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 66% 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.

Mr. WEICHEL. One-third of it?

Mr. GATOV. Yes.

Mr. WEICHEL. What is the other part of it?

Mr. GATOV. The other part would be in the foreign trade, to the Hawaiian Islands, and to Alaska.

Mr. WEICHEL. They do not use the Canal.

Mr. GATOV. The ships going to Alaska and Hawaii do not use the Canal. Then, we have, as you know, quite an extensive service to other destinations that do use the Canal, such as the east coast of South America, the Mediterranean, to Europe, to South Africa, and to other destinations which traditionally move east-bound rather than westbound.

Mr. WEICHEL. With reference to the so-called intercoastal trade there were some 300 ships engaged in the intercoastal trade previous to the war.

Mr. GATOV. I believe it was closer to 170, Mr. Weichel.

Mr. WEICHEL. 170?

Mr. GATOV. Yes.

Mr. WEICHEL. And now there are about 45 altogether engaged in the intercoastal trade?

Mr. GATOV. I believe it is closer to 55.

Mr. WEICHEL. What accounts for that decrease?

Mr. GATOV. Well, there are several factors involved in that. One of them has been the high cost factor of vessel operation, the inability to revive a service which was not converted to war, as were the other forms of transportation like the railroads and the truck lines. The intercoastal service was abolished, as you recall, and all of the vessels were requisitioned during the war. There was no commercial service in the intercoastal trade at all during the war. The service just disappeared, and they have been confronted with all of the inherent difficulties and problems of actually reestablishing the service.

Mr. WEICHEL. As soon as the war was over the Government operated in the intercoastal service for at least 3 or 4 years. The Government operated ships on a competitive fee basis, but there was not any business. The Government operated under general agency in this intercoastal business from 1945 through 1948.

Mr. GATOV. Yes; I recall that experience very well, and I think that points up my statement. It was like trying to change the course of a river. The traffic pattern had been set at that time, and the land carriers had the traffic. The traditional users of water transportation were in a position where they could use other forms of transportation. To cite one example, there was a tremendous rush for commodities to take care of country-wide or Nation-wide shortages, and there was use of the faster forms of transportation apparently in that particular domestic market. The cost of transportation was not a factor, and they used the fastest form of transportation. On the other hand, the habit or pattern was set in use during the war, and there was no need to go back to the old established routes of the water users, but they came back very slightly, as you recall.

Mr. WEICHEL. Do you mean that the shippers should give you a share of the traffic whether they want it or not or that you should get it on a competitive basis?

Mr. GATOV. I believe the factor which leads any businessman to use one form of transportation over another is the economic factor,

and the determination is, of course, his. It is not a question of sentiment or being willing to support one form of transportation out of friendship. It is a dollars-and-cents proposition as it always has been. Mr. WEICHEL. Are the rates too high in intercoastal transportation? Mr. GATOV. What rates?

Mr. WEICHEL. Are the rates too high on water?

Mr. GATOV. I think that should be answered by a shipper.

Mr. WEICHEL. Is it not sort of answered by the fact that you had 300 ships in the intercoastal service before and now you have only 45 ships in it?

Mr. GATOV. No; I do not think so. I think the intercoastal services are still in the process of being reconstructed.

Mr. WEICHEL. How, by somebody giving them some money through an increase in rates or what?

Mr. GATOV. There are several factors involved. One of them is the fact that the buyers' market and sellers' market situation is developing to a point where there are many instances where inventories have been taken care of, and the rush to get goods to market quickly has disappeared and there is a more orderly method of inventorying and warehousing. As a result of this they revert to the most economical form of transportation which is, and traditionally has been, water transportation.

Mr. WEICHEL. Referring to the intercoastal shipping operations and with reference to the carriage of freight, have they not had an application before the Interstate Commerce Commission which has been pending for the last 4 years, an application for a higher rate?

Mr. GATOV. I think you are speaking of Docket 164, Mr. Weichel, and I do not know the details of that.

Mr. WEICHEL. Is there such an application pending for increased rates?

Mr. GATOV. No; there is not-increased rates?

Mr. WEICHEL. Yes; increased rates for water transportation intercoastally?

Mr. GATOV. I am not a rate expert, but I believe that I am correct in saying that there is no such an application pending before the ICC by the water carriers.

Mr. WEICHEL. They have not asked for increased rates over those that they received in 1939?

Mr. GATOV. As I explained before, I will preface my remark by saying that I am not a rate expert.

Mr. WEICHEL. I mean as a general thing, I thought that was true. Mr. GATOV. The water-transportation segment, the intercoastal segment of the American merchant marine is in the position of being guided on rate matters by the rate determinations, or the rate practices established to support the railroads.

Mr. WEICHEL. No, I did not mean that. We had some testimony given before this committee by one of the Commissioners of the Interstate Commerce Commission, and it was my understanding from that testimony, and for some of the ship operators, that they have asked for an increase in rates on intercoastal carriage as common carriers. I understand that application is still pending. I also understand that

the increased cost of loading and unloading vessels, the increased cost of stevedoring was from 100 to 200 or 300 percent, and that those engaged in water transportation claimed that they were not getting enough money to haul freight from the east coast to the west coast, and from the west coast to the east coast. That was my understanding from the testimony given before this committee.

Now, do I understand from you that they have not asked for anything like that, that they are satisfied with the present rates, but that they want the toll cut down so as to be able to compete, is that the proposition now?

Mr. GATOV. No; it is not. First of all, I am not familiar with the proceedings before the ICC in that connection.

Mr. WEICHEL. If you are operating ships intercoastally I thought you might know whether you were asking for an increase in rates, whether you were satisfied with existing rates, or whether they were high enough to bear the stevedoring charges in the rates?

Mr. GATOV. I do not believe that the ICC has any regulatory powers over setting stevedoring rates. That is a cost factor in determining them, perhaps.

Mr. WEICHEL. Yes, they do not set those rates.

Mr. GATOV. I must say again, that I am not familiar with the proceeding which you mentioned, Mr. Weichel.

Mr. WEICHEL. I mentioned that in view of the fact that you operate intercoastal ships.

Mr. GATOV. I believe you have reference to a docket before the ICC that had to do with the competitive situation of the railroads on certain noncompensatory rates. It had to do with the proposed investigation of certain noncompensatory transcontinental rates.

Mr. WEICHEL. On the basis that the railroads are not important enough, or that the shipping companies should get more, is that correct?

Mr. GATOV. I do not believe that is substantially the issue before the ICC, if it is still there, and I am not sure that it is.

Mr. WEICHEL. Is marine transportation getting enough return, or is the rate high enough to carry intercoastal and stevedoring rates?

Mr. GATOV. I cannot answer that. It is beyond the province of the work that I do with the association.

Mr. WEICHEL. Does not your association have any idea whether they are getting enough money for hauling freight back and forth? Mr. GATOV. Our association has no rate making in it-

Mr. WEICHEL (interposing). Then they do not care with reference to the rates received for hauling freight back and forth?

Mr. GATOV. Yes; we have a great interest in it, but we do not handle rate proceedings.

Mr. WEICHEL. The only rate proceeding you are interested in is the question of the tolls

Mr. GATOV. I am interested in the factors, and among them is the Canal toll and the rate.

Mr. WEICHEL. But you are not interested in these other factors with reference to the cost of hauling freight from the east coast to the west coast and the rates set by the ICC?

Mr. GATOV. I am very much interested in those matters, but our association does not delve into those matters.