. We will come to order. We shall proceed tentatively, in the absence of Senator McCarran, deferring the discussion of questions until he comes up, those questions which were submitted by him.

STATEMENT OF GEORGE, BAKER, ACCOMPANIED BY EDWARD G. MILLER, ASSISTANT TO THE UNDER SECRETARY OF STATEResumed

Senator BREWSTER. In connection with your visit to France, Mr. Baker, you contemplate a procedure presumably along the lines of Bermuda, that is, to discuss, formalize and, if practical then to execute an agreement? Do you expect that?

Mr. BAKER. It would be like Bermuda in some respects and unlike it in others, Senator. It would be the responsibility of the Ambassador, Mr. Caffrey, to accomplish and execute agreement, to accomplish the bilateral agreement with France, which is something he has been trying to do now for some 5 or 6 months. And Mr. Morgan and I will be there as his advisers in so doing.

I think the main point of your question could be answered by "Yes," but it is in somewhat a little different framework from the Bermuda Conference.

Senator BREWSTER. I can understand what you say, and if it is not violating any diplomatic secrets, would it be contemplated that you would exercise the Presidential authority or that it would be done by the Ambassador?

Mr. BAKER. It would be done by the Ambassador.

Senator BREWSTER. That is, if there were a decision arrived at to formalize an agreement, it would be signed by him and not by you? Mr. BAKER. That is right.

Senator BREWSTER. Senator McCarran, Senator Bailey had to go to a meeting of Appropriations temporarily, and we deferred the questions that we had intended to ask until your arrival. So I think that Mr. Baker can go ahead with those.

If you will read the question, that will be the better procedure. Mr. BAKER. Senator McCarran, do you have any preference as to the order?

Senator MCCARRAN. NO.

Mr. BAKER. We shall just take them as they come.

I think the references refer to pages in the hearings on S. 326; is that correct?

Senator MCCARRAN. That is correct, sir.

Mr. BAKER (reading):

On page 17, under the section "Rates for foreign air transportation," there appears the following excerpt from a letter of the Civil Aeronautics Board dated December 11, 1944, opposing S. 1790:

"However, under present law, there is no power by which the passenger and property rates of our international carriers may be regulated, and since our international air carriers are privately owned and managed, this Government would be powerless to make effective any agreement negotiated with a foreign government with respect to the level of passenger and property rates. The provisions of the proposed bill, amended to make clear the power to fix rates in accord with international agreement, would permit the Authority to deal adequately with this problem."

The question continues:

In view of this plain admission, upon what basis was the agreement over rates reached at Bermuda?

This, I think, is primarily a question for the CAB to answer. They are in session. I talked with Mr. Ryan, and I will endeavor to give the best answer I can on it.

The start of that quotation I will read again:

"However, under present law there is no power by which the passenger and property rates of our international carriers may be regulated * * * "1

I think that the Board feels that certainly still applies.
Senator McCARRAN. The Board feels what?

Mr. BAKER. The Board feels that statement certainly still applies and is still true. And that is why they are going to ask you once again, that is, ask the Congress, to give them the power to regulate international rates. That was clearly understood at Bermuda by the British as well as ourselves, that there was no clear-cut power to regulate rates in the over-all sense, I think the discussion this morning

Senator MCCARRAN. I do not quite follow you. not gone far enough for me to keep up with you. were no power to regulate rates."

Maybe you have You say, "If there

Mr. BAKER. No, sir. I think it is understood that there is no power to regulate international rates.

Senator BREWSTER. They agree with that.

Senator MCCARRAN. All right. I thought you were putting it in the conjectural.

Mr. BAKER. No, sir, I did not mean to.

Senator MCCARRAN. Excuse me.

Mr. BAKER. It is clearly understood that there is not that power, and that is why the Board is going to ask you again to be granted

that power.

The Bermuda agreement, as far as rates are concerned, breaks into two parts: (1) What is to be done after the Board is given the power by Congress, if it is given the power, and a separate period, which is the period before that time, in which the Board does not have power to regulate rates, and in which it is admitted that the foreign government can keep a line out if it does not charge rates satisfactory to that power, either to the foreign power or to ourselves in reverse, although there is a mechanism set up for consultation between the two Governments in that period to try to work out some arrangement, if they can.

Senator MCCARRAN. Some arrangement for what?

Mr. BAKER. Whereby, for instance, the British would not keep one of our air lines out, if we can get them not to. There is consultation between the two Governments.

Senator MCCARRAN. You haven't any arrangement for that now, have you?

Mr. BAKER. There is merely the arrangement that you would consult before they finally said to one of our air lines, "You shall not come in because you are charging rates which are distasteful to us.'

Senator MCCARRAN. They have already done that very thing.

Mr. BAKER. They have done that.

Senator MCCARRAN. And you knew that?

Mr. BAKER. Yes.

Senator MCCARRAN. In the conference. Your conference did. nothing to relieve that situation, did it?

Mr. BAKER. No.

Senator MCCARRAN. All right.

Mr. BAKER. What was the question based on that?

His question was, "In view of this plain admission, upon what basis was the agreement over rates reached at Bermuda"?

Senator MCCARRAN. Yes.

Mr. BAKER. Well, the Bermuda agreement, insofar as it covered the regulation of rates, only covered regulation of rates subsequent to the giving of power by our Congress to our CAB.

What happened prior to that time, it was admitted, was not regulation, because there was no power to regulate. It admitted the right of either country to keep out the air line of another country, if it charged rates which were distasteful to that country.

Senator MCCARRAN. Did it admit our power to do that?

Mr. BAKER. Oh, surely, for each country.

Senator BREWSTER. That would be under the agreement?

Mr. BAKER. Yes, that exists, anyway, of course, and an agreement could only modify it. But that sovereign right is there.

Senator BREWSTER. That does not hold under the Chicago agreement, does it?

Mr. BAKER. That does exist, certainly, under the Chicago agreement, the right to keep out, does it not?

Senator BREWSTER. I don't know where you get that from.
Senator MCCARRAN. Where did you get that from?

Senator BREWSTER. Under the Chicago agreement you have no authority to do that.

I will say this. The right exists as a sovereign right of any nation to keep any other air line out if it wants to. If the country signed the "five freedom" agreement in Chicago, it would renounce that right, it would seem, to keep them out.

Senator BREWSTER. And we have signed that?

Mr. BAKER. That is right. Insofar as any other country has also signed it, then they would have the right to come in, and we could not keep them out on that basis.

Senator BREWSTER. That is right. Any country which is ready to sign the "five freedom" agreement has renounced that right, and we have done that.

Mr. BAKER. That is right. We renounce it to any other country which also signs.

Senator BREWSTER. That is right.

Senator ROBERTSON. I think the actual answer to that question was that nothing was done about that agreement.

Mr. BAKER. About the regulation of rates?

Senator ROBERTSON. Yes.

Mr. BAKER. There was written into the agreement an agreement of what we would do if Congress did give the power.

Senator ROBERTSON. Nothing was done.

Mr. BAKER. And nothing has been done.

Senator BREWSTER. That would not be quite accurate. That is, we did have this IATA arrangement which you should, I think, explain to Senator McCarran.

Mr. BAKER. In the prior period before Congress should give power over rates to the CAB, there is a statement that the CAB approves of IATA for 1 year, of the IATA machinery for setting rates. In other words, we agreed that the CAB will relieve the carriers, under the Sherman Act, of sitting down, of a liability for simply sitting down