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would be allowed to the water carriers engaged in domestic commerce who are the competitors of the railroads,
We think that the position taken by the shipping interests is directly contrary to that. In effect, the principal proposition which they have expounded before this committee has been the allocation of a part of the capital cost to national defense. We think that is wrong in principle. Furthermore, the soundness of the position we have taken on it has been backed up by the position taken by the Bureau of the Budget and also the view of the last previous impartial tribunal, or committee, that studied this matter. That was a special committee of three persons appointed by President Roosevelt in 1936. I think that that committee consisted of Mr. Emory Johnson as chairman and Mr. Rock and Mr. Weaver. They unanimously held to the view there should be no allocation of a part of the capital investment to national defense.
We think that is sound, and that principle is adopted in H. R. 8677. We want to endorse that 100 percent.
The way that it works out under the theory of H. R. 8677 is that the total cost of the investment, excluding any special features which might be designated as included especially for defense purposes, will be considered as the base on which interest is to be charged and which is to be paid for through tolls.
Now, the military value is recognized just as the commercial value is recognized if, as the Bureau of the Budget recommended, and if, as this bill proposes, a credit allowance is made for transiting of Government vessels through the Canal.
Under the present law and the present policies of the Canal administration, no credit allowance is made for the movement of Government vessels through the Canal. We think that under present conditions it would be reasonable to make such an allowance. That puts the division of the interest charge and of all other expenses on a user basis. We know of no fairer way to divide the cost of an activity such as this, which is admittedly of great value both to the commerce of the United States—in fact, the commerce of the worldand the national defense.
We do not try to run down the national defense value of the Panama Canal, by any means. We recognize it has both purposes. We agree with the Bureau of the Budget that it is a fruitless undertaking to try to determine which is the sole or primary purpose for constructing the Canal. You can find any number of quotations pointing either way, depending upon the particular angle from which the problem was being considered at the time-whether emphasis was being laid on the commercial value or whether on the defense value.
However, it is recognized that it is a dual-purpose canal. What fairer way can you determine the relative value for these different purposes than through letting each user meet the cost in the proportion of the use to which he puts the facility?
That is what the Bureau of the Budget recommended, and that is what this bill does.
That was the fundamental point attacked by the shipping interests in their appearances before this committee. We hope the committee will recognize that the Budget Bureau's position on this is sound.
you heard testimony just this morning, that is also the view of the Department of Defense as well as the view of the Secretary of the
I think it should be borne in mind very strongly that if you were to allocate 50 percent of the investment in the Canal to national defense, as suggested by the National Federation of American Shipping, you would be conferring a very definite subsidy, $5,000,000 or $6,000,000 annually on shipping, and not alone on domestic shipping. It would be conferred in major part on foreign vessels. Even if you should think the American merchant marine needed some aid, certainly you should not choose a means that would give a major part of the subsidy to foreign users. I think that expresses our view on the fundamental points that we want to stress before this committee.
We favor the bill and the principle established, that there should be no allocation of the capital investment between national defense and commercial users, and we also go along with the proposal of having a credit allowed against the tolls for the transiting of Government vessels. That tends to reduce the tolls on commercial vessels below what they would be under the present policies of the administration of the Panama Canal. However, we think that is fair under presentda y conditions.
Recognize how this will work, in wartime when the use of the Canal is principally by Government vessels, war vessels, or commercial vessels taken over and operated by the Government, they would be paying the major part of the cost and the commercial users would be paying only a minor part. That would be as it should be because at that time the Government vessels would be making the major use of the Canal, but in peacetime the situation would be reversed.
Commercial users would be making the principal use of the Canal and the military use would be very much smaller. In that situation why should not the commercial users pay the principal part of the cost and the military only the amount attributable to their use? We think that is eminently fair, sound, and should be adopted by this committee.
I would just like to say this one other thing: Since the war the rates at the Suez Canal have been raised and they have reached the point of $1.60 a ton. After the devaluation of the pound, the rate dropped to where for American users it amounts to, I think, approximately $1.20 per ton. But costs have gone up there, and they felt it necessary to increase the tolls, and that is sound as a business proposition.
The Suez Canal is just as much a life line of the British Empire as the Panama Canal is of the United States, but that fact does not in any way, shape, or form alter the soundness of making this great international public utility self-supporting. We think that should be done and there should not be created through a division of the capital investment a subsidy, principally for foreign, and to some extent, domestic
That, Mr. Chairman, is all I will say at this time. I am subject to questioning, of course, by the committee, and I would be very happy to answer any questions.
Mr. O'TOOLE. During the last few days there has been much discussion on the part of witnesses as to whether the Canal is a military project, a defense project, or a commercial one. There has also been testimony, such as your own, that it is almost impossible to determine
If we were to go back to the record of the House to such time as President Theodore Roosevelt sent his message to the Congress with the suggestion that the Canal be built, and read the record of that time, does the witness think he could tell for what purpose the Canal was built?
Mr. PRINCE. It would take a better man than I.
Mr. O'TOOLE. There must have been a primary intent expressed at the time as to whether it was commercial or defense.
Mr. PRINCE. I do not think, with all due respect, that you would find such an answer.
President Theodore Roosevelt, in one of his messages to Congress and this is not the particular quotation that I have in mind-says: :
For 400 years, ever since shortly after the discovery of this hemisphere, the canal across the isthmus has been planned.
Certainly that was long before it was thought of just as a defense proposition.
For two score years it has been worked at. When made it is to last for the ages. It is to alter the geography of the continent and the trade routes of the world.
Certainly in that particular statement he was thinking of it more from the standpoint of trade than of national defense.
Mr. O'TOOLE. As I recall it, the greatest agitation for the construction of the Canal was caused by the conditions during the SpanishAmerican War when it was felt necessary to protect one of our new battleships, the one that had to be brought all the way around the Horn.
Mr. PRINCE. That may have given some impetus to it.
Mr. O'TOOLE. The principal motivating force at that time was the question of fear.
Mr. Prince. That, perhaps, gave some impetus to it, Mr. Chairman, but that by no means indicates the primary purpose of it.
A full and complete study of that subject was made by a committee of three appointed by President Franklin Roosevelt in 1936, and their conclusions are stated in this language—and they studied all the background of it. It was an impartial committee of three appointed by President Roosevelt pursuant to an act of Congress.
Mr. O'TOOLE. If there is no national existence, there is no commerce. Commerce is just the fruit of the existence of civilization and civilization cannot exist unless we are secure.
Mr. PRINCE. That is true. But I think that does not really get to the heart of this question. The railroads, for instance, are certainly recognized by all the military authorities as having been a vital part of our national defense during the last war. Without railroads we would not have been able to win the war. They are absolutely an essential part of our defense, but that does not mean that you should allocate half of our fixed charges to national defense. That is not the way we look at this.
Let me read to you what the special committee had to say with respect to this point in its report submitted to President Roosevelt in 1937:
The study and investigation that the committee was required to make include the tolls that should be charged for the use of the Panama Canal. A recommendation as to the tolls or revenues that should be derived from the Canal must be determined, first of all, by giving due weight to the purposes for which the Canal was constructed and is being operated and administered.
The major purpose of the Panama Canal is to provide American and foreign shipping and commerce with a much needed facility. It removes the barrier that restricted the commercial intercourse of the countries and ports of the Atlantic and Pacific. The Canal Zone concession was obtained, the Canal has been constructed, the Canal is being operated, and the activities incident to the operation of the Canal are being carried on in order, primarily, that the Canal may render a commercial service.
The cost of constructing and the expense of maintaining and administering the Canal are obligations that have been assumed primarily to provide a commercial facility. The capital and current expenses thus incurred may properly be borne by the shipping that is aided. (Pp. 14–15.)
I would like also to read to you this very brief statement from the separate report by Mr. Weaver, a member of the special committee which made its report in 1937. I am reading from page 141 of the report:
The Panama Canal was initiated, designed, and constructed for commercial purposes.
full and fair consideration of the nature and purpose of the Panama Canal project, as well as the manner of its use in the 22 years that it has been opened for traffic, will answer the question so often raised as to whether the cost of the Canal, or any part of it, was for military purposes.
Then, after discussing some of the evidence bearing on the question, he reached the following conclusion:
The evidence hereinbefore set forth, as well as other subject matter reviewed as to the purpose and nature of the Canal project, unquestionably leads to the conclusion that the Canal was conceived, constructed, and operated as a commercial project, with the single exception of the additional cost of $9,588,750 for widening the locks at the instance of the General Board of the Navy, and therefore is strictly a national defense item. There is no evidence that any other item for the purpose of national defense is a part of the present capitalization.
That committee concluded that it was principally a commercial project, but I say our position is not to minimize in any way the defense importance of the Canal. We are not trying to run that down. We recognize it is vital and important from the standpoint of national defense.
We know of no fairer way to divide the cost of it than on a user basis. I think it is unquestionable that the Canal would have been built for commercial purposes alone. If we had a system under which there would never be even the threat of another war, we would still have the Panama Canal and the commercial users would pay all the costs of it.
Since it does have a definite military value, divide the costs of the Canal in the proportion in which it is used for the various purposes it serves. That is what the Bureau of the Budget found was sound. The Secretary of the Army and the Secretary of Defense endorsed that view. That is what this bill would put into effect. We think that principle should be adhered to.
Mr. WEICHEL. Referring to the Suez Canal, it is primarily commercial but is used by the British in time of war. Is there any essential difference between the two? The Suez Canal is used by all nations and everybody pays the same rate. At the Panama Canal everybody pays the same rate. The ships of war pay for the use of the Suez Canal, do they not, or do you know?
Mr. PRINCE. I am afraid that I cannot answer that question. I do not know.
Mr. WEICHEL. What did you say the rate at the Suez Canal was?
Mr. PRINCE. I said the rate went up to $1.60 per ton, and after the devaluation of the pound it amounted to about $1.20 per ton for American users.
Mr. WEICHEL. With reference to the Panama Canal, what is the rate per ton there?
Mr. PRINCE. Ninety cents per ton.
Mr. WEICHEL. So it is still cheaper than the world-wide trade route through the Suez Canal by 30 cents per ton.
Mr. PRINCE. Very definitely.
Mr. WEICHEL. And with reference to the President's proposed increase, how much is that?
Mr. PRINCE. Only 10 cents, but bear in mind the present law contains a ceiling of $i. That is the maximum to which he can raise it under the law.
Mr. WEICHEL. So that is the ceiling. Under the existing law, Government ships pay nothing to go through the Canal.
Mr. PRINCE. That is correct.
Mr. WEICHEL. I mean ships of war, Government ships, commercial ships for Government use?
Mr. PRINCE. That is correct.
Mr. WEICHEL. During the war all the cargo-carrying ships of the United States were under control of the Government. The Government either owned them outright or they were chartered. They were all operated for and on behalf of the Government, so all the shipping that went through the Canal during the war period was free.
Mr. PRINCE. That is my understanding. Perhaps you should have confirmation.
Mr. WEICHEL. During the war there was no commercial shipping under the American flag, so whatever commercial shipping there was was by foreign flags, and they had to pay, I assume.
Mr. PRINCE. Yes.
Mr. WEICHEL. With reference to this payment for use, is it the idea that ships owned by the Government, warships, transports, or any commercial ship chartered and operated by the Government, shall pay the same price per ton as the so-called commercial shipper?
Mr. PRINCE. That is substantially correct. I think there is a different method of calculating the toll on war vessels as distinguished from cargo vessels.
Mr. WEICHEL. How do they compute it on the cargo vessels? Is it by dead weight tons?
Mr. PRINCE. It is the Panama Canal ton. That is a very complicated subject, and I think that you need an expert to tell you just how it is done. There is a special set of rules for measurement and for calculating
Mr. WEICHEL. With reference to the rules that are now used for commercial ships, should not the same rules be used for Government ships? Which way does that advantage work-if there is one rule for a commercial ship and another one for a warship?