The Commission is overburdened. It has no definite standards to go by. It is lost in this jungle of freight rates which has little logic to justify it except that it just grew that way.

Now, suppose the water lines are regulated by the Commission under present conditions. What can the Commission do to regulate water rates except to use the rail rates as a guide?

The purpose of this proposed regulation, if it is adopted, is to raise the rates of the water lines so they will not compete too strongly with the railroads. That means you would force on the water carriers a rate structure based on what the railroads charge and which bears no relation to the water lines' costs or the conditions of water transportation.

We have had some experience with the Interstate Commerce Commission regulation of inland water rates and coastal water rates. So far as they are joint with the railroads, they have been under the Interstate Commerce Commission's regulation since 1920 or even before that. Since that time the Commission has undertaken to fix numerous joint rates. They have invariably done so by making them a percentage relationship of the existing rail rates and the relationships have varied from 80 to 95 percent of the rail rates without regard to the cost of water transportation or the savings which have resulted from water transportation.

The Commission may in time as it gets more information modify its practices which have prevailed up to this time. There is an investigation before it now which has been going on since 1923I believe I mentioned it yesterday--on the question of what differentials if any should be maintained on the rail and barge routes in the interior. That case may be settled within the next 2 years, and if so, we will then know whether the Commission will depart from its uniform practice of the past to make such joint rates slightly under the water rates, with the idea apparently that the water lines should have some traffic, but not too much; that the traffic should be required to bear such rates that both rail and water lines would get a share of it. A theory by the way, which is very difficult of enforcement.

Water costs and water services are so entirely different from rail costs and rail services; water craft are so different; the elements of the costs are so different; there are so many kinds of water craftanybody can go on our waters with any kind of a boat and do business under our national policy today.

Now, that kind of traffic does not lend itself to any kind of rigid, uniform, rate regulation and as I have said, there is no public need for it and the only effect of it will be to raise transportation costs that the public pays.

There is a further objection to regulating port-to-port rates of the inland water carriers. The proposals are to regulate only the common carriers, and those only on inland waterways. Well, the common carrier is a small part of the inland-waterway transportation, but it is the part we hope will have the greatest effect in distributing the benefits of inland waterways into the interior, by joint rates, with the railroads, with the truck lines, and with the pipe lines.

These common carriers and the traffic that they handle, enter into competition, with the private carriers, and the contract carrier, and

the water carriers on the rivers and on the Great Lakes, and coastal and intercoastal, all of them, compete. All of that commerce is competitive.

Now, how can you impose rigid, artificial regulation on a common carrier by water and expect it to compete with the unregulated private carrier? How could a common carrier on the river under such regulation survive against competition of common, contract, and private carriers on the lakes and coasts not so regulated?

SUBSIDIES

There was some mention made of subsidies which are alleged to be paid to these water carriers, which enables them to cut under the railroad rates and destroy the railroad investment and railroad com

merce.

The railroads come to you and say that because of those subsidies, regulate the river carriers, but let the lake carriers and the ocean carriers alone.

They have given you some figures as to the millions of dollars that the Government has spent for waterways, channels, and so forth. I have before me the figures as to the expenditures up to June 30, 1936, on the various systems of waterways in the country. The total for the Mississippi River system, and that includes all of the tributaries, was $693,000,000.

Intercoastal canals and other coastal waterways of that character, $148,000,000.

For lake harbors and channels, $237,000,000.

For seacoast harbors and channels, $721,000,000.

That, with some miscellaneous items, comprises the total investment, approximately $2,000,000,000, in waterway facilities up to that time.

Note that the investment in the seacoast harbors and channels and in the lake harbors and channels, which the railroads do not complain of, which they ask be kept free from regulation and free from tolls, amount to a billion of that $2,000,000,000, and the investment in the Mississippi River system amounts to approximately $700,000,000.

Why, may I ask, should the river system alone pay tolls? Why should the river carriers alone and the common carriers only be subject to interstate-commerce regulations?

The Government investment in rivers as in harbors and channels along the coast and Great Lakes was for one purpose only, and that was to reduce the transportation cost of the people of the country.

Now, we are faced with a proposal after the people have spent that money to lower their transportation costs in order that their commerce may move more freely that this commerce shall be taxed, shall pay tolls, so that this investment cannot be used for the benefit of the people.

It amounts to charging the people of this country twice, or maybe many times, for their waterways-first for the initial investment and then in the form of tolls, presumably permanently, they shall pay for them over and over again.

The people cannot pay for them that way. The commerce will not move if regulated and restricted and taxed on the waterways. If we are going to get the benefit of the waterways of this country, we must let the commerce move on the waterways, and let the commerce move on the waterways at the lowest rates the water carriers can afford to charge. Regulation would defeat that purpose. It would not help it. I want to mention briefly some specific provisions of the Lea bill and also of the railroad bill, of which I have here a committee print.

THE LEA BILL

Railroad consolidations-Land-grant rates

Taking first the Lea bill, there are two sections which we can endorse in accordance with the principles adopted by the Mississippi Valley Association which I read to you yesterday. I refer to the provisions of part II of the Lea bill, section 12, dealing with the consolidation of railroads. We favor the elimination of the compulsory consolidation plan. We favor giving the railroads a chance to consolidate, if they will, voluntarily.

As to the provisions in title V, land grant repeal, we endorse that as a measure which would help the railroads a little bit. Let the Government pay commercial rates, even though the railroads did get a lot of land and a lot of donations, for which they would now use the hated term "subsidy."

DISCRIMINATORY REGULATION OF RIVER CARRIERS

We object to the provisions in the Lea bill for the regulation of common carriers by water.

Note that section 21, pages 8 and 9 makes the provisions applicable only to common carriers on the rivers and not common carriers using the high seas, or the Great Lakes.

That, we submit, is a discrimination against the inland waterways commerce which the inland commerce cannot and should not stand. Referring to sections 24 to 32, inclusive, the provisions with reference to the authority of the Commission over transportation facilities and the traffic, the rates, maximum and minimum of water carriers, requiring certificates of public convenience and necessity before carriers can operate on the inland waterways-all of those are by their terms, restricted to common carriers and to the common carriers on the rivers only, not the carriers operating coastwise, intecoastal, or on the Great Lakes.

I shall make this exception that certain coastwise carriers operating on the inland sounds, and so forth, that is to say, not on the high seas, would be regulated, but they are an unimportant part of the whole. Of course they are important to the communities they serve. Section 41, part IV, deals with coordinations, minimum rates. Again that is objectionable as we see it, because it applies to common carriers only.

As to title II, the Transportation Administrator, our association has taken no position.

That is true also with regard to title III and title IV dealing with railroad reorganization amendments to the Reconstruction Finance Corporation Act.

RAILROAD BILL POLICY

That briefly states our position on the Lea bill.

Turning now to the railroad bill: Section 1, declaration of policy. Note that there is carefully omitted from the declaration of policy anything with reference to the effect of rates on the movement of commerce; anything with reference to traffic moving at the lowest cost consistent with the furnishing of the service.

We believe that is a most important omission.

SCOPE, EXEMPTION OF LAKE BULK CARRIERS

Section 2 dealing with scope and application.

Paragraph (5) in this section, which provides that the act shall not apply to interstate contract carriers by water, which by reason of the inherent nature of the commodities transported, requirement of special equipment, shipment in bulk, is not actually and substantially competitive with transportation of interstate commerce, we believe that is intended to carry out the railroads' suggestion that bulk freight carried on the Great Lakes shall not be regulated.

Bulk freight carried on the Great Lakes is just as much competitive with the common carriers on the rivers, and common carriers by rail, as bulk commerce on the rivers is competitive.

On the Ohio River, on the Mississippi, the Missouri, and the Illinois the great part of the tonnage today consists of transportation of such bulk commodities as coal, grain, and steel.

The railroads propose to regulate all of that and leave similar commerce on the Great Lakes free of regulation, which would, of course, destroy the movement of bulk freight on the rivers.

FILING TARIFFS

Section 7 provides for the filing of tariffs by commercial carriers and would apply the present elaborate set-up which the Interstate Commerce Commission imposes on the railroads on every common carrier by water and would greatly increase the water carriers' operating costs.

There is, you will notice in this part of the bill, no section corresponding to section 4 of the present Interstate Commerce Act. In other words, the railroads wish to be free to charge lower rates for long-distant transportation which they consider competitive and higher rates at the intermediate points which they consider noncompetitive.

I stated, I think, in sufficient detail our objections to that practice yesterday.

COMMODITIES CLAUSE

Section 12, commodities clause, would require after January 1, 1941, that every carrier-that means every water carrier, I presumeshall not transport products in which its owner is interested.

There is no public demand for any such prohibition as that so far as water carriers are concerned. Many of our most useful water carriers, inland, coastwise, and Great Lakes, are carriers which haul some freight for their owners and some freight for the public for hire. By so doing they reduce their costs. They reduce the cost of transportation to the public; they injure no one. We see no object whatever in prohibiting this useful practice.

RIGHT TO RECOVER DAMAGES LIMITATIONS OF ACTION

Section 20 and section 22 deals with damages and with limitations of actions and would appear to limit the rights of the public to recover damages for unreasonable rail rates to cases where actual pecuniary injury is proven. That would make it practically impossible for anybody to recover damages for unreasonable rates. It is hard enough, I may say, to persuade the Interstate Commerce Commission to award reparations for unreasonable rates now.

There should be some provision whereby the public, if it has paid exorbitant, extortionate rates, would have some right of recovery similar to the provisions of the present act. If a limitation of 90 days or 6 months is fixed on the right of recovery, it will not only prevent people who do not act within that period from maintaining an action for recovery of damages to which they are entitled, even the recovery of overcharges, but it would be a most prolific source of discrimination if a railroad for one reason or another delayed for 90 days or 6 months the collection of its tariff charges from some shippers and collected those charges from others.

THROUGH ROUTES AND JOINT RATES; DIVISIONS

With reference to section 27, the rule with reference to through routes and joint rates and divisions, there is one provision which I think is particularly objectionable. Paragraph (2) states that in the establishment of joint routes that no railroad should be required without its consent to embrace in such routes substantially less than the entire length of its road.

The Interstate Commerce Commission has pointed out how difficult it is to apply that rule to through routes and joint rates, and if the rule were applied to joint rates between rail and other modes of transportation that would mean no such joint rates could be established that did not embrace substantially the whole length of the railroad, and that is obviously impossible in many cases.

RATE-MAKING RULE

Section 30, the rate-making rule is, I think, one of the most iniquitous perhaps of anything in the bill. It provides, in effect, that if the railroads are not earning enough to maintain their credit and obtain needed money for their properties from investors, the Interstate Commerce Commission would have nothing to say if they chose to raise rate levels to any point that they considered necessary. It would practically take the ceiling off of general rate increases. Combined with the absence of any long-and-short-haul rule, which is the other most conspicuous feature of this proposed bill, it would mean that on the commerce which the railroads consider competitive they could cut rates to the bone; they could go just as low as they saw fit, down to what they call their out-of-pocket costs, which when translated means anything in the way of revenue is considered by them