Mr. PRINCE. In my judgment, what it would do would be to eliminate an unfair advantage which water competition now has. We have to pay all our costs of operation and we have to meet all our costs fully. We think that is what the private-enterprise system demands. We also think that is what the declaration of the transportation policy set forth by Congress in the Act of 1940 calls for. It calls for fair and impartial treatment of all modes of transportation. The fair and impartial treatment of all modes of transportation demands that each pay its full costs of operation. Now, the full cost of carrying on any business, as all of us know, has gone up very markedly since the war. Why should the shipping interests be allowed to have this cost of operation held down artificially? That is giving them an artificial advantage, and that is a subsidy. We think they should pay their full costs, and if you do meet the full costs of operating and maintaining the Panama Canal, through the imposition of tolls, then that subsidy will be removed. We will then be on a fair competitive basis, and the form of transportation that can handle the particular type of business most efficiently should be entitled to handle that business. That would be the effect of an increase in tolls. It would really be putting it on a realistic basis.

Mr. FUGATE. Testimony has been given here from time to time that there are 65 ships operating in the intercoastal trade, and testimony has further shown that they are having some difficulty in operating at all. With a 30-percent increase in tolls, would not that have the effect of completely eliminating the future operations of those ships, or practically that, and would not that certainly give all the movement of freight, east-west or west-east, to the railroads?

I am not partial to either side. I am just trying to get the facts. Mr. PRINCE. I doubt that I am qualified to answer that except in this way: Of course, that would depend to some extent on what proportion of the total rate that has to be charged by these water carriers is attributable to the tolls. The toll is not the major cost factor, so I do not believe it could have any such overwhelming effect as you indicated some people have thought it might. I do not think that could be so. I do not believe that the toll could be such an important part, or such a large proportion of their operating costs and that it would be the thing that would turn the balance and put all these people out of business. I am surmising. I admit that I do not know the facts.

Mr. BARRETT. Do you have any idea what the net operating return per annum for the Suez Canal is?

Mr. PRINCE. I am afraid I do not know.

Mr. WEICHEL. Did I understand you to say that you are advocating an increase in tolls?

Mr. PRINCE. I did not say anything of that sort.

Mr. WEICHEL. In view of the questioning from the other side, I just wondered if you were indicating that they might be increased or should be increased. The reason I asked that is, the railroads have gotten along pretty well in competition with the present rate of 90 cents.

Mr. PRINCE. Well

Mr. WEICHEL. The railroads have done pretty well against the 90cent toll that the shipping interests have been paying since before the war.

Mr. PRINCE. Before the war-look at what has happened to our costs since the war. I am speaking from the standpoint of principle. We pay our costs of doing business, and they should pay their costs of doing business and then we will let the business fall where it deserves to go-to the form of transportation that can carry it most efficiently. Mr. WEICHEL. One of the Commissioners of the Interstate Commerce Commission testified before this committee several years ago, if I remember correctly, that the rate that the ships have for carriage has not been changed, although an application has been in for a long time with reference to increasing the rate.

The railroad interests complain that the rates are too low. Traditionally, the complaint was always the other way, that the shipping rates were too low compared to the railroad rates, but the testimony from the Commissioner of the Interstate Commerce Commission indicates that while they were setting the rates for each one the railroads controlled all the factors and there was the stevedoring factor that the shipping interests could not control, which went up some 300 or 400 percent.

You still advocate a raise in the rates, the toll rates?

Mr. PRINCE. That is a pretty hard question to answer.

Mr. WEICHEL. I thought perhaps in view of the conversation we had before you could answer it.

Mr. PRINCE. I would like to comment on one or two things. It sounded as though you felt the Interstate Commerce Commission did have control over all the cost factors as far as the railroads are concerned, but did not as far as the water carriers are concerned. Mr. WEICHEL. Generally, yes.

Mr. PRINCE. Generally, of course, they have very little control over the cost factors so far as the railroads are concerned. They have nothing whatsoever to do with the rates that we pay our labor, which is 50 percent of our operating costs.

Mr. WEICHEL. That is true with the water shippers, too. But there is the factor of stevedoring which goes into the over-all cost.

Mr. PRINCE. That is a labor charge, and so is the payment of our employees. That is a labor charge. It is the same thing. They have no control over that. The costs of that have gone up for us tremendously since before the war.

Mr. WEICHEL. The ships have all of that.

Mr. PRINCE. That is correct. They have no control over the costs of materials and supplies we buy. That has gone up about 100 percent. Everything has gone up. I think it is just one of the facts of economic life that the cost of tolls-because of the service they are getting in having their vessels passed through the Panama Canal— should in all probability go up if you are going to have the Panama Canal a self-sustaining sound business enterprise.

Mr. WEICHEL. I meant the Interstate Commerce Commission does not take into consideration the stevedoring rate, whereas in the railroads, when you get an increase in rates, labor is taken into consideration.

Mr. PRINCE. You may be right.

Mr. WEICHEL. That was the testimony here. The railroads got along with the rate before the war. I would not see any real reason for increasing it now when the Interstate Commerce Commission has

said that they do not take into consideration the stevedoring labor charges for the vessels.

I take it then you are not particularly advocating an increase in the toll rates.

Mr. PRINCE. I do not think that is the issue.

Mr. WEICHEL. It might not be the issue.

Mr. PRINCE. I cannot answer a question like that. I think it has to depend upon the facts. I can tell you circumstances under which I would advocate an increase, or circumstances under which I would be compelled not to object to a decrease. It all depends upon the facts that come out.

Mr. WEICHEL. Everyone has gotten along fairly well under the present rate.

Mr. PRINCE. That question could be argued from here to doomsday.. You could get a traffic man from a transcontinental railroad and a traffic man of a steamship line and turn them loose and I doubt when they were finished that you would be very sure of that conclusion.

I do not think that we should take the Panama Canal tolls and set them up as a balance wheel to control competition between transcontinental railroads and shipping interests. Let us have the chips fall where they will. Put the tolls on a proper basis to return revenues necessary to make the Panama Canal a self-sustaining operation, and then let your rates be determined by the Interstate Commerce Com-mission and let the business go where it should.

Mr. WEICHEL. Are you advocating a change in the rates?
Mr. PRINCE. I cannot answer that.

Mr. WEICHEL. You are just giving this as a general principle? You are not advocating a change?

Mr. PRINCE. It is not in issue here. We think it would depend upon what the facts show. We would go into a hearing and state our position, depending upon the facts. I am not here saying, "Raise the Panama Canal tolls." I am saying the principle of this bill with respect to which I have testified is sound and should be adopted, and if it is it should eliminate all questions of subsidy and put things on a very fair basis.

Mr. O'TOOLE. We thank you very much.

Mr. PRINCE. I appreciate the courtesy of the committee.

Mr. O'TOOLE. Are there any other witnesses who desire to submit a statement or make a statement?

STATEMENT OF ALBERT W. GATOV, PRESIDENT OF THE PACIFICAMERICAN STEAMSHIP ASSOCIATION

Mr. GATOV. The association I represent encompasses most of the United States flag, the dry cargo and passenger ships operating on the Pacific coast, and I want to thank you at the outset, Mr. Chairman, for the opportunity to say a few words.

I have no prepared statement. I would like to express my pleasure at the presence on this subcommittee of Representatives Shelley and Allen, who, I understand, are not members of the subcommittee but who have a great interest in this subject and have been following it very closely.

The details of the adjustments being sought in connection with the toll situation, I think, have been amply presented by the federation,

and we fully subscribe to the viewpoints they expressed Monday and previously. We have nothing to add of a detailed nature that would not be a duplication of material that has already been discussed.

I am here at the hearings not because of any feeling that the Canal problem is other than a national problem, but because we feel that Pacific coast shipping, and the accessorial services of Pacific coast shipping, and perhaps more important than those two, the users of the services, have a greater stake in the outcome than does any other section of the country.

The Pacific Coast, in addition to being a long-haul, high-transportation-cost area, sends through the Canal about 54 percent of its water-borne commodities. And, of course, the importance of the whole Panama Canal problem is very keenly felt because of that

situation.

We also believe that the hearings have clearly indicated so far that, come what may, in respect to tolls, there is certainly warranted a reappraisal of the Canal operation and administration. We feel that such reappraisal and adjustment will remove a burden on Pacific coast water-borne commerce and shipping and, of course, that is our interest in the matter. We are not asking for a free ride. We are willing to pay our own way but cannot see that this must include the carrying of a load not even remotely connected with the commercial transiting of vessels and that there continue a complete lack of an equitable recognition of the national defense value of the Canal.

Certainly these things were brought out in some of the questions last Monday by Mr. Allen and Mr. Shelley and Mr. Thompson, and I want to state my view on that. It was partially developed and it was touched upon by the previous witness that if there were no commercial vessels transiting the Canal, and only spasmodic use by the military on an unscheduled basis we feel certain that the Canal would be maintained at the insistence of the military in a continuous operating status.

I have nothing to add of a technical nature. We are hopeful that some adjustment can be made at this session.

Addressing my remarks to the previous points raised we have never held that this is a complete answer to the shipping problem. We are thinking of it in terms of the impact on commodities. It is not a shipping problem as evidenced by the great amount of interest shown in it by Pacific coast interests: agricultural, manufacturing, processing, and distributing. They are relating this to commodities rather than to the shipping industry. In the final analysis it is the commodity that pays the way, and we are thinking of it in those terms, in terms of commodities. There is widespread interest in it on the Pacific coast. There are many shipping problems there. This is one that we think is clear cut, and one on which something can be done now. We have high hopes that something will be done at this session of Congress.

Thank you very much.

Mr. O'TOOLE. Are there any questions?

Mr. BARRETT. I wonder if you could give us your opinion as to what you think a reasonable and fair price for tonnage might be. Mr. GATOV. That is a difficult question to answer unless there is recognition of the factors that go toward making the present toll rate of 90 cents a ton.

We think that there will evolve an equitable toll rate, and we are willing to let it come after the recognition of certain factors that have been fully explained before this committee, the principal factor being that there be recognition of the fact, as the Bureau of the Budget said, that the difference between national defense value and commercial value is the width of a hair, and that there is no precise, scientific way of making that determination. However, we take that to mean that it is 50-50, and we believe that with the recognition of 50-50 value of the Canal, national defense and commercial, and making a corporate structure on a business-like basis with that in view regarding capital investment and other factors, eliminating the dual-purpose items, and charging to commercial transits only that which relates to them, we feel an equitable rate will evolve. I am not prepared to say what that might be at this time.

Mr. O'TOOLE. Mr. Weichel.

Mr. WEICHEL. The statement was made here that there are about 45 ships now engaged in the intercoastal trade, and you are talking about toll rates with reference to ships engaged in the intercoastal trade. What percentage is 45 ships of the total number using the Canal, the total number of the ships of the world using the Canal?

Mr. GATOV. I would say that it is a very minor percentage. I have not the precise percentage, and I believe a question was asked of the previous witness as to the competitive impact if toll reductions were given for the intercoastal trade. We must bear in mind, in that connection, that the intercoastal trade is perhaps one of the minor segments of the total number of users of the Canal.

Mr. WEICHEL. That is, a minor segment with reference to the use of the Canal by the ships of the world?

Mr. GATOV. That is correct.

Mr. WEICHEL. Now, we do not have any way of giving the intercoastal ships a special rate on tolls. If we give a rate to them we have to give it to the whole world, so that if we give you a dime we would have to give away a dollar to the rest of the world.

Mr. GATOV. I do not believe that there has been any expression on the part of the industry representatives that there be any unequal treatment with respect to toll rates.

Mr. WEICHEL. I mean if the percentage is small compared to the vessels of the whole world, we would have to give that rate to the whole world. You would expect that?

Mr. GATOV. Yes; I would because I am not worried about Canal tolls for any specific class of vessels, but the commerce of the whole world.

Mr. WEICHEL. Well, if we have to give it to the rest of the world, it would be cheaper to subsidize the industry you are talking about there than give it to the whole world. It would be cheaper to subsidize

them.

Mr. GATOV. To answer your question we are not specifically pointing the problem toward any segment of the American merchant marine or any merchant marine.

Mr. WEICHEL. I thought you were making that point with reference to the importance of it to the intercoastal trade out there.

Mr. GATOV. No, I do not believe I made that point, Mr. Weichel. I was talking with reference to the previous witness's remarks about the impact on his interest which was railroad competition. I was try