Mr. CHILDE. The River Rhine is a river requiring a great amount of maintenance work.

Mr. HINSHAW. I do not know anything about it.

Mr. CHILDE. I judged you did not, because the River Rhine like every other river requires expenditures for maintaining channels. In fact, the River Rhine is so swift in spots that they have to have a sort of a cable arrangmeent, chains, to pull the boats up against the

current.

Mr. HINSHAW. I withdraw the River Rhine as a horrible example. Mr. CHILDE. I am glad that you mentioned it, because it emphasizes the point that no river, no harbor, no ocean channel, with the exceptions of the Suez and the Panama Canal, have attempted to exact a charge from the water carriers for their use.

On the contrary, water transportation has always been considered desirable from the standpoint of its low cost and its low cost only, and the governmental policy in the United States and in the world generally has been to make the cost of water transportation as low as possible, even to the extent of subsidizing ships. They do not stop at the so-called subsidy of building channels and harbors but the whole tendency is to make the cost as low as possible, and it is a good policy, in my opinion.

Mr. HINSHAW. Is not the subsidizing of ships largely a matter of national defense in connection with the merchant-marine policy?

Mr. CHILDE. A part of it, naturally, and for the national commerce quite as much.

Mr. HINSHAW. In connection with the merchant marine?

Mr. CHILDE. Yes. But I think you are trying to draw a parallel here between railroad rights-of-way and water rights-of-way, and I am trying to show you the difference between them.

Mr. HINSHAW. Yes.

BENEFITS TO INTERIOR SHIPPERS FROM USE OF JOINT RAIL-WATER RATES

Mr. MARTIN. I would like to ask one question on joint rail and water rates. How would such rates help Colorado and Utah and Wyoming, and such States as that to get to Chicago and San Francisco?

Mr. HINSHAW. And to California.

Mr. MARTIN. You are on the coast. I wanted to know how these midland States having no population or industries, or anything right now, how joint rail and water rates would help them get into these big markets, such as Chicago and San Francisco?

Mr. CHILDE. Well, Mr. Martin, you have grain and you have sugar out in Colorado.

Mr. MARTIN. Yes.

Mr. CHILDE. Both of which want to go to Chicago.
Mr. MARTIN. Yes.

Mr. CHILDE. With joint rail and water rates, you could move your sugar from Colorado to Chicago at lower rates than by rail.

Mr. MARTIN. But it has to go by rail and will have to be loaded on the boat.

Mr. CHILDE. Exactly.

Mr. MARTIN. At the river and go the rest of the way by boat.

Mr. CHILDE. And, if you ship by rail to the Missouri River and by boat from there to Chicago or Cincinnati, or Pittsburgh, if you please, you will get a rate which is profitable for the railroads, in that it would give the railroads substantially profitable earnings for their part of the haul, and it would be profitable for the barge line, and would still be one-third lower than the railroad can afford to haul it all of the way.

The people out in the producing areas want to get to Chicago and the Ohio River territory and as far east as they can go because that is where the people are that consume grain and sugar.

Joint rail and water rates will give them that very thing with profit to the carriers.

Your grain producers will save 5 to 10 cents a bushel by using the joint rail and water rates as compared with all rail.

Mr. MARTIN. How would it help the Colorado Fuel & Iron Co. at Pueblo to get into Houston?

Mr. CHILDE. It would not help them get into Houston. I think you have in mind Houston as a place that was talked about in connection with the fourth-section proceedings.

Mr. MARTIN. Exactly; and Chicago is another place we were talking about, and San Francisco was another place, and Los Angeles was another.

Mr. CHILDE. That is right.

Mr. MARTIN. And I cannot see where water will let us get into any of them.

Mr. CHILDE. Water would not help Colorado products to go to Houston or San Francisco, but water would help to get people around Denver in this area of no population which will provide more customers for your steel manufacturers, as well as your sugar producers, and your farmers.

The thing works both ways.

LONG-AND-SHORT-HAUL RAIL RATES, AND THEIR EFFECT

Mr. MARTIN. Now, you have a graphic and a wonderful showing there on that relief map, and in subsequent explanations you have shown the tremendous congestion of population and industry and business and wealth, on the coasts, and on the navigable waters.

You have shown nearly all of the wealth of the country and perhaps four-fifths of the population were congested in those localities; but the railways of the country must depend on those localities both for the origin and destination of the great bulk of their traffic and the consideration in the hearings on the Pettengill bill that won me over to the repeal of the long-and-short-haul clause were that they could not compete with the low water rates at those places. The low water rates are there regardless of the railroads, and the congestion of population, business, and industry, are there, and they cannot make rates to meet that situation.

Now, let me give you another illustration. You have mentioned sugar and steel. The Colorado Fuel & Iron Co. at Pueblo built a steel warehouse at Houston and filed an application under section 4 for relief from the long-and-short-haul clause, which about 2 years afterward was denied and they had to abandon it, close it and recede

clear back up to Fort Worth before they got beyond the reach of the cheap water rates at Houston.

Now, I was advised about a month ago by a representative of the company that they have gotten some relief; that they have gotten back into Houston on some basis.

Now, you take sugar. They tried to get into Chicago against the cheap water rates around from San Francisco through the canal, up the Mississippi River, and they got a reduction from around 50 cents to 35 cents a hundred on sugar from Colorado into Chicago; but in the rate war the sugar rates from the west coast to St. Louis were depressed to 19 cents a hundred and the railroads could not haul it down there for less than twice that.

The representatives of the sugar companies have told me that if they could have gotten 4 cents less than they did get into Chicago they could have done a vast amount more business.

It is true that we have not a heavy population in those Midland States, but this is what we have got: we have production in excess of consumption in everything we produce, whether steel, sugar, cattle, minerals, coal, or what not. We are an excess production area which must find outside markets.

The steel cannot reach San Francisco against water rates from Pueblo, and that is the general situation, and my idea was, or became, after listening to testimony for a month, that if the railroads could get rid of the restriction of the long-and-short-haul clause and reduce their distance rates, their through rates, to more nearly approximating water rates, they could get a proportionately larger share of the traffic and expand our market zone. They are absolutely penned in, hedged in, by high rail rates from those Midland States to the coast where the population lives.

Mr. CHILDE. I think I understand your motive and your desires, which are very commendable; but the trouble is you did not have a chance to hear enough of the other side of that picture. Perhaps I can answer you very briefly by taking the illustrations you have just given.

It is true that the Colorado people say they would like to ship steel out here to San Francisco, some 1,400 miles away, and they would like to ship to Houston, which is 1,000 miles away, but where cheap water transportation makes competition very stiff. The water rates to Houston and San Francisco are much lower than any railroad rate can possibly be to those points with any profit to the railroads.

Mr. MARTIN. Surely. You said awhile ago that every nation furnished a free highway to the boats. The Government furnishes free harbors and terminal facilities. All a man needs is a boat and he is in the water-transportation business. All he needs is a bus or a truck and he is in the motor-transportation business. Everything else is furnished him free by the Federal Government.

Mr. CHILDE. That is right; and it makes for low-cost water transportation, but the remedy which I think you have in mind, which the railroads propose, is to make the cost of water transportation high, and then they say everything would be all right.

Well, we think it would be all wrong because you cannot encourage commerce by making rates high. You have got to have low rates if you are going to have commerce, and that is true as to domestic and

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it is true as to foreign commerce. Regardless of that, here is a thing which I think, Congressman, perhaps you have not considered as much as I would like to have you consider it:

If your steel people, instead of having 5 people to the square mile within a thousand-mile area around them, had 10 people to the square mile, or 40 or 50 people to the square mile, they would have markets nearby which the water carriers could not take away from them, for a great deal more than their present output.

Now, you talk about San Francisco. The rate by water through the Panama Canal from the Atlantic seaboard to the Pacific coast is about half what your railroads can afford to haul steel for from Pueblo to San Francisco.

The railroads say, "If we had a rate of 40 or 50 cents, maybe we could get some business out there." Well, they could get mighty little because the water lines must have steel business west-bound; it is the backbone of their traffic. If the railroads reduced rates on steel from Colorado to San Francisco and Los Angeles low enough to take any appreciable business away from the water lines, they would cut their rates. They would have to have it or go out of business. They have hauled steel in the past, and they can haul again, if necessary, for a time at least, for about 20, 25, or 30 cents a hundred pounds.

Now, that is going to keep your Colorado steel largely out of the Pacific ports, no matter what the railroads do about it-the same way with Houston. You say your people want to get down to Houston from Colorado. A 42-cent rate is what they asked for. The Interstate Commerce Commission had a hearing on it and decided that they would let them have a rate of 50 cents per hundred pounds; that has since been raised by the railroads to 55.

Well, the Colorado people never will get much steel at Houston on any kind of a rate that the railroads ever establish there because here is Birmingham [indicating on map], with steel going right down to the Gulf by water and thence by water to Houston. Here is the Atlantic coast steel and, if you please, here is foreign steel, all available at very low rates, and your Colorado plant never can get into that territory to any great extent. Moreover, if the railroads, by cutting rates with fourth-section relief made the rates still lower to the seacoast cities, why, that means the coastal areas would have that much more commercial advantage over the interior, and make it that much more difficult for anybody in the interior to do business against the coast.

Now, let us look at this other alternative. Your Pueblo steel plant wanted to get to Houston for 42 cents a hundred pounds, and it wanted fourth section-relief to do it. Why? Because the rate to Fort Worth that you speak of, which is 250 miles in the interior away from water, is 77 cents a hundred pounds.

Now, Congressman, what sense is there in maintaining a rate on steel from Pueblo to Fort Worth of 77 cents a hundred pounds, which is twice as much as the railroads need to earn a good profit? Fort Worth in the interior can never be a steel center for distribution or fabrication or manufacturing if they pay 77 cents for steel when Houston pays 30 cents, or 40 cents or maybe 25 cents; but if the railroads, as they can well afford to do, would make a rate to Fort Worth of 42 cents, or less, they would make money at it. Forth Worth could become a steel-manufacturing center. People would go there and there would be jobs there, and a demand for articles produced at Fort Worth. The same thing would be true of Oklahoma City and Tulsa and on the Missouri River, and at Salt Lake.

Why in the world do your railroads want to charge 55 cents a hundred pounds for hauling steel 400 miles, or maybe it is 500, from Pueblo to Salt Lake City. The Salt Lake City man cannot pay that rate and compete with San Francisco, but if your railroad would charge a rate of 30 or 40 cents per hundred pounds from Pueblo to Salt Lake, and your steel mill would base its price accordingly, Salt Lake could compete with San Francisco in a large area and the railroads would make money, and there would be people in the interior and you would not have to ship 1,500 miles to get some steel business. The trouble with your fourth-section theory-pardon me, I do not think it is yours. It is the railroads? The trouble with the fourthsection theory (low rates for the long hauls, high rates for the short hauls) is that it drives people to the coast. It forces interior industry to the coast and it will not permit people to build up industry in the interior, because they cannot compete.

Mr. MARTIN. Naturally the transportation facilities are already at the coast. The population is there. It would be the same if there were not any railroads. If it were not for the railroads there would be nobody in that inland country. They would all be at the coast.

Mr. CHILDE. That is true, and if the railroads quit trying to ship their stuff thousands of miles to the coast and allow the interior to develop markets and traffic in the interior where they do not have water to compete against, they will get somewhere and the country will get somewhere.

Mr. PATRICK. That demands a specific rate-making stand by Congress?

Mr. CHILDE. Yes; I think it would, or else the railroads will have to voluntarily see a great light or else the Interstate Commerce Commission, which has the power now to fix the interior rates on a reasonable level with relation to the coast will act accordingly.

Mr. MARTIN. Let me ask you a question.

I suppose that it is up to the railroad people for the answer to that Fort Worth-Houston figure or illustration you gave.

I suppose it would fall somewhat under the same theory that the International Harvester Co. sells farm machinery in South Africa and Australia cheaper than it does in Illinois; that seems to apply very generally, but

Mr. CHILDE (interposing). The whole thing works out this way. The man in the interior is soaked on freight rates; is soaked on prices, and therefore your population and your manufacturing disappears and your railroads go broke.

Mr. MARTIN. I want to admit that the rails cannot go down to water rates, but they might be able to go down to them if the water carriers required any capital structure or investment to conduct or carry on water transportation.

You take these figures here which Dr. Splawn, of the Interstate Commerce Commission, put in when he was before us.

The rail investment is $24,000,000,000; water lines, $3,800,000,000. In other words, the water lines' investment is only about 15 percent of the rail investment, yet it can undersell and drive out of the ports