-2-

[lc]

4. Apart from the fact that even in the narrow field of civil aviation this point of view can never be accepted and has never been accepted (when such arrangement was proposed to the Scandinavians it was rejected by them) by any other country, the whole relationship between the U.S. and the Netherlands should be taken into account. The Netherlands is one of the oldest allies of the U.S.

The field of civil aviation is a traditional and important element in the Dutch economy. More than any other economic activity it is held in high esteem by the population and by public opinion.

The average Dutchman feels great pride in the achievements of KLM and is deeply interested in the way other countries treat the national airline. This feeling has become even stronger after the loss of Indonesia because by instinct the average Dutchman feels that KLM is one of the few instruments which lifts Holland beyond its geographical size. In the whole framework of our expanding economic relations I think it is reasonable to expect that we are not hurt in one of our most vulnerable activities.

From the general economic point of view the Netherlands has a huge import surplus in its trade with the U.S. and as to KLM itself its purchases of American aircraft to the extent we always did by far exceeds the revenues we can obtain from our routes to the U.S.

5. Our experience has been that the American carriers have always reacted very violently against our request and much to my regret very often with distorted facts. I am not going to bother you with details but I will be glad to send them to you if you are interested.

6. I am very worried indeed that the gap between the Netherlands and American points of departure will again not be bridged by the negotiations which take place now. That would mean that for the third time our reasonable request would be rejected. The discrimination against us in not granting us landing rights to the West Coast has been replaced by discrimination against us, as to the conditions on which we could obtain these rights and which have not been demanded to any other airline which obtained these rights. We simply can not presume that in arranging these new negotiations the new Administration envisaged this development.

In writing this letter as President of KLM I am of course and naturally most concerned about the future of my company which I consider as an important economic and psychological element in the life of the Netherlands.

But as you will have heard from your other friends in the Netherlands this issue goes beyond a purely commercial fight. What is at stake is a vital interest of a small ally of the U.S. and what is at stake further more is an in my opinion unnecessary strain on relations which in so many other fields belong to the happiest in the Atlantic Community.

With kind regards,

E.H. van der Beugel

US - NETHERLANDS' AIR RELATIONSHIP

September 1946 First Netherlands-US civil air negotiations. US does not accept Dutch route proposals. System of temporary permits allowing KLM to fly the Amsterdam-New York and the Curaçao-Miami route, and US carriers to exercise traffic rights in Amsterdam, Paramaribo and Willemstad.

1951 New negotiations for the conclusion of a bilateral air agreement fail because of restrictive attitude of US with regard to capacity regulation. The status quo is maintained.

July 27, 1955 Renewed negotiations between US and the Netherlands are postponed by the US because of public reactions against the allegedly too liberal US route grant in the US-German bilateral air agreement concluded shortly before that date.

March 27, 1956 Conclusion Treaty of Friendship between US and the Netherlands.

April 5, 1956 Finally negotiations take place in Washington, but break down on June 13, because of the US refusal to grant the main Dutch request viz. the Los Angeles route.

March 18, 1957 Exchange of letters between the Prime Minister of the Netherlands and the President of the US concerning the forthcoming US-Dutch civil air negotiations. From the answer of the President of the US: "I have instructed the US delegation for the forthcoming civil air negotiations to give the most serious consideration to the factors described in your letter".

March 19, 1957 Resumption of negotiations resulting in the conclusion of a bilateral air agreement on April 3, 1957. Although the main Dutch request i.e. for the Los Angeles route was not granted, the agreement was accepted because in an exchange of letters between the Heads of Delegation the possibility was opened to request the Los Angeles route at a future date.

September 3, 1959 After continuous soundings during 1958 and 1959 as to the opportune moment for renewed negotiations concerning the Los Angeles route, a formal request to resume the talks is made.

September 12, 1959 The President of the US is informed about the coming negotiations.

December 16-18, 1959 Technical discussions take place in preparation of renewed negotiations.

February 3, 1960 Consultations which had started on January 7, are broken off.

<table>
  <tr>
    <td>April 21, 1960</td>
    <td>State Department suggests to Embassy that resumption of negotiations be requested in May, so that renewed consultations can begin immediately after recess of Congress on July 4.</td>
  </tr>
  <tr>
    <td>May 25, 1960</td>
    <td>This suggestion is being reiterated, whereby State Department indicates that negotiations might be resumed in September.</td>
  </tr>
  <tr>
    <td>June 17, 1960</td>
    <td>Mr. Dillon states that he is willing to personally brief the President on the KLM-case.</td>
  </tr>
  <tr>
    <td>July 8, 1960</td>
    <td>Mr. Dillon informs the Chargé d'Affaires a.i. that inter-agency consultation continues and that he has not yet been able to brief the President.</td>
  </tr>
  <tr>
    <td>July 21, 1960</td>
    <td>Assistant Secretary for Economic Affairs, Mr. Mann, informs Chargé d'Affaires a.i. that President Eisenhower deems resumption of civil air consultations to be "impracticable and imprudent". The reason given for this is that the CAB permit-procedure is likely to be protracted beyond his term of office. This would imply that the President would commit his successor which he is not prepared to do.</td>
  </tr>
  <tr>
    <td>August 26, 1960</td>
    <td>Under Secretary of State confirms Mr. Mann's communication of July 21. He blames prolonged session of Congress for this development.</td>
  </tr>
  <tr>
    <td>October 8, 1960</td>
    <td>Netherlands Foreign Minister visits White House for a discussion of KLM-case. President Eisenhower promises "to put the thing back on the rails again and try to reach some satisfactory arrangement awaiting the final decision of my successor".</td>
  </tr>
  <tr>
    <td>November 9, 1960</td>
    <td>Mr. Dillon informs Dr. van Roijen that after Mr. Iuns' visit to the President, the matter had been reconsidered and that State Department was now looking forward to a resumption of consultations at the beginning of December. This new development was the result of the President's wish "to get through with it and do away with it".</td>
  </tr>
  <tr>
    <td>December 4, 1960</td>
    <td>The Dutch Ambassador is assured that things are going well but waiting for the return of Mr. Dillon from abroad.</td>
  </tr>
  <tr>
    <td>December 7, 1960</td>
    <td>Assistant Secretary for European Affairs, Mr. Kohler, informs the Ambassador that the case has again been reconsidered, this time in the light of the present balance of payments situation, which has led President Eisenhower to the conclusion that, mainly from a public relations viewpoint, negotiations cannot be resumed.</td>
  </tr>
  <tr>
    <td>December 9, 1960</td>
    <td>Mr. Dillon confirms Mr. Kohler's statement and indicates that the President's decision has been greatly influenced by the Secretary of the Treasury.</td>
  </tr>
</table>

December 13, 1960 Mr. Luns expresses his dissatisfaction to Mr. Dillon about the sudden change of the position of the U.S. administration.

January 13, 1961 The Netherlands Ambassador hands a memorandum to Mr. Martin, protesting against the refusal of the U.S. Government to deal with the Los Angeles route request.

February 10, 1961 The Netherlands Ambassador submits a request to the U.S. Government to resume the Los Angeles negotiations at the earliest convenient date.

E. H. VAN DER BEUGEL k.c.m.g.

PRESIDENT
KLM ROYAL DUTCH AIRLINES

THE HAGUE, 17th July, 1961

1. PLESMANWEG
TEL. 184860

HAG/DA/379

I shall certainly do whatever I can to assist Mr. Graubard when he comes to Holland. I understand that he will get in touch with me so that I will just await his call.

I regret very much that I did not have an opportunity to contact you during my last stay in the United States. I have been terribly busy those days with the many problems we have to face in this rather difficult period for my company. I shall be in New York in the beginning of August and I will certainly call you then.

As to the air negotiations between the Netherlands and the United States you may have heard that these have been ended without any result having been achieved. It is sure that both parties have sincerely tried to reach an understanding but the serious concessions which the U.S. desired us to make in exchange for the rights to fly to Los Angeles were really unacceptable to us. Both parties have during the negotiations given up some of their previous positions but the gap that remained at the final stage proved to be too great to breach. The basic difficulty was the interpretation of the extremely vague wording of the famous Bermuda clause in the bilateral air agreement. The U.S. were of the opinion that under this clause we had to curtail our operations to the U.S. and while we were fully willing to reach a sans prejudice practically solution the final standpoints remained too far apart. In this connection I should tell you that in the last few months air negotiations between the U.S. and about 5 or 6 other nations have ended unsuccessfully. The difficulties are best demonstrated by the fact that negotiations in which the British were involved - together with the U.S. the originators of the Bermuda clause - were also broken off on the interpretation of this clause. The position now is that not much can be done until such time that the U.S. will have reviewed its air policy.

I shall tell you more in detail about this matter when I contact you in August but I feel that you might be interested to know the present situation - on that occasion I should like to discuss with you when I should come to Harvard again.

With warmest regards,

Prof. Henry A. Kissinger,
Harvard University
6 Divinity Avenue,
CAMBRIDGE 38.
Mass.

July 25, 1961

Mr. Ernst Van Der Beugel
President, KLM
1, Plesmanweg
The Hague, The Netherlands

Dear Ernst:

I appreciate your letter of July
17th very much, and also your willingness to
see Stephen Graubard.

I have been aware of the negotiations
about landing rights. One problem is that our
government is now devoting 30 per cent of its
energy to Berlin, with an inevitable slighting
of the problems which most concern you.

I look forward to seeing you when you
come again to America.

Warm regards.

KLM - ROYAL DUTCH AIRLINES

KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V.

609 FIFTH AVENUE
NEW YORK 17, N. Y.
PLAZA 9-2400

DATE : August 3, 1961

NUMBER :

Dr. Henry A. Kissinger
104 Fletcher Road
Belmont, Massachusetts

My dear Henry:

How good it was to have such a quiet talk last night.

I am sending you herewith the President's letter to Prince Bernhard and the Prince's reply as it was put before him on his holiday in Italy. I am not 100% sure that he will sign the letter as it stands, but you might assume that the letter will be exactly as this copy.

As I personally see the situation now, the chances that we will reopen negotiations on the Los Angeles route are very remote indeed. On the other hand, I don't see how the Administration possibly could attack us on our other routes after having refused us Los Angeles, but both judgments are no more than judgments and not certainties. If you get a different impression on either point in Washington, please let me know.

I'll write you a memorandum on the Common Market situation during the course of this or next week, and I hope to be in touch with you as soon as possible.

Again, many many congratulations to Mrs. Kissinger and yourself. Do you hope that he will be a Harvard professor or not?

With warmest regards.

Enclosures: 2

P.S. Of course our American friends asked us to treat these matters very confidentially.

Dear Prince Bernhard:

It is with sincere regret that I have learned that our respective aviation delegations found it impossible to reach agreement on outstanding aviation issues in the recently concluded negotiations. I asked for a report upon the reason for the collapse of these discussions which I have just received.

It seems that the delegations reached substantial agreement with reference to the establishment of KLM service to Los Angeles. They differed only on a minor matter regarding the volume of service to Los Angeles to be operated after the first year. It was in other areas that the major differences of opinion existed.

Although the United States believes that KLM has been offering capacity considerably in excess of that justified by our interpretation of the Bilateral Agreement, we were prepared to accept substantial and continuing increases to KLM in the future. Agreement in principle appeared to have been reached on the method of determining these increases. The United States was even prepared to delete any reference to any understanding which might imply Dutch acceptance of the United States interpretation of the existing Bilateral Agreement. The United States also offered to concede to KLM the right to stop in Montreal enroute to Los Angeles. We also indicated our willingness to accept the Dutch suggestions for termination of any understanding reached. But despite all these very substantial concessions on the part of the United States negotiators, your Chairman felt that he could not accept the United States proposals.

I have recognized the sensitive nature of these issues, and I asked my personal staff to make every effort to modify our position to meet the Dutch desires. It is a source of keen regret to me that your delegation found it impossible to accept the United States position.

We expect to undertake a review of our over-all international aviation policy in the near future. It is possible that the outcome of this policy review may provide some basis upon which future negotiations could be undertaken. However, our aeronautical industry has expressed substantial concern over the levels of KLM operations to the United States; and in the absence of any understanding on capacity, they may be expected to seek an adjustment of the volume of service offered by KLM. I would hope that your negotiators would bear this in mind.

Thus, although the current negotiations have been terminated, I am still hopeful that the differences which separate us on these aviation problems will eventually be resolved. I am confident that the friendship and cooperation which have characterized Netherlands-United States relations in the past will continue in the future and will serve to dissipate temporary disagreements.

It is with great appreciation that I have received
your letter of July 14, 1961 on the failure of the air
negotiations, recently held in Washington between the
United States and Netherlands delegations and I am
particularly grateful for your personal interest in this
matter, because I am aware of the problems which must
require your continuous attention in these days.

You have given a summary of the efforts made by the
United States in order to reach an agreement and - in
turn - you will perhaps allow me to explain briefly the
reasons why the Netherlands had to decline the conditions
laid down in the last United States' proposal.

The Netherlands delegation came to Washington to
have a situation eliminated, which was felt to be
discriminatory to KLM. Various European carriers had
been granted landing rights on the U.S. Westcoast and
these were repeatedly denied to the Netherlands. We were
of the opinion that through unilateral action on the part
of the United States Government this situation would be
remedied.

The United States, however, wished to use the grant
of Los Angeles as a means to obtain agreement on certain
capacity limitations of KLM's operations to the United
States, inspired by an - also unilateral - interpretation
of the existing bilateral Agreement.

Our delegation being aware of the difficulties which
the United States Government might envisage in granting us
landing rights in Los Angeles, was at once prepared to
investigate the possibilities of a practical solution to
the capacity problem, bearing in mind that such a solution
should not prejudice the respective positions with regard
to the interpretation of the bilateral Agreement.

- 2 -

This in itself constituted a major concession on the part of the Netherlands, as in our view there was no obligation to do so. Furthermore, during the course of the negotiations, we were prepared to accept:

a. a frequency limitation on the Los Angeles route. (This route to be operated initially with two frequencies per week, without the exercise of traffic rights between Montreal and Los Angeles.) Such frequency limitation is without precedent in the United States-Europe air relationship.

b. a reduced yearly increase of KLM operations over the North Atlantic, which also would constitute a novum.

c. presentation of the statistics necessary to implement a practical solution.

The Netherlands recognize the fact that the United States agreed with the suggestion to find a practical solution and that they were prepared to make certain concessions, as you mentioned in your letter.

Nevertheless in the final United States position with regard to this solution there remained a number of conditions which our people could not accept:

1. limitations of future capacity increase on the existing KLM routes to the United States, which - already very difficult to accept as such - were specified in such a way that they offered too little possibilities for a continued sound development of KLM's operations;

2. exchange of full statistical data unrelated and superfluous to the practical solution as proposed; also an unprecedented condition. Apart from that, production of such data would give complete insight in KLM's commercial activities, which by their nature should be confidential;

3. limitation of the capacity on the routes between the Netherlands Antilles and the United States, notwithstanding the special character of these routes which furthermore fall outside the North Atlantic area;

4. imposition of limitations on all cargo and charterflights. In view of the characteristics of these flights acceptance of limitations thereon would make any agreement unworkable in practice;

5. reduction of the allowable capacity for New York and Houston by the amount initially offered to Los Angeles.

Instead of solving the problem of discrimination with regard to the Westcoast acceptance of these points would have resulted in a situation which would be discriminatory in an even more unfair and harmful way to the Netherlands interests. This would not be understood by our people.

The insistence on these points by the United States delegation was the more disappointing in the light of the major concessions to which the Netherlands delegation was prepared, notwithstanding the fact that other European carriers had been granted Westcoast rights without having to comply with similar conditions.

I fully and sincerely share your regret that the two delegations found it impossible to reach agreement. For the fourth time these negotiations have failed and the feeling of keen disappointment in this country is very strong indeed. Government, public opinion and Press simply do not understand that a matter to which we attach such an importance can not be settled in a satisfactory way. I would have hoped this time a solution could have been found and it is my impression that from our side everything possible has been done to reach agreement.

You mentioned the substantial concern of the United States aeronautical industry about the level of KLM operations to the United States. Especially in the field of civil aviation one very often sees the industry concerned trying to influence their governments to curtail competition in order to protect its own interests. In view of good relations between our two countries I trust that the policy of the United States Government will not reflect this attitude.

I want to thank you again, Mr. President, for the personal interest you have taken in this matter and for the trouble you took to write personally to me about it.

1. The decision of the U.K. to apply for a membership of the Common Market is in itself a major decision.

The third phase of the post-war relation between the U.K. and the continent of Europe has started.

The first phase consisted of the unsuccessful attempt to bring Britain in at the moment the new shape of Europe was created (Schuman-plan).

The second phase was the unsuccessful attempt to meet each other half way in the form of the free trade area.

2. In view of the scope of the British decision and in view of the major importance, for reasons of political and economic stability, that Britain enters into the Common Market everything should be done to make this third and in my opinion last attempt a success.

3. In all probability the reactions of the Six to Britain's entry will be rather different.

Holland is at one extreme. It has always desired British participation for political and economic reasons.

Belgium under the Spaak regime will be more co-operative in bringing Britain in than the last Belgian Government was, but by political and economic tradition French influence on Belgian policy is stronger than in Holland.

Italy is rather neutral, far away and very much influenced by French thinking.

Germany has two souls. There is an important group in Germany which is very close to the idea of British participation (Erhardt, Strauss) but the only voice which really counts is the voice of the chancellor. He gives absolute priority to the relation with De Gaulle, the more so as long as De Gaulle for obvious reasons follows the what the Germans consider tough line viz-à-viz the Berlin crisis.

This means that France will be the dominant factor in determining the atmosphere of the future negotiations with the Common Market.

From the political point of view France does not wish the British taking part in the venture of European integration. It views European integration primarily as a way to establish a dominant position for French policy. De Gaulle does not like integration as such, but he likes this specific form of continental cooperation

-because-

- 2 -

because on the top of the list of his political priorities is establishing an important role for France in world politics and one of the ways he tries to achieve this is the closed continental club. This is beyond any doubt proven by the insistence on political consultations between the Six, covering all the fields, including defence.

He knows very well that the entry of the U.K. into the club would mean such a shift in power that any dream of French predominance in Europe would vanish.

From the economic point of view French industry has adapted itself to being open to competition from the other European countries. It will do everything to stop additional English competition coming in.

4. If and when the British could decide just to sign the Rome treaty and have their name inserted after Luxembourg it would be rather difficult for the French to refuse them. This, however, will not be the case.

When we negotiated the Rome treaty, every country and certainly the major countries have insisted on specific provisions for their specific interests. It is obvious that the British must do the same. Their Commonwealth relations and their relations with the other countries of the smaller free trade area compel them to do so, even when they are prepared to accept the broad principles of the treaty. In the course of these complicated negotiations the French will try to use the unlimited variety of difficulties to keep the U.K. out.

In the present Europe there will not be much pressure on them to give in. The Commission in Brussels will as usual follow the French lead. The attitude of the other countries is described above.

5. This means that other influences and pressures, amongst which the U.S. in the first place, should continue to stress the importance which they attach to a reasonable and positive solution of this problem.

In view of the international situation it is also essential that the solution should be found quickly and that the British joining of the Community should become a fact as soon as possible. The U.S. therefore should persuade Britain not to try to arrange too much beforehand - most of their problems can also be solved when being a full member - and should try to convince the French that it is of the greatest political importance that the enlarged Community comes into being and starts working as soon as possible.

August 30, 1961

Mr. E. H. Van Der Beugel
KLM Royal Dutch Airlines
1, Plesmanweg
The Hague, Netherlands

Dear Ernst:

It was good as always to talk to
you the other day, and I appreciate
your sending me the material on the
Common Market. As you know, I am in
substantial agreement with you.

Do call me when you have a moment
on one of your next visits, and of
course we expect you to come back to the
Center at your convenience during the fall
or winter.

Warm regards.

Dictated by Mr. Kissinger and signed in
his absence.

E. H. VAN DER BEUGEL
PRESIDENT-DIRECTEUR
KLM

'S-GRAVENHAGE, November 9 1961
PLESMANWEG 1
TELEFOON 184860

Dear Henry,

I am ashamed that I only write you now in reply to
your letter of September 28 regarding the letter you received from
Mr A.F.G.M. van Thiel. The pressure of the work and the traveling
is no real excuse but I still use it.

I know van Thiel rather well and like him very much. He
is the most intimate friend of two of my best friends Pieter Blisse
and Joseph Luns.

I have no judgment on his ideas for which he really
lives. He has talked with me about it and I have never really
understood. I would not draw the conclusion that because I did not
understand his ideas, he is crazy. It might be that I am, because
I do not understand them. That is how I feel about it. I must
admit that the letter he wrote to you is not one of the most
comprehensible documents I have seen.

How very much I should like to see you again. I shall
let you know when there is a possibility.

With kind regards

Prof Dr Henry 'A. Kissinger
Harvard University
Center for International Affairs
6 Divinity Avenue
CAMBRIDGE 38
Massachusetts