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I am here representing both organizations.

Both organizations are vitally interested in the efficient and economical distribution of west-coast lumber in the Eastern States. An adequate merchant marine'is of vital importance to this industry as the industry is dependent on the merchant marine for the economical transport of lumber products. A very important factor in the application of reasonable rates to the transportation of this lumber and the level of the rates is of necessity determined by the costs of operation including the charges for transit through the Panama Canal. We definitely do not think that Panama Canal tolls should be based on any cost factors beyond the cost of transit on commercial vessels. All other charges for Government account should not be assessed on the commercial transit.

I would like to file a statement of the West Coast Lumbermen's Association to supplement the views which I have just expressed and to present this committee with the views of more than 1,000 lumbermanufacturing plants on the Pacific coast.

The West Coast Lumbermen's Association of Portland, Oreg., is an organization of manufacturers of Douglas fir and related species of lumber in the western parts of Washington, Oregon, and California. This region and its species represent more than 25 percent of the total national lumber production of the United States, and more than onethird of the total production of softwood lumber of the kind ordinarily used in home construction.

Last year, in 1949, more than a billion board feet of lumber were shipped from Washington and Oregon to the Atlantic coast through the Panama Canal. According to Panama Canal records more than half of all of the cargo moving from the United States Pacific coast to the Atlantic coast in the fiscal year 1949 was lumber.

I have just received a telegram from the West Coast Lumbermen's Association giving further details:

In 1949 there were 1,021,381,000 feet of lumber shipped from Oregon and Washington to the Atlantic coast through the Panama Canal. The equivalent is 1,276,727 tons.

From January 1 to April 30 this year the latest figures available show 346,393,000 board feet or 432,992 tons.

The present rate on intercoastal shipments of lumber from the Pacific coast to the Atlantic is $26.50 per thousand board feet, net measure. Since this rate is equivalent to almost one-third of the mill value of the lumber, or 25 percent of its delivered price laid down on the Atlantic coast, we have a real interest in any matter which would affect this rate. The Panama Canal toll charges represent a significant part of the cost of shipping our lumber. For that reason, we are concerned with H. R. 8677, the bill here under consideration.

It is our understanding that the Panama Canal was built for two purposes:

(1) To assist commerce, and (2) to strengthen our national defense.

It would seem reasonable that the relative importance of the Canal for the two purposes be appraised and that commercial traffic be expected to pay no more than its proportionate share of the costs of services and facilities, and its proportionate share of the computed return on the total capital investment.

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We do not think the Federal Government should penalize those of us who use the Canal by imposing charges which go beyond reimbursement of the costs of operating the Canal reasonably allocable to freight transit. Nor do we think that the commercial traffic going through the Canal should carry costs of other uses to which the Canal Zone is put, such as national defense. It would seem to us that properly there should be an allocation of the costs of all facilities and services between the national defense and the commercial operation of the Canal.

Certainly there is no justification for assessing commerce which transits the Canal with the entire burden of expense arising from those facilities which are provided in large part for the military and other personnel in the Canal Zone.

If your committee will recognize the merit of these principles, we are sure you will arrive at a formula which is equitable and fair to those who use the Canal as well as to the American taxpayers.

I would like to supplement that written statement with an observation. From the standpoint of commerce this country is a large country, the mileages are very great and we feel that very forcibly in the Northwest lumber industry because our mileages are probably greater than those that any other commerce in this country has to bear.

Now, we believe that the United States should be operated as one country. Freight rates can break the commerce of this country into isolated districts or little empires where each production area serves a limited territory, and thus we would eventually arrive at the condition which is largely prevalent in Europe.

We are, therefore, strongly of the view that an increase in the cost of Panama Canal tolls would have the effect of breaking up the commerce into small segments, particularly in the case of an industry such as the west coast lumber industry where the distribution mileage is very great.

Mr. O'TOOLE. Are there any questions?

Mr. THOMPSON. I wanted to ask you, Mr. Buckley, of the freight cost of $26.50 a thousand, how much is represented by the Canal toll? Do you know that offhand ?

Mr. BUCKLEY. Why, it would vary, of course, with the size of the ship and the amount of lumber carried, whether the ship has a full cargo or not, but take a Liberty ship, for example, and assuming that it is loaded full with lumber or any other cargo, I should say that the tolls-represent $1 or $1.25 a thousand feet.

Mr. THOMPSON. Thank you.
Mr. O'TOOLE. Are there any questions, Mr. Fugate?
Mr. FUGATE. I have no questions, Mr. Chairman.
Mr. O'TOOLE. Mr. Lichtenwalter, do you have any questions?
Mr. LICHTENWALTER. No.
Mr. O'TOOLE. Thank you very much, sir.

At this point the Chair will place in the record a report from Assistant Secretary Jack McFall of the Department of State, confirming a telephone call, to which reference was made in the record yesterday, saying that there are no provisions in this proposed resolution affecting treaty arrangements with any other country.

(The report referred to is as follows :)

DEPARTMENT OF STATE,

Washington, June 26, 1950. The Honorable EDWARD J. HART, Chairman, Committee on Merchant Marine and Fisheries,

House of Representatives. MY DEAR MR. HART: I refer to your letter of May 31, 1950, and the Department's acknowledgement of receipt dated June 5, 1950. In your letter you requested the Department's comments relative to H. R. 8677, a bill to authorize and provide for the maintenance and operation of the Panama Canal by the present corporate adjunct of the Panama Canal, as renamed, and to reconstitute the agency charged with the Civil Government of the Canal Zone and for other purposes.

Paragraph (d) of section 25 of H. R. 8677, amending section 412 of title 2 of the Canal Zone Code, appears to safeguard satisfactorily the treaty commitments of the United States to other interested governments. Accordingly, since there do not appear to be provisions in the bill contrary to the treaty obligations of the United States, the Department perceives no objection to the enactment of H. R. 8677.

The Department has been informed by the Bureau of the Budget that there is no objection to the submission of this report. Sincerely yours,

JACK K. MCFALL,

Assistant Secretary,

(For the Secretary of State). Mr. THOMPSON. May I ask Governor Newcomer a question ?

Mr. O'TOOLE. Yes. Governor Newcomer, have a seat for just a moment, please.

Governor NEWCOMER. Yes, sir.

FURTHER STATEMENT OF F. K. NEWCOMER, GOVERNOR, THE PAN

AMA CANAL, AND PRESIDENT OF THE PANAMA RAILROAD COMPANY

Mr. O'TOOLE. Mr. Thompson.

Mr. THOMPSON. Governor, I am a little disturbed by some of the rumors that seemed to escape here yesterday, as to whether or not the Department of Defense, or any of its subordinate units, opposes this legislation. That is a very blunt question, and I think I should give you the background from which I ask it. Of course, those of us who have had to do with the Panama Canal and its ramifications understand that the chain of command, so to speak, comes from the Governor of the Panama Canal Zone, yourself, to the Secretary of the Army.

Governor NEWCOMER. Yes, sir.

Mr. THOMPSON. Now, it reaches him directly, and without going through any of his subordinate echelons; that is correct, is it not!

Governor NEWCOMER. That is the theory of our channels of communication, yes, sir.

Mr. THOMPSON. In other words, you do not come through the Chief of Engineers ?

Governor NEWCOMER. No, sir.

Mr. THOMPSON. Nor the Chief of Infantry or any other subordinate echelon?

Governor NEWCOMER. No, sir.
Mr. THOMPSON. Your communications go directly to the Secretary?
Governor NEWCOMER. Yes, sir, that is correct.

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Mr. THOMPSON. Then from him your recommendations or communications go to the President?

Governor NEWCOMER. As a rule through the Bureau of the Budget. Mr. THOMPSON. Well, after all, that is a part of his executive staff. Governor NEWCOMER. That is correct.

Mr. THOMPSON. I am very curious to know how the Defense Department got into the act on this particular piece of legislation. It went, and very properly, to you from the Bureau of the Budget for your comment, and your comments involve the rather complicated changes that you feel are necessary and that the Bureau of the Budget does not. It is not for the purpose of trying to compose this differentiation that I ask you these questions now, but the very definite understanding is that after your recommendations came back here and went to the Secretary of the Army they went to the Defense Department where they remained for nearly a month, and they were not finding favor within the Department of Defense. Finally, however, your recommendations went forward to the Congress, through channels, which included the Department of Defense.

Now, speaking purely for myself—I have not even discussed this with the chairman of the committee, and everything that I say now is subject to his approval—I think this committee is entitled to a frank statement by the Department of Defense as to whether they favor or whether they do not favor this legislation. If they do not there may still be a means by which they can block it, and we suspect that perhaps someone who is unfriendly to the legislation could load it down with a great mass of details which could not be handled either by the committee or by the Congress. If the committee now has to spend its good hours trying to work this legislation out, we can do it only with the finest kind of cooperation from all concerned. So now let me ask

you, you can tell us, who in the Department of Defense we might call upon to give us a direct and positive answer to that question?

Governor NEWCOMER. In answer to your first question as to whether I know of anyone in the Department of Defense who is opposed to this legislation

Mr. THOMPSON (interposing). Governor, may I interrupt you? If I asked that question I did not intend to because I realize that is not a proper question to ask you, and so if I asked it I withdraw it.

Governor NEWCOMER. Possibly the question was whether the Department of Defense does oppose this legislation. So far as I am aware, they do not.

You, of course, have a letter from the Secretary of the Army favoring the passage of this legislation, and it is my understanding, although I have not seen that letter, that you have also received some communication from the Secretary of Defense transmitting the prorosed legislation and, so far as I am aware, not opposing it.

As I understand the situation with respect to this bill and the Department of Defense, there is a rule in the Department of Defense that whenever any legislation is considered by any of the three Secretaries under the Secretary of Defense, that legislation must be coGrdinated with the other two branches of the Department of Defense. It follows, therefore, that this bill, being referred to the Office of the Secretary of the Army, went through this coordinating process in

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the Department of Defense and was finally released from that Department to the Bureau of the Budget for its clearance for submission by the Secretary of the Army.

Now, presumably, they would have indicated some opposition to the bill during that process, and so far as I am aware they have not.

Mr. THOMPSON. Well, Governor, that answers the question that I asked you primarily as to just how the Defense Department got into the act. I can see that now. Of course, for the Defense Department now to superimpose itself on the Secretary of the Army, an individual who is assigned to keep his eye on the Panama Canal, may or may not be proper. I think that is not for this committee to decide.

There could easily be a difference of opinion within the Defense Department that did not reflect either your views, or the views of the Secretary of the Army. For example, the special committee on the tolls question took the liberty of recommending that the Army relinquish its control over the Panama Canal, a wartime measure, which had no business in there, so we thought, in time of peace. That recommendation did not meet with favor of the Department of Defense, and I have a little apprehension that, perhaps, the Department of Defense does not want to relinquish any part of the Canal, and through their opposition to this measure they would seek to keep all possible control. I think the answer to that question should come from them.

Governor NEWCOMER. So far as I know they are not opposed to the bill. I have had no indication of that, and I think that, possibly, in this particular case it was a good procedure to have it coordinated in the Department of Defense, particularly because of the provision as to military and naval vessels paying tolls when transiting the Canal. That is a subject of interest to them. What their opinion of the merits of the bill is I do not know, but I have heard of no opposition from them to it.

Mr. THOMPSON. I do hope that you are right, Governor. Of course, this went far beyond any coordination. This was approval or disapproval in the hands of the Secretary of Defense. However, as I say, that is neither here nor there.

Mr. Chairman, may I make the request that somebody from the Department of Defense be requested to be here tomorrow morning to give a positive answer to that question ?

Mr. O'TOOLE. The clerk will take the necessary steps to see that someone from the Department of Defense is here to testify on that point.

Mr. THOMPSON. Thank you.

Mr. O'TOOLE. Our difficulty is that we can always trace the chain of command, but we have difficulty tracing the chain of responsibility.

Governor NEWCOMER. Yes, sir; that is frequently a problem.
Mr. THOMPSON. Thank you very much, Governor.

Mr. O'TOOLE. Governor, I do not know just what your plans are, but as far as the committee is concerned, it will not be necessary, unless you so desire, to return to the hearings. You may leave now if you wish.

Governor NEWCOMER. Thank you.
Mr. O'TOOLE. We will adjourn until 10 o'clock tomorrow morning.

(Thereupon, at 11:43 a. m., the subcommittee adjourned until tomorrow, Wednesday, June 28, 1950, at 10 a. m.)

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