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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 Commission 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

ing to say that it is a very competitive situation between the railroads and the intercoastal lines. There are world-wide users of the Canal, American-flag and foreign-flag users, but the preponderance of the tonnage going through the Panama Canal is destined to the United States. I am relating that to the commodities, and the impact of the tolls has been in that category.

Mr. WEICHEL. What interest do you represent?

Mr. GATOV. The Pacific American Steamship Association which represents most of the Pacific coast operators of dry-cargo and passenger vessels.

Mr. WEICHEL. Do I still understand that the percentage of intercoastal tonnage is a very small fraction of the total commercial tonnage that passes through there?

Mr. GATOV. If I made that statement I did not mean to minimize the importance of intercoastal tonnage in this matter.

Mr. WEICHEL. Now, I am just talking about this objectively. Mr. GATOV. I would say that right now, perhaps one-third or less. than that of the transits through the Canal are intercoastal transits. Mr. WEICHEL. I mean whatever the percentage is, if that 33 percent represents the interest of the west coast, why should we give 6623 percent of the world a free ride on that basis? It would be far cheaper to just give the money to throw out there than to give twothirds of the world a free ride.

Mr. GATOV. I cannot say that you should do anything out there when you view this in the light of subsidies. We are talking about factors influencing and entering into transportation costs.

Mr. WEICHEL. The rate has to be fixed the same for everybody.

Mr. GATOV. We have advocated that the rate should be the same for everybody.

Mr. WEICHEL. Well, it is by law.

Mr. GATOV. Yes, and we have advocated that any change made be made on an equal basis with equal treatment to all.

Mr. WEICHEL. Therefore to cut it down for the intercoastal trade we would have to give two-thirds of the reduction to somebody else to give a one-third reduction out there.

Mr. GATOV. We have not advocated special consideration for the intercoastal or the domestic carriers.

Mr. WEICHEL. If we give a reduction in rate to the people out there we would have to give the rest of the world, or two-thirds, just twice as much.

Mr. GATOV. Yes. We are thinking in terms of tolls as affecting the commodity rates, and shipping rates, irrespective of whether they are American-flag vessels or foreign-flag vessels, the economy of this country, and the impact on the economy of this country.

Mr. WEICHEL. With respect to rates on things which are grown on the west coast, special commodities, you have special commodity rates for fruits transported into Ohio, for instance.

Mr. GATOV. The water lines from the west coast are not engaged in that particular type of traffic, Mr. Weichel.

Mr. WEICHEL. Well, with reference to any commodity you have special commodity rates for east-bound products going from the west coast. You have special commodity rates which are cheaper than you can ship them back out West for, and you have that special advantage now.

Mr. GATOV. You are speaking now of the domestic, intercoastal, and transcontinental traffic?

Mr. WEICHEL. Yes.

Mr. GATOV. In that respect the water lines are in the position of not necessarily making the rates. I am sure that you appreciate the fact that the rates established on intercoastal traffic are set by the railroads. The water lines because of the inherent advantages or disadvantages between two forms of transportation must, of necessity, come under those rates on traffic tonnage. Our rate pattern in the domestic service and the transcontinental service is set by the railroads. The water lines have slower service and must, necessarily, in order to attract tonnage, come under that rate set by the railroads.

Mr. WEICHEL. There are special rates for the products from the west coast moving east, and there are special rates for them by rail. Mr. GATOV. Yes, sir, that is correct, and the water lines must follow that pattern which is set by the railroads.

Mr. WEICHEL. And are there not special rates from the west coast to the east coast by water?

Mr. GATOV. The pattern for special rates is established by the railroads.

Mr. WEICHEL. Yes, but those special rates from the West to the East are not the same as the rates from the East to the West.

Mr. GATOV. Usually the commodities which are involved are different.

Mr. WEICHEL. I mean there is a preference given to products originating in that part of the country.

Mr. GATOV. That is correct, which is based on the volume of traffic moving and many other determinations that go into the making up of any rate.

Mr. WEICHEL. With respect to refrigerator ships. for fruits and vegetables, and refrigerator cars for fruits and vegetables, for instance, vegetables which come from the west coast over into Ohio and Pennsylvania, you cannot ship anything out there for the same rate that it comes east. They have all of that preference now.

Mr. GATOV. Well, speaking of fresh fruits and vegetables there is no intercoastal water service that offers that refreigerator service for carrying fresh fruits and vegetables.

Mr. WEICHEL. Were there not some refrigerator ships in service before the war?

Mr. GATOV. No, there were never any refrigerator ships in the intercoastal service. There were ships with a small amount of refrigerator space in them, but they were not a factor in large mass movements of fresh agricultural products.

Mr. WEICHEL. You are talking about tolls as part of the rate with reference to competition in transporting freight moving from the west coast to the east coast principally?

Mr. GATOV. Not necessarily principally, but to all destinations which are served by the west coast.

Mr. WEICHEL. Is that about 90 percent of it?

Mr. GATOV. No, it is not 90 percent of it.

Mr. WEICHEL. What is it?

Mr. GATOV. I would say that the intercoastal service now, that the tonnage moving in the intercoastal service from the Pacific coast now is about one-third of the Pacific coast waterborne traffic.

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