Two high transportation officials from the Carter administration clashed yesterday over the wisdom of the former administration's policy favoring competition in international aviation.

Alfred E. Kahn, former chairman of the Civil Aeronautics Board, told a House public works and transportation subcommittee that travelers and the new airlines offering lower fares that have come into the market would be the losers if the nation abandoned its competitive policy.

"We have the most dynamic, aggressive, low-cost airline industry in the world; the way to keep it so is to retain competition." he said.

In contrast, Brock Adams, former Secretary of Transportation, argued that U.S. airlines are losing money and market share as a result of the policy, under which bilateral agreements were negotiated with some countries to allow greater pricing freedom and freer access to routes. "The use of bilateral agreements . . . has been a disaster," Adams said. "The only successful new U.S. carriers have been those engaged in limited point-to-point service."

Kahn disagreed. He said losses of the U.S. airlines in many cases could be attributed to other factors, including bad management, domestic routes, rising fuel prices and the recession. Besides Air Florida, one of the beneficiaries of the pro-competitive policy, Kahn noted that Trans World Airlines also had an operating profit on its North Atlantic services.

"It is the public that comes first, not the profits of the incumbent carriers who, like any other businesses, would of course be happy to be protected from competition," Kahn said.

The clash before Congress continued a battle between the two that had been fought during the Carter administration and more recently in print; during his testimony, for instance, Kahn criticized Adams for what he called a "rather silly" article that had been published in The Washington Post. The article appeared on The Post op-ed page on Nov. 19 and took exception to an earlier op-ed piece by Kahn on Nov. 5.

Now a lawyer whose clients include TWA, Adams said that United States should allow U.S. airlines to participate in International Air Transport Association conferences that set rates for flights across the North Atlantic.

"I do not believe the U.S can . . . establish a competitive worldwide air carrier system by prohibiting its carriers from participating in world conferences attended by over 90 percent of the rest of the world's air carriers," Adams said.

Kahn said that statistics show the U.S. airlines have done better and increased their market share on the routes on which more competition has been allowed. Allowing U.S. airlines to participate in the cartel's activities would mean higher prices, since most countries whose carriers participate in IATA adopt the cartel's pricing decisions. He also rejected Adams' contentions that privately owned U.S. carriers were competitively disadvantaged when competing with subsidized carriers of other countries. Kahn said the competitive pressure was coming from the newer, low-cost U.S. airlines on the routes.

Kahn also said there has been increasing pressure within Europe for more competition, pressure that can be attributed to the attention the benefits the U.S. pro-competitive policy has spawned. "It would be supremely ironic, if it were not also sad, if the Europeans, who are trying to emulate American policies and are increasingly excited about the prospects of giving their citizens the benefits of competition, were to find themselves passing us flying off in the opposite direction," he said.