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Pursuant to the recommendations in this report, the Secretary of War, under date of October 18, 1921. ordered a careful study to be made in order to establish if possible a capitalization to determine a fair commercial value that should be fixed for the Canal and its various allied activities. As a result of this order, the Governor of the Canal reported in 1921 the (a) transit, (6) business, and (c) defense capitalization of the Canal. Approximately $113,000,000 was allocated to defense, $235,000,000 to transits, and $19,000,000 to business.

Until 1927 no interest was charged in the Annual Reports of the Governor on either the commercial, business, or defense capital expenditures so arrived at. In 1927, however, the Governor reported surplus over and above operating expenses of $16,487,630.60 for the year, and for the first time included in his report a fixed capital charge at 3 percent on the commercial investment in the Panama Canal as determined under the 1921 order. Interest was not then charged on the amount determined in 1921 to be defense capital.

The Canal continued to report profits after this interest and it was suggested by the Canal authorities in 1928 and 1929 that the capitalization of the Canal should be increased and that the rate of interest should be increased to 4 percent.

In 1932 the practice of charging interest only on the commercial portion of the capital investment was abandoned and the defense capital expenditures were from that time forward included in the capitalization upon which interest at 3 percent was thereafter charged. In this way the defense capital, which was excluded in 1921, was restored to the Canal books.

In addition, in the 1932 report and all subsequent reports there was included in the capital upon which interest was charged “interest during the construction period” in an amount which is now established at approximately $129,000,000, hnd from that time forward interest has been computed annually upon this interest and charged in the accounts of the Canal against tolls and other revenues.

The effect of the restoration of the defense capital to the Canal books and the inclusion of interest during the construction period can be seen from the reports of the Governor. In 1931, before these changes, the Governor reported a profit for 1931 of 7.1 million dollars. In his 1932 report, however, the Governor, as a result of these switches in accounting methods and the reinclusion of defense capital and interest, reported a loss for 1931 of 0.8 million dollars.

It is only fair to say, of course, that these changes, accomplished by administrative fiat, were subsequently in 1937 approved by Congress and that the present congressional policy is to charge interest on the defense capital. What is required is a reexamination of this policy by the Congress to determine whether it is equitable and fair and whether on a broad long-range basis it best serves the public interest.

Mr. O'TOOLE. If there are not other witnesses who desire to be heard, the meeting stands adjourned.

(Thereupon, at 12:25 p. m., the subcommittee adjourned, subject to the call of the Chair.)

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Important commodity shipments over principal trade routes, Pacific to Atlantic-

Continued
[Tons of 2,240 pounds)

[blocks in formation]

9, 594
150, 278

12, 008
171, 880

27, 725
55, 516

156
83, 397

31

Total.
West coast Canada to east coast United States:

Iron ore.
Lumber.
All other and unclassified.

25, 025

6, 946
4, 272
11, 218

5, 776
4,395
10, 171

21, 479

4,194
25, 673

Total...
West coast Canada to West Indies:

Lumber..
All other and unclassified.

Total
West coast Canada to east coast South America:

(No single outstanding commodity in this trade.)
West Coast Canada to Europe:

Ammonium compounds.
Canned food products-
Coal
Fertilizers, unclassified
Flour.
Fruit, fresh.
Grains, other than oats and wheat.
Lumber
Metals:

Lead.

Zinc.
Oats.
Wheat..
Wood pulp.
All other and unclassified.

Total...

23,046
5, 404

24, 857
51, 806

1, 815
39, 743

11, 645
35, 433
17,993
14, 111
79, 713

2, 730

56, 030
1, 174, 789

32, 615
57,021
23,992
21, 398
978, 113

12, 500
626,059

4, 349
9, 256

1,000
975, 119
49, 355

40,000
1, 787, 646

11, 237

5, 802

10,633
1,001, 264

26, 676

34, 032
2, 482,088

7,676
41,376

75, 468
1, 281, 104

9, 938

32, 722
2,638, 086

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Tots
West coast Central America Merino to east coast United
Stetes

Banangs
Ore, manganese
All other and melassified

Total
West coast Central Ameries Mexico to Cristobal, Oanal Zone:

Coffee
Lumber
All other snd unclassified

Total
West coast Central Ameries Mexico to Europe:

Bananas
Coffee.
All other and unclassified

Total...
West coast Central America/Mexico to West Indies:

(No single outstanding commodity in this trade.)
West coast South America to east coast United States:

Bananas
Beans, edible
Cocoa
Coffee.
Cotton, raw
Metal:

Copper
Lead.
Tin

All other and unclassified.
Molasses.
Nitrate of soda
Ore:

Copper
Iron..
Manganese
Tin.
Zinc..

Other and unclassified
Sugar.
Whale oil.
All other and unclassified

Total
West coast South America to east coast South America:

Rice.
Sugar.
All other and unclassified

Total.....
i Corrected figure.

136, 830

10, 228 188,368

6.881 14, 2018 14, 008 370, 104

83, 494 1,888, 181 113, 884 38, 218 70, 041

0,010 28, 221

Important commodity shipments orer principal trade routes, Pacific to Atlantic

Continued
[Tons of 2,240 pounds)

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Total.......

367, 904

336, 779

263, 406

137, 560

Hawaiian Islands to east coast United States:

Canned fruit.
Molasses
Metal, scrap.
Sugar
All other and unclassified

199, 550
19,831
58,670
77, 706
37, 724

38,033

125, 787 15, 057

1, 178 16,070 43, 511

52, 584

393, 481

228, 177

201, 603

Total.
Hawaiian Islands to east coast Canada:

Metal, scrap.

Total.....

8, 260

12, 551

20, 158

8, 260

12, 550

20, 158

Hawaiian Islands to Europe:

(No single outstanding commodity in this trade.)
Australasia to east coast United States:
Metal:

Iron.
Lead

Scrap..
Ore, chrome.
Sand.
Skins and hides
Wool.
All other and unclassified

28, 492
33, 855
32, 468
57, 005
14, 947
14, 153
35, 376
39, 606

10, 518

8, 994 21, 433 31, 294 15, 751 10, 969 53, 039 38, 280

1,500 6, 518

353 8,050 26, 168 23, 109 115, 774 15, 160

Total.

255, 902

190, 278

196, 632

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