coastal trade is because of the high rates that the coastal and intercoastal people have to pay for unloading, and that the rate charged for carriage is set by the Interstate Commerce Commission. That is the testimony that has been given before this committee.

Mr. AMUNDSEN. Yes, sir; we recognize that; but we also recognize the fact that tolls are a major factor also.

Mr. WEICHEL. Well, you do not know what the present tolls are or what they were, so you cannot talk about that; but supposing they were the same, the testimony given before the committee was with reference to stevedoring that the price of stevedoring had gone up 200 to 300 or 400 percent. That was the testimony given before this committee, and I am talking about operating since the war is over.

Mr. AMUNDSEN. Yes; stevedoring is a recognized factor in that. Mr. WEICHEL. What is the increase in the price of stevedoring in the intercoastal trade?

Mr. AMUNDSEN. Well, it is several hundred percent.

Mr. WEICHEL. What was the price before the war?

Mr. AMUNDSEN. Well, there was a 10 percent differential rate applied to domestic shipping.

Mr. WEICHEL. What was it by the ton?

Mr. AMUNDSEN. I do not know the exact figure; I do not try to carry these figures in my head.

Mr. WEICHEL. Well, you are here as the representative of the American Association of Port Authorities. How do they charge for stevedoring-by the ton?

Mr. AMUNDSEN. They do not charge for stevedoring—

Mr. WEICHEL. Well, they know what is going on, do they not?

Mr. AMUNDSEN. Yes, sir.

Mr. WEICHEL. Is it charged for by the ton; is that the way the charge is made now?

Mr. AMUNDSEN. Yes, sir.

Mr. WEICHEL. How much is the charge per ton for loading and unloading?

Mr. AMUNDSEN. It would vary with the commodity.

Mr. WEICHEL. What?

Mr. AMUNDSEN. It would vary with the commodity.

Mr. WEICHEL. It would vary with the commodity?

Mr. AMUNDSEN. Yes.

Mr. WEICHEL. What is it on canned goods?

Mr. AMUNDSEN. I cannot name you those commodity prices.

Mr. WEICHEL. You have been talking about the increase in Canal tolls. That has nothing to do with the increase in the amount of intercoastal business at all, according to the testimony we have had here since 1945.

Mr. AMUNDSEN. Well, but it is a factor in reviving these ports. Mr. WEICHEL. But the big factor is the cost of loading and unloading and the rates charged for that.

Mr. AMUNDSEN. That is one factor.

Mr. WEICHEL. You do not have any control over the rates. The toll cost has not changed very much, but you do not even know how much it has changed. Do you know how much it has changed? Mr. AMUNDSEN. No; I do not.

Mr. WEICHEL. You do not know whether the rate has changed at all, do you?

Mr. AMUNDSEN. I know that there was a prospective increase earlier this year.

Mr. WEICHEL. How much was the amount of that prospective increase?

Mr. AMUNDSEN. I think it was 11 percent; I do not recall. Mr. WEICHEL. Eleven percent of what? What was it before? Mr. AMUNDSEN. I have already stated that I do not know the previous rate.

Mr. WEICHEL. That is all.

Mr. O'TOOLE. Mr. Allen?

Mr. ALLEN. I have no questions.

Mr. O'TOOLE. Thank you, Mr. Amundsen.

STATEMENT OF GREGORY PRINCE, REPRESENTING THE ASSOCIATION OF AMERICAN RAILROADS

Mr. O'TOOLE. Mr. Julius H. Parmelee or Mr. Gregory Prince, representing the Association of American Railroads.

Mr. PRINCE. Mr. Chairman and gentlemen of the committee, my name is Gregory S. Prince, assistant general counsel of Association of American Railroads.

If the chairman finds it consistent, I would like to submit a statements for the record by the 10th of July stating our position on this

bill.

Mr. O'TOOLE. You may do whatever you wish. If you wish to be questioned now, I will ask the committee. Mr. Fugate, do you have any questions?

Mr. FUGATE. Are you submitting your statement now, Mr. Prince? Mr. PRINCE. No; I ask permission to file a statement stating the views of the railroads with respect to H. R. 8677 by the 10th of July. Mr. FUGATE. By when?

Mr. PRINCE. By the 10th of July.

Mr. FUGATE. I think that would be a little late.

Mr. PRINCE. I understood from the chairman that, in view of the anticipated recess, if we had the statement in by the 10th of July that would be satisfactory.

Mr. FUGATE. The Committee would like to finish the hearings today, as the chairman has just said. Would it be possible for you to submit your statement at an earlier date?

Mr. PRINCE. Our difficulty, Mr. Fugate, is this, that the railroads, the members of our association who are primarily interested in this, are the transcontinental lines.

Mr. FUGATE. You do not think that you could submit your statement earlier than July 10?

Mr. PRINCE. What date do you think would suit the convenience of the committee?

Mr. FUGATE. Of course, there is the possibility of a recess, and it is possible that we will not dispose of this bill before then, but we would prefer to have your statement at an earlier date.

Mr. PRINCE. You see, the difficulty is this; we want to get the views of our members on certain of the matters dealt with in this bill. Mr. O'TOOLE. We are not at all certain that there is going to be a We were under the impression that there was going to be a recess; but, in view of the crisis that has arisen, at this moment we are

recess.

not sure whether or not we are going to sit right through. I would suggest, if it is agreeable to the committee, if you cannot get your statement ready before July 10, that, if you wish to prepare a statement, send it to the committee for our information, perhaps not to be made a part of the record. Would that be agreeable?

Mr. WEICHEL. Are you suggesting, Mr. Chairman, that he prepare and file a statement; and, if he does not appear before the committee to subject himself for examination on the statement, that it would not be considered; is that what you are suggesting?

Mr. FUGATE. Make it a part of the record when the record is prepared.

Mr. WEICHEL. Mr. Prince suggested filing a statement by July 10. Usually, if it is expected that the committee is going to consider a statement which is submitted, it is expected that the person submitting the statement come before the committee to be examined on the statement. Otherwise statements come in to the committee and they do not get much consideration-little, if any. So is the chairman suggesting that it just be filed and not considered? I do not know whether Mr. Prince desires that or not.

Mr. PRINCE. No, sir; I do not. I only want to file a statement if it is going to receive the consideration of the committee.

Mr. WEICHEL. Usually when a statement is sent into the committee the committee members want to question somebody with reference to what is in the statement. However, if a statement is just filed, there is no opportunity to question the person who submits the statement, and I do not know how much consideration it might be given by the committee. I think that is what the chairman was suggesting, that here is a piece of paper, Mr. Prince put it in, but he is downtown and not here before the committee for examination.

Mr. PRINCE. I would be very happy to return before the committee at any time for questioning.

Mr. WEICHEL. I think everybody on the committee should have an opportunity to question you just like we questioned people with reference to ship leases, and so forth. If a statement is simply filed with the committee, I do not know whether the committee would consider it very much when they did not have an opportunity to examine the person making the statement.

Mr. PRINCE. I wonder, in view of those facts, if I might make a statement at this time.

Mr. O'TOOLE. You may submit a statement; and, if we cannot incorporate it in the record due to the lack of time, we can assure you that the statement will be given every consideration.

(The statement referred to was subsequently supplied for the record as follows:)

SUPPLEMENTAL STATEMENT OF ASSOCIATION OF AMERICAN RAILROADS BEFORE THE PANAMA CANAL SUBCOMMITTEE OF THE HOUSE COMMITTEE ON MERCHANT MARINE AND FISHERIES WITH RESPECT TO H. R. 8677, JULY 7, 1950

As this committee well knows, the subject of Panama Canal tolls has received intensive study for the past several years. One phase of the study of this subject was an investigation made by a special subcommittee, under the chairmanship of Representative Thompson, of the House Merchant Marine and Fisheries Committee, pursuant to House Resolution 44, conducted in the first session of the Eighty-first Congress. As a part of that investigation there was a hearing at which testimony was presented by most of the witnesses who have appeared

before the Panama Canal subcommittee with respect to H. R. 8677. Two witnesses representing the Association of American Railroads appeared before the Thompson subcommittee, on June 14, 1949, and presented fully the views of the railroads with respect to the subject of Panama Canal tolls.

In view of the fact that H. R. 8677 is for the purposes of carrying out the recommendations made in the report of the Bureau of the Budget to the President and that such report by the Bureau of the Budget was made pursuant to a recommendation of the Thompson subcommittee, it is assumed that the record of the hearing pursuant to House Resolution 44 before the Thompson subcommittee is, as a practical matter, a part of the over-all record of the subject. Accordingly, it is not felt necessary to repeat here all the views of the railroads as stated at that hearing. However, in order that this committee may be advised of the scope of the previous presentation, there is here set forth at the outset a brief outline of the points therein covered.

The true nature of the proposal by the shipping interests that 50 percent of the Federal Government's investment in the Panama Canal be allocated to national defense was discussed. It was shown that the proposal would in essence amount to an annual subsidy and that the subsidy would be conferred in large part upon the operators of foreign vessels. It was also shown that the adoption of such a proposal would be in direct conflict with the national transportation policy declared in the Transportation Act of 1940.

Very substantial authority was quoted to demonstrate that the primary purpose of constructing the Canal was as an aid to commerce. In support of this conclusion extensive quotations from a report by the special committee of three appointed by President Roosevelt in 1936 were included. The full importance of the Panama Canal from the standpoint of national defense was recognized. It was also pointed out that this special committee found that the service which the Canal renders to the United States Army and Navy vessels by allowing them to transit the Canal without charge might justly be regarded as but a partial compensation for the valuable service rendered by the Army and Navy in protecting the Canal and maintaining its neutral use by the vessels of commerce and war of all nations. It was recognized that the experience of the last war might justify a different treatment of the so-called forgiven tolls. By reason of the fact that commercial shipping under private operation came to a virtual standstill during the war and for several years thereafter as a result of the Government's assumption of the control and operation of such vessels, the view was expressed that the policy might be changed in this respect to require payment of tolls by Government vessels or the allowance of a credit for the transit of such vessels in calculating the tolls to be levied on commercial vessels.

It was also shown that for the period 1914 to 1948 the computed cumulative deficit amounted to approximately 1511⁄2 million dollars; that toll-free transits in this period amounted to approximately 64% million dollars; and that the deficit after allowance of such forgiven tolls was approximately $87,000,000. (Those figures brought down through the fiscal year 1949 would be as follows: Total computed deficit, $166,800,000; toll-free transits, $67,000,000; and adjusted deficit, $99,800,000.) A similar showing was made for the 10-year period 1939–48, which resulted in an adjusted deficit of approximately $79,000,000. It was also indicated that on the basis of the present methods of determining the level of tolls, modified to make allowance for toll-free transits, the toll rate would have to be increased from 90 cents a ton to approximately $1.35 a ton in order to place the operation of the Panama Canal on a self-sustaining basis.

These views as well as the views of shipping interests were before the Bureau of the Budget at the time they made their study and were explored in conferences between representatives of the Bureau and the principal parties in interest. After a full consideration of the evidence and conflicting views as to this vital issue the Bureau of the Budget concluded that there should be no allocation to national defense of any part of the capital investment in the Panama Canal. Two previous studies, both of which are referred to in the report of the Bureau of the Budget, reached precisely the same conclusion. The report (H. Doc. No. 460, 81st Cong., 1st sess.) had the following to say on the subject, at page 9: "Studies made by the Bureau of Efficiency in 1931 and by the special committee in 1937 determined that no major part of the capital costs of the Panama Canal should be allocated to national defense. The only additional feature of the Canal which might not have been included if it had been constructed exclusively for commercial use is the increase in the width of the locks from 100 to 110 feet. Actually the additional width has been an important factor in facilitating the approach to, and handling of commercial vessels in, the locks. There would

appear to be no significant added costs in the construction of the Canal attributable solely to national defense.

"The subsidy to national defense comes not from a failure to allocate capital costs but from the fact that military and other Government vessels do not pay tolls."

Thus the Bureau of the Budget recommends that no part of the capital investment in the Canal be arbitrarily allocated to national defense and, in lieu thereof, that tolls be paid for the transit of military and other Government vessels, or that credit be allowed on account of such transits. This amounts to a recommendation that all of the costs of the Canal be divided on a user basis. The recommendation of the Bureau of the Budget on this point is unquestionably sound and should be adopted..

This principle is contained in section 25 of H. R. 8677, which amends section 412 of title 2 of the Canal Zone Code. It is heartily endorsed by the railroads, and the committee is urged to make no change in this respect.

As recommended by the Bureau of the Budget, H. R. 8677, in section 18 (c),. provides that interest on investment shall be at a rate or rates determined by the Secretary of the Treasury as required to reimburse the Treasury for its cost. The Bureau of the Budget in its report estimated that the rate of interest presently required to reimburse the Treasury for its cost would be in the neighborhood of 2.3 percent. Under present procedures interest on investment is calculated at 3 percent.

Thus, it is apparent that immediately an advantage accrues to shipping interests by reason of the adoption of the theory of using the "going" rate of interest. Attention is also called to the fact that at various periods in the past the "going" rate of interest was higher than the flat 3 percent employed heretofore, and at such times an advantage accrued to shipping from the use of the non-fluctuating-interest rate. The point we wish to make is that the committee should make it clear in its report that its decision with respect to the treatment of the rate of interest to be charged on the capital investment is a determination based on principle not expediency, and that in the event the "going" rate of interest should go up in the future, the interest to be charged on the investment in the Panama Canal must also go up.

I should like to refer to one other recommendation of the Bureau of the Budget. In discussing the method of arriving at the capital investment in the Panama Canal on which interest would be calculated, the representatives of the Bureau of the Budget suggested that there should be excluded from the amount of such investment figure first, the investment in national defense facilities, and second, the investment in civil government, health, and sanitation facilities. It was also suggested, as a third offset against the capital investment, that there be deducted the amount of the dividends which have been heretofore paid into the Treasury by the Panama Railroad Company, amounting to approximately $38,000,000.

No justification is seen for this third offset. The facts are that the operations of the Panama Railroad Company in the past have been successful and a substantial surplus has been accumulated from the conduct of its operations. On the other hand, the operation of the Panama Canal in the past has not been successful from a monetary standpoint and there has been accumulated a substantial deficit in the conduct of its operations. If the surplus accumulated by the successful segment of this new combined operation is to be deducted from the capitalization of the new organization, then certainly in all logic the accumulated deficit of the unsuccessful segment of the combined organization should be added to the new capitalization. As already shown, the accumulated deficit from the operation of the Canal, even after a credit allowance for toll-free transits, amounts to approximately $100,000,000. Thus the net effect of taking into account the past operations of both segments of the new combined enterprise would be to increase the capitalization of the new organization by $62,000,000. It is left to the wisdom of this committee and the Congress to determine whether to make a fresh start, using as the investment figure the net property investment shown on the books of the Canal, or whether to take into account the results of the past operations of the two principal segments of the combined enterprise. In no event, however, would it seem to be appropriate to take into account only the past operations of the Panama Railroad Company. Appropriate amendments to H. R. 8677 should be made to rectify this situation.

A major phase of the recommendations of the Budget Bureau had to do with the organizational aspects of the various activities conducted in the Canal Zone In this connection it was recommended that all of the functions of the Pan