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railroads submitted to the Surface Transportation and Communications Subcommittee of the Senate Interstate and Foreign Commerce Committee on March 26, Prof. Marvin J. Barloon, of Western Reserve University, conclusively documented the operating prosperity of Ohio Valley railroads. Since the end of World War II, their experience has been markedly superior to the national average of class I railroads, with respect to volume of freight, freight revenue, and operating profits. Railway carloadings in the Ohio Valley have likewise increased more than the national average, especially in more recent years.
Indeed, Ohio River barge traffic contributes to railroad prosperity outside the valley. A growing portion of Ohio River traffic moves in and out of the Mississippi River, carrying massive tonnages to and from points as far away as Minneapolis and New Orleans. Professor Barloon's testimony demonstrated that the railroads of the Mississippi Valley likewise have been enjoying a markedly higher volume of freight, freight revenue and operating profit than the national average and that this is particularly true of 2 out of 3 of the lines most exclusively waterway competitive.
Since the end of World War II, the volume of freight carried by barge on the Ohio and Mississippi Rivers has more than tripled. If waterway competition were damaging to the railroads, one would consequently have expected the river valley railroads to be among the chief sufferers. In extensively documented detail, however, Professor Barloon's testimony demonstrated them to have been among the chief beneficiaries. Your attention is respectfully invited to his testimony as it appears in the records of the Smathers committee hearings.
Enactment into law of the principles embodied in section 5 of S. 3778 would invite a short-sighted rate-cutting attack by these railroads on their smaller waterway competitors. Because of high fixed costs, railroad management is subject to the irresistible temptation to cut competitive rates below cost, and because of their huge backlog of nonwater-competitive traffic, both inside and outside the river valleys, the railroads can replenish their competitive losses indefinitely. Railroads are vastly bigger business firms than the more specialized water carriers, and by selective rate cutting, they can destroy the water carriers one by one. Having cleared the field of significant waterway competition, the railroads would then be free to restore rates to higher levels, the historically invariable sequel to transportation rate wars. If any doubt persists as to the realism of this prospect, reference to the competitive extermination of waterway transportation prior to the adoption of the Act to regulate Commerce of 1887, should dispel the uncertainty, Indeed, the terms of the Smathers bill impose an even greater threat. In the setting of the financial assistance to the railroads provided in the Smathers bill, the rate wars permitted by section 5 would in effect be underwritten by the Federal Government.
May this association respectfully point out that the objective of the Smathers bill is to relieve the railroads from operating and financial distress. In its destructive impact on industrial development in the Ohio Valley, section 5 would have the opposite effect. Only in the short run and in a superficial sense, would it provide any assistance to the valley railroads. Its enduring effects, on the other hand, would be the stifling of further industrial growth, based on river-borne commerce, to the long run hardship of the valley railroads themselves.
To permit the railroads to embark on this destructive course of conduct would deprive the Nation of the inherent advantages of low-cost water transportation and of a major national defense asset-the modern barge fleet. It would, moreover, directly conflict with the established policy of Congress, reflected in the Hoch-Smith resolution and the national transportation policy to encourage all modes of transport and to preserve the inherent advantages of each. Reestablishment of the railroad monopoly would inevitably increase transport costs and thus discourage industrial development based upon water transport; it would moreover penalize the farmers with lower realization for grain, and it would result in the raising of prices to consumers of electric power and countless commodities essential to daily life.
Finally, adoption of this provision would impair the entire national investment in improved navigation facilities on the inland waterways and nullify the hopes of many millions of people in the great river valleys for a better life based upon the improvement and fuller utilization of the Nation's waterways as arteries of commerce.
Under such a short-sighted policy, the railroads themselves would be among the principal sufferers. For in the river valleys where bulk commodities and
fuel move by water at low rates to industrial plants, the railroads have reaped a rich harvest in higher value freight on finished goods.
This association is keenly aware of the importance of the railroads to the national economy. It favors such sound and constructive measures as may be required to relieve their financial difficulties. But it is also convinced that all means of transport must be fostered and preserved and that no one mode should be permitted to destroy the others.
We respectfully submit the principles of section 5 of the Smathers bill are contrary to the national interest and should not be enacted into law.
LUCKENBACH STEAMSHIP CO., INC.,
New York, N. Y., May 21, 1958.
United States Senate, Washington, D. C.
NEW YORK, May 14, 1958.
United States, Senate, Washington, D.C.:
Senator Smathers stressed importance of rate section and indicated is so treated in bill as to preserve prohibition in national transportation policy against unfair and destructive competition. This is not clear and may be otherwise interpreted ; at least we have reason to feel that the purpose of the railroad recommendation was to destroy the national transportation policy in this respect by amendment to section 15–A. The Interstate Commerce Commission recently condemned such relaxation of rate control under 15-A on the basis it would permit unfair and destructive competition.
Reasonable minimum rate as proposed in section 5 of the bill may also be construed on added traffic theory instead of on fully distributed cost and profit and accentuate the old railroad game of cutthroat competition against intercoastal and coastwise water carriers while making up such deficits by upward adjustment of noncompetitive rates. All carriers should, in public interest, remain restrained constantly by the provisions of the national transportation policy against unfair and destructive competition.
The intercoastal and coastwise lines disappeared through requisition for last world war service and partial restoration has been achieved against great odds. Even this partial restoration has been losing ground recently and the records will show that there is no financial aid needed by the railroads that is not needed as much or more so by its competitors in coastwise and intercoastal trade.
For our company we must insist, in equity, that any financial assistance made available to our rail competitors should likewise be available to us.
LUCKENBACH STEAMSHIP CO., INC.,
UNITED STATES SENATE,
May 15, 1958.
United States Senate, Washington, D. C.
Deanne Street, New Orleans, La., and Mr. Lindsey J. Williams, port agent, International Union, AFL-CIO, 523 Bienville Street, New Orleans, La., expressing opposition on the part of their organizations to section 5 of S. 3778, dealing with changing the rule of ratemaking in the Interstate Commerce Act. I understand your committee is to hold hearings on this legislation on May 20 and 21, and I would appreciate it if you would incorporate the views expressed in the attached telegram in the hearings.
I would also appreciate it if you would place Mr. Stoddard and Mr. Williams
ALLEN J. ELLENDER,
MAY 20, 1958. Hon. ALLEN J. ELLENDER, United States Senate,
Washington, D.O. DEAR SENATOR: Thank you for your letter dated May 15 with which you enclosed telegrams from A. P. Stoddard, president, Central Labor Council of New Orleans, and Lindsey J. Williams, port agent, International Union, AFL-CIO, concerning S. 3778.
I will be glad to have these telegrams made a part of the printed hearings on this bill and in accordance with your request I am placing both names on the mailing list to receive copies of the hearings when they are printed. With best wishes, I am Sincerely yours,
WARREN G. MAGNUSON, Chairman.
NEW ORLEANS, LA., May 13, 1958. Hon. ALLEN J. ELLENDER,
Washington, D. O.: Section 5 of bill S. 3778, by Senator Smathers, contains provision highly dangerous to competitive position of coastwise and intercoastal shipping. This provision would deprive Interstate Commerce Commission of power to consider ship freight rates in fixing rail rates. This would enable railroads to engage in rate cutting which would be ruinous to maritime competition, with resulting loss of employment to thousands of merchant seamen, and would be a severe blow to the economy of the port of New Orleans. Membership of the Seafarers International Union of North America in Louisiana respectfully urges you to vigorously support efforts to strike section 5 from S. 3778 and to call upon the appropriate Senate committees to give the maritime industries at least an opportunity to be heard on this legislation of such vital importance to the port of New Orleans and maritime labor and management in Louisiana.
LINDSEY J. WILLIAMS,
NEW ORLEANS, LA., May 13, 1958. Hon. ALLEN J. ELLENDER,
United States Senator, Senate Office Building, Washington, D. C.: Delegates to Central Labor Council of New Orleans and vicinity, AFL-CIO, representing more than 100 affiliated trade unions, have instructed me to inform you of our grave concern over the effect of section 5 of bill S. 3778, by Senator Smathers, on maritime workers in particular and economy of port of New Orleans in general. This provision in S. 3778 would deprive Interstate Commerce Commission of authority to consider ship freight rates in fixing rail rates, which would enable railroads to cut rates to levels which would have effect of killing off maritime competition. Placing coastwise intercoastal shipping at such a ruinous competitive disadvantage would result in widespread unemployment of maritime workers and would greatly depress the present expanding economy of the port of New Orleans. We honestly urge you to oppose section 5 of bill S. 3778 and give your support to efforts to strike it from the bill.
A. P. STODDARD, President, Central Labor Council of New Orleans and Vicinity, AFL-CI0.
STATEMENT OF HARRY E. O'REILLY ON BEHALF OF MARITIME TRADES DEPARTMENT,
AFL-CIO My name is Harry E. O'Reilly. I am executive secretary-treasurer of the Maritime Trades Department, AFL-CIO, 815 Sixteenth Street, NW., Washington, D. C. A list of the affiliates of the department is attached to this statement. The affiliates to the department have a membership in excess of 200,000. Among the affiliates are the Seafarers' International Union of North America, representing unlicensed seamen; the International Organization of Masters, Mates and Pilots, representing licensed deck officers; and the Marine Engineers' Beneficial Association, representing licensed engine department officers.
After World War I, after World War II, and after the Korean War the American merchant marine was allowed to decline disastrously. The merchant marine has been called the fourth arm of our defense. Our military authorities tell us that a merchant marine adequate to our national defense would be one which carried at least 50 percent of the foreign commerce of the United States. In 1947, the American merchant marine carried 50 percent of our exports, and more than 50 percent of our imports. In 1954, the American merchant marine carried less than 25 percent of our exports and less than a third of our imports. The shrinkage of the American merchant marine is continuous and increasing from year to year. From March 1, 1957, to March 1, 1958, the number of unlicensed seamen employed on American ships fell from 56,000 to 47,000, or more than 16 percent. From 1947 to 1957, the number of employed seamen fell by 50 percent. The existing merchant marine is therefore inadequate for our national defense and for our economy.
These facts prove the decay of the American merchant marine, which is incomprehensive when it is remembered that Congress has repeatedly declared that it is the policy of the United States to maintain a merchant marine which is adequate for our economic and military needs.
We have followed with great interest the studies which have been made by committees of the Congress, and notably the Surface Transportation Subcommittee of this committee, of the present plight of the railroads. We fully recognize the importance of the railroad system to all phases of our economy, including maritime. The maritime unions believe in and vigorously support aid to the railroads. But we do not believe that the prosperity of the railroads should be promoted at the expense of other forms of transportation which are economically indispensable to the welfare of this country. We do not believe that it will be, or ought to be, the policy of Congress to cripple further other forms of transportation, in the vain hope that by destroying other essential segments of our transportation system we can help the railroads. We believe that Congress, in adopting the national transportation policy embodied in the Act of September 18, 1920, correctly set forth the conditions upon which a powerful and efficient transportation system can be developed. In that policy, Congress declared that:
"It is hereby declared to be the national transportation policy of the Congress to provide for fair and impartial regulation of all modes of transportation subject to the provisions of this act, so administered as to recognize and preserve the inherent advantages of each; to promote safe, adequate, economical, and efficient service and foster sound economic conditions in transportation and among the several carriers; to encourage the establishment and maintenance of reasonable charges for transportation services, without unjust discriminations, undue preferences or advantages, or unfair or destructive competitive practices; to cooperate with the several States and the duly authorized officials thereof; and to encourage fair wages and equitable working conditions; all to the end of developing, coordinating, and preserving a national transportation system by water, highway, and rail, as well as other means, adequate to meet the needs of the commerce of the United States, of the Postal Service, and of the national defense. All of the provisions of this act shall be administered and enforced with a view to carrying out the above declaration of policy.” 1
We think it will be a tragic blunder if this transportation policy is abandoned. Generally speaking, we support the provisions of the Smathers bill, S. 3778, which is designed to provide important assistance to our railroads. We believe that the author and the sponsors of that bill have conceived it as an instrument for effectuating the national transportation policy of Congress. We believe that, in the main, the Smathers bill will accomplish that desirable result.
1 United States Code Annotated, title 49, Transportation, secs. 1 to 15, p. 49.
However, we believe that section 5 of the Smathers bill, which would amend section 15a of the Interstate Commerce Act, is, unintentionally and inadvertently, dangerous to our national transportation system, and that its enactment would not only sabotage our national transportation policy, but seal the doom of coastwise shipping.
As we understand section 5 of the Smathers bill, it would deprive the Interstate Commerce Commission of the power to take into account other forms of competitive transportation in determining the reasonableness of railroad rates.
We believe that enactment of that section would enable the railroads to complete their destruction of coastwise and intercoastal shipping. We say complete, because in the last 20 years the railroads and other forms of land transportation have reduced coastwise carriage of freight from 5.6 million tons to less than 1.2 million tons, or almost 80 percent. Even under existing laws, the railroads are filing rate cuts between ports which, if the Interstate Commerce Commission approves them, will drive coastwise operators out of business. Indeed, at the present time there are only two coastwise operators on the Atlantic and Gulf coasts, and they are suffering desperately from rate cuts at the very time when, in other areas, the railroads are insisting on and receiving permission to increase their rates drastically. It is clear from past history, from proceedings now pending before the Interstate Commerce Commission, and from the testimony of the experts, that coastwise shipping could not endure the unregulated and unrestrained competitive tactics which the railroads could exploit if section 5 of the Smathers bill became law.
The two shipping companies now operating in our Atlantic and Gulf coastal trade are manned by the members of affiliates of this Department. They are Seatrain and Pan Atlantic. Thus far they have withstood the competition by other forms of transportation; they have developed a very high degree of efficiency, and have contributed substantially to the prosperity of our Atlantic and Gulf ports. The management of these companies have shown themselves to be bold and imaginative, practical and efficient. They have won important places in the economic system of the Atlantic and Gulf areas. They have provided employment for seamen, longshoremen, warehousemen, and all of the other trades which are dependent upon maritime. They have won the respect and confidence of the communities they serve. We believe that, if they are permitted to continue their operations under fair and reasonable competition, they will grow and expand and with ever-increasing efficiency serve the economy and national defense. But we believe that these two companies, among others, would be destroyed if section 5 of the Smathers bill became law. Perhaps the best description of what their plight would be under the Smathers section was contained in the report on the ICC's legislative committee with respect to the bill which became the Transportation Act of 1940. I quote:
"Let us suppose, for example, a situation where competing railroads, coastwise steamship lines, and trucks are all maintaining, to their own and the shippers' satisfaction in general, a comparatively high level of freight rates on various packaged goods of high value, and some carrier, for the sake of a temporary advantage, undertakes to cut these rates. If this must be allowed, ultimately all the competing rates will be reduced and a hole created in carrier revenues which may make it necessary to increase rates on traffic less able to stand the burden." 2
We agree wholeheartedly with that prediction, and we concur in the conclusion of the Commission which said:
“We think that it should not be allowed, and that the Commission should be in a position to prevent such a train of events by exercise of its authority over minimum rates."
We do not believe that the economic facts of our time indicate that it would be prudent for the Congress to destroy what little remains of our coastal and intercoastal transportation system. We believe that the efficient and progressive companies which have been able to thrive should be permitted to live and prosper. While foreign competitors are swarming in our ports, and threatening to undermine the standards of our maritime industry, we do not believe that Congress should, deliberately or by mistake, expedite destruction of the American merchant marine. Therefore we strongly recommend that section 5 be deleted from the Smathers bill.
Surface transportation (ratemaking legislation). Hearings before a subcommittee of the Committee on Interstate and Foreign Commerce, House of Representatives, 85th Cong., 1st sess., April 2, 3, 4, 5, 10, and 11, 1957.