1 This figure reflects the approximately $150 million in tax savings resulting from the 7 percent investment tax credit and the new depreciation guidelines.

Source: Interstate Commerce Commission reports.

It has been said that deficits from passenger operations are largely responsible for the unfavorable situation of the railroads. The figures below, however, demonstrate that net railway operating income from freight operations has been declining sharply in every district of the country.

This decline in earnings has of course curtailed the buying power and impaired the credit for some of the railroads. This, in turn, has restricted the process of modernization of equipment and properties, thereby further weakening the rail carriers' competitive ability and earning power. The railroad industry estimates that its capital expenditures for modernization should approximate $2 billion annually. As shown below, however, its capital expenditures for each of the years 1956-1962 have fallen far below that mark.

We recognize that the discrimination in question can be eliminated by expanding the rate regulation of motor carriers and inland water carriers, as well as by reducing the rate regulation of the railroads. It would appear, however,

that the latter procedure is preferable. Our history and our traditions generally favor more competition rather than less. Competition results in better methods, improved service, greater efficiency, and lower costs. Moreover, competition should permit each mode of transportation to prosper in the area in which it is best suited to serve the public, thereby reducing the overall cost of transportation. We do not mean to suggest that discrimination in rate regulation is the only problem facing the railroads. There are undoubtedly other areas where correc tive measures are necessary. As in all such matters, however, total solutions cannot be accomplished in one step. We believe that in principle the bill before you constitutes an important step in the right direction. For these reasons, we respectfully urge its favorable consideration.

SCHEDULE I.-Total railroads, motor carriers, and inland waterways intercity ton-miles regulated versus unregulated

Source: 1947-58 "The Doyle Report," Jan. 3, 1961 (prepared for Senate Committee on Interstate and Foreign Commerce), with minor revisions by the Transportation Association of America. 1959-62 Interstate Commerce Commission reports (breakdown between regulated and unregulated for 1959-62 estimated by the Transportation Association of America).

SCHEDULE II.-Class I railroads-Rate of return over last 30 years

Source: "Railroad Transportation," AAR, 1921-61; 1962 partly estimated.

STATEMENT OF AMERICAN PAPER & PULP ASSOCIATION

This statement is submitted by the American Paper & Pulp Association, 122 East 42d Street, New York, N.Y., to the Surface Transportation Subcommittee of the Senate Committee on Commerce, concerning S. 1061 which is a bill "To exempt certain carriers from minimum rate regulation in the transportation of bulk commodities, agricultural and fishery products, and passengers, and for other purposes"; and S. 1062 which is a bill "To provide for strengthening and improving the national transportation system and for other purposes," and identified as the "Transportation Act of 1963."

The American Paper & Pulp Association is a federated association of 12 divisional associations to which the preponderance of manufacturing companies

in our industry belong. The American Paper & Pulp Association is broadly representative of the entire domestic industry. By way of very brief background regarding our industry, sales of paper and allied products for 1962 approxi mated $14 billion. This represented the products of some 400 companies, with 369 pulpmills, 313 papermills, and more than 4,000 converting plants located in nearly every State in the Union. Our industry employment totals some 600,000, with a wage bill in excess of $31⁄2 billion. Our Federal tax bill in 1962 approximated $600 million.

The products of the industry are distributed nationally via all forms of transportation and the various inbound products and raw materials likewise move via all modes of transportation.

The paper industry is a highly competitive industry, and, in the national distribution of its products, it is essential that the industry have the benefit of competitively adjusted transportation rates and charges which should be on the lowest reasonable basis consistent with the costs and efficient operation of the various modes of transportation.

The paper industry supports the principle of equality of opportunity for all forms of transportation and their users and undue preference to none; with greater reliance on the forces of competition and less reliance on the restraints on regulation. In other words, equal competitive opportunity under diminished regulation.

For the above reasons the American Paper & Pulp Association supports the provision of S. 1061 which provides, in part, for elimination of Interstate Com merce Commission control over minimum rates on bulk commodities, agricultural, horticultural, and fishery products.

S. 1061 specifically provides that although the Commission shall have no authority or power to determine that a certain rate, fare, or charge is lower than a reasonable minimum rate, fare, or charge, "The Commission, however, shall retain all currently effective authority and power to determine that such a rate, fare, or charge is in violation of applicable provisions against unjust discrimination, or undue or unreasonable preference or advantage."

Any fear that the rail carriers would reduce rates on bulk and agricultural commodities to such an extent that they would have to raise the rates on other traffic to offset the deficit could be controlled by the maximum rate provisions, and other sections of the Interstate Commerce Act.

The American Paper & Pulp Association is opposed to the provisions of 8. 1061 that would subject the carriers to the provisions of the antitrust laws in lie: of the provisions of section 5(a) of the Interstate Commerce Act. There are sound reasons for making such a drastic change. The carriers and the shipping public have been functioning under section 5(a) of the Interstate Commerce Act for several years and it has proven satisfactory to carriers and shippers alike We, therefore, strongly urge that section 5 (a) be retained.

With reference to S. 1062, the American Paper & Pulp Association supports the provisions of section 2 that would empower and encourage the regulatory agencies to authorize experiments by the common carriers on a voluntary bass so as to test new service combinations, new methods of providing transportatio and of pricing. We also support the provisions of section 3 of S. 1062.

Our industry opposes the transfer of powers vested in the Interstate Comerce Commission with respect to the guarantee of loans to common carries by railroad as provided in section 10 of S. 1062. The Interstate Commerce Commission which administers the Interstate Commerce Act is best qualifie to carry on this function.

We respectfully urge, therefore, that the Surface Transportation Subcommitte of the Senate Committee on Commerce report favorably on the minimum rat provisions of S. 1061 and that they leave unchanged the rules for ratemaking by continuing the section 5 (a) arrangement.

In addition, with respect to S. 1062, we respectfully urge that the Surfa Transportation Subcommittee of the Senate Committee on Commerce repor favorably on sections 2 and 3 and unfavorably on section 10. The America! Paper & Pulp Association takes no position on the other sections of S. 1062.

STATEMENT OF AMERICAN RETAIL FEDERATION

The American Retail Federation is a federation of 31 national retail ass ciations and 43 statewide organizations of retailers representing, through the

constituent membership, all types and sizes of retailers. In dealing with sections on the above numbered bills, I will indicate appropriate policy declarations which, upon recommendation of the transportation division in 1960, were adopted upon ballot by the member associations of the federation. This statement is based on consideration of the provisions contained in these bills at meetings of the transportation committee on January 17, 1963, and May 13, 1963.

S. 1061

The American Retail Federation policies contain two which have application to bills providing for the exemption of certain carriers from minimum rate regulation in the transportation of bulk commodities, agricultural and fishery products. These policies, together with the explanatory paragraph which accompanied each upon the ballot presentation are as follows:

"2. Competition within and between all modes of transportation should be encouraged or maintained, and the rate structure and regulation be designed to permit regulated carriers to compete with nonregulated carriers. (The economy of the country needs rail, motor, water, and air transportation service, and these carriers should fully compete with each other. Those carriers which are regulated by the Government and elsewhere should not be controlled so strictly that they cannot, where otherwise economically feasible, compete with carriers who, for one reason or another, are not subject to regulation.)

"3. The inherent advantages of each type of transportation should be reflected in their rate structures. (This policy expands on No. 2 above. To the extent that one type of carrier has some advantage, either in speed, cost, or equipment, it should be permitted to price its transportation service so as to capitalize on these advantages without being artificially restricted.)"

Upon reconsideration of these policies, in the light of the provisions of S. 1061, it was concluded that the objective of the proposed legislation would have little or no direct effect on traffic transported for retailers-primarily in the general category of merchandise or manufactured articles. It was anticipated that rate reductions effected by the carriers, freed from minimum rate control, would have little relationship to the rate structure of other articles of commerce. For this reason, it was concluded to express to the Congress the terms of the above policies with the recommendation that if, after receiving testimony and evidence from the interested carriers, shippers, Government agencies, and others, it is the judgment of the committee that S. 1061 would encourage competition between regulated and unregulated carriers, and if it would aid in the publication of rates for which the regulated carriers have an inherent advantage, then the bill should be approved.

S. 1062

Section 2: In the same spirit as this section of the proposed bill, we have adopted a policy which, with its submittal explanation, reads as follows:

"5. Simplicity in rate structure, classification, minimum charge, operating procedures, and service, by cooperation between shippers and carriers should be developed and supported, as necessary, to ease the burden now imposed by the complex tariff application under which charges are determined. The objectives of such simplicity should be lesser charges as well as other advantages including improved service. (Requirements imposed through legislation or through administration procedures have caused the pricing of transportation service to be complex, detailed, and technical. The cost to the carriers in the publication and maintenance of detailed tariffs results in a higher overall cost and, thus, higher rates. Retailers, in interpreting and applying these tariffs to their needs, also have added costs. To the extent that cost savings, through simplification, can be effected in corresponding savings to shippers and carriers ilike, such simplifications should be encouraged. Other benefits are expected to accrue through simplification as well. For example, elimination of delays lue to billing and rating procedures should result in faster transit time. Also, nixtures of various types of retail freight should be facilitated. Retailers' ariff files, and the checking thereof, should be reduced. However, the principal ›bjective should be lesser charges to the retailer.)"

In a discussion as to the application of this policy within the terms of section of S. 1062, it was concluded that the regulatory agencies have shown recent ndications of looking upon new departures in ratemaking or classification with nore favor. In view of the current situation, the decision was to recommend o the Congress that the provisions of section 2 are not necessary but in reporting