Memphis, Tenn. On March 12, 1954, the rate was lowered to 110 cents; on May 4, to 90 cents; on June 13, to 80 cents; and on July 30, to 75 cents. Thus, in just 13 months the rate was cut in half, while the commercial rate remained far greater than even the original rate quoted the Government.

What's wrong with this?

The primary objection to competition of this sort is that it discriminates in favor of the Government. If the reductions are warranted, why not let shippers enjoy them too? If these shippers, on the other hand, obtain a rate from a carrier that is lower than the officially published rate, they are subject to a fine and imprisonment.

No one should be against free competition when it is clearly in the public interest. However, regulation of rates and services of public carriers engaged in interstate commerce has been considered a "must" in this country since 1887. While many changes have been made in the original act, and many changes are being sought by different groups today, the fact remains that no recognized transport group, carrier or shipper, seeks to destroy the principle of regulation itself. Two sets of rules?

Today, we have two sets of rules in public carrier rate making. The one for the Government says that complete freedom of competition is all right. The one for the public says that it must govern itself according to established rules and regulations considered necessary for the good of all.

Under our present transportation statutes, the Interstate Commerce Commission is directed, among other things, to foster sound economic conditions in transportation and to prevent unjust discriminations, undue preferences or advantages, or unfair or destructive competitive practices. Unfortunately, there is a difference of opinion about whether these principles apply to Government traffic. Example.-Despite an admonition by the Senate Appropriations Committee last year to executive agencies "to pay full heed to the national transportation policy in their dealings with carriers," a high traffic official of GSA stated last August that these agencies have no such responsibility.

The States get in the act

To make matters worse, this right to get special reduced rates from otherwise regulated carriers extends to the State and local governments as well, and they are taking advantage of the situation to get a cheaper ride.

Example.-A special report, in 1953, to the distillers industry traffic executives pointed out that so-called monopoly States (State controlled liquor monopolies) were using this privilege to gain an advantage over open States, thereby disrupting the industry's rate structure.

Why this Government right?

The records indicate that this right was granted in the original Interstate Commerce Act of 1887 to sanction previous agreements between the Government and carriers for reduced rates. Many railroads, prior to passage of this act, received land-grants from the Federal Government and other benefits from State and local governments. These roads, in return, had to move Government traffic at reduced rates over the land-grant mileage.

Other railroads wishing to share in this Government traffic had to meet the lower rates. The specific provision permitted such competition without violating the act. It also permitted other forms of transport, who later came under the ICC, to compete for the Government's traffic.

The reason disappears

Government-sponsored studies in the thirties and early forties clearly proved that the railroads had through rate preferences repaid the Government for these land-grants. As a result, Congress repealed the land-grant provision, stating in 1945 that:

"✶✶✶ the full commercial rates, fares, or charges shall be paid for transportation by any common carrier subject to the Interstate Commerce Act of any persons or property for the United States. * * *"

The right remains

Unfortunately, at the same time, Congress left the door open for continuing cutrates to the Government by keeping in the act the provision that:

“* * * nothing in this part shall prevent the carriage, storage, or handling of property free or at reduced rates for the United States, State, or municipal gov

ernments,

or the transportation of persons for the United States Government free or at reduced rates. * * *"

What should be done?

The Government should be capable of negotiating with carriers for rates in the same manner as shippers in general. There is no valid reason why it should foster unhealthy conditions by its traffic management practices and at the same time try to foster healthy conditions through regulation.

Clearly the provision quoted immediately above is contrary to the principles of transportation regulation. The only solution is to have it repealed.

Mr. HARRIS. I observed in your statement that you read a moment ago the priority items listed for 1956. The fifth one that you mentioned was opposition to repeal of the bulk commodity exemption.

I suppose you would much prefer not to take any action on that subject in 1956, at all, would you?

Mr. BAKER. I don't think it is very well worded the way I read it. What it really was, was instruction to the staff about what to worry about most. It did reflect what the Board felt was the most important

issue.

Mr. HARRIS. Your entire statement will be included in the record. Do you have a further statement to make?

Mr. BAKER. No, sir.

Mr. HARRIS. Mr. Hammond, did you have a further statement to make at this point?

Mr. HAMMOND. I just want to put in the record, or point up certain examples here of where government is benefiting from cut-rates on which the private shipper, or commercial shipper is having to pick up the tab.

In other words, where commercial shipping is actually having to subsidize Government. And I believe that if your committee, Mr. Chairman, were to inquire of a number of shippers that they possibly would get quite a few examples similar to these that would show very definitely that the Government is being subsidized by the commercial shipper.

Now, these two examples are very brief. They are contained in this memo that you made a part of the record, but let me point it up this

way:

The first example as late as June 1954, one Government agency was using a 1942 tariff for determining rates on shipments in the east, while commercial shippers were obliged to use current tariffs with rates 40 percent or more higher.

I think that is a good concrete example of where the commercial shipper is paying a lot more than Government.

Mr. Dolliver. What was the commodity?

Mr. HAMMOND. Canned goods.

Mr. HARRIS. Do you have another point?

Mr. HAMMOND. One other example on the second page:

June 1953, carriers quoted the Government a rate of 150 cents for 100 pounds to move wool and nylon shirts from Anderson, S. C., to Memphis, Tenn. On March 12, 1944, the rate was lowered to 110 cents; on May 4, to 90 cents; on June 13 to 80 cents, and on July 30 to 75 cents. Thus, in just 13 months the rate was cut in half, while the commercial rate remained far greater than even the original rate quoted the Government.

Those are just two examples, and I know you can get many more and I am sure during the hearings you are going to hear from many

groups such as the NIT League, National Chamber of Commerce, and National Farmers Cooperative which will bring out I am hopeful many more examples of that character.

Mr. HARRIS. You heard me ask the question of the General Services Administration a moment ago. Is it not true that this procedure is contrary to the explanation we had this morning of what was a sound national transportation system?

Mr. HAMMOND. I believe it was, sir.

Mr. HARRIS. Do any members of the committee have any questions of these gentlemen?

Mr. HINSHAW. I would like to have Mr. Hammond include that curious example he has on page 3, of a Government rate, which has nothing to do with the Federal Government.

Mr. HAMMOND. That is correct. The example there is a case of where the monopoly States on liquor monopoly are using, of course, section 22, and thus they have an unfair advantage over the open States which therefore disrupts the industry's rate structure.

I might add that when I had a small part to play in Montgomery County, Md., where we have the only monopoly county in the United States, that the county felt obligated to use section 22 quotations in order to better compete with other localities.

Mr. HINSHAW. Do they obtain a section 22 quotation for shipments outside the county?

Mr. HAMMOND. I don't know about that.

Mr. HARRIS. Thank you very much, Dr. Baker, and gentlemen.

In view of the fact that some other people have been given this room at 4 o'clock for some special occasion, we will adjourn the committee at this time.

Tomorrow the House meets early. It is scheduled to meet at 10 o'clock unless later on in the evening it is changed.

That means, of course, we will not have an opportunity to continue the hearings tomorrow.

On Tuesday of next week the full committee has an executive session. It means that we cannot meet Tuesday. So the committee will adjourn until Wednesday morning at 10 o'clock in our own committee room in the new building. Mr. James G. Lyne, chairman of the Federation for Railroad Progress, will be the first witness.

The committee is adjourned.

(Thereupon, at 4:05 p. m., the committee was recessed, to reconvene at 10 a. m. Wednesday, May 2, 1956.)

TRANSPORTATION POLICY

WEDNESDAY, MAY 2, 1956

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON TRANSPORTATION AND COMMUNICATIONS,
OF THE COMMITTEE ON INSTERSTATE AND FOREIGN COMMERCE,

Washington, D. C. The subcommittee met, pursuant to adjournment, at 10 a. m., in room 1334, New House Office Building, Hon. Oren Harris (chairman of the subcommittee) presiding.

Mr. HARRIS. The committee will please be in order.

The Chair observes that our colleague, Mr. Horan, has been in the audience, and was going to make a statement and present a witness this morning from Spokane, Wash., Mr. Loren W. Markham.

We have been advised by our colleague, Mr. Horan, that Mr. Markham represents several groups out in the Northwest, and because of his position with the United States Chamber of Commerce here, his time is, like the time of some of the rest of us, quite tight.

Mr. Markham has a statement that he would like to make which will require only a few minutes.

Mr. Markham, we will be glad to hear from you.

STATEMENT OF LOREN W. MARKHAM, MANAGER, SPOKANE CHAMBER OF COMMERCE, SPOKANE, WASH.

Mr. MARKHAM. Thank you, Mr. Chairman.

Mr. HARRIS. You are Mr. Loren Markham, general manager of the Spokane Chamber of Commerce?

Mr. MARKHAM. That is right, sir.

Mr. HARRIS. I understood you were here also in the capacity of representing other organizations.

Mr. MARKHAM. That is right; the Intermountain Freight Association and the Utah Rate Association. I speak for them. I do not represent them.

I will make this statement very brief.

I appreciate the opportunity of presenting this statement to the members of the House Interstate and Foreign Commerce Committee and to express Spokane's and the intermountain area's concern over certain revisions of the Interstate Commerce Act proposed by H. R. 6141 and Senate bill 1920. The section of the bill with which the area I represent is particularly concerned is the one which amends the fourth section, the long-short haul clause of the act.

For many years the Spokane Chamber of Commerce has worked for fair and equitable freight rates for the inland empire. From 1900 to 1920 our major effort was directed at strengthening the fourth

section of the Interstate Commerce Act so that discrimination against interior points would be eliminated. Since 1920 our efforts have been dedicated to the protection of the strengthened fourth section. Since the entire intermountain area suffered from the same discrimination that penalized the inland empire, it was only natural that the businessmen of Spokane, Salt Lake City, Reno, Boise, Helena, Cheyenne, Phoenix, and other cities should band together to form an area association. This was done in 1916, and the association was known as the Intermediate Rate Association. It was active from 1916 to 1940.

Following the defeat of the Pettingill bill, which had proposed a major revision of the fourth section, it became inactive. It seemed at that time that the protective clauses of the fourth section of the Interstate Commerce Act were safe from further attack. However, the organization was activated again in 1952 when an effort was made within the Transportation Association of America to press for legislation to amend the fourth section. Officers and directors again were elected for the association from the 11 Western States. Morris Rosenblatt of Salt Lake City was elected president, and I was elected secretary. (Incidentally, following a thorough discussion with the Transportation Association at that time, the Transportation Association of America decided against pressing for fourth section revision.) I have been asked by the president of the Intermediate Rate Association to appear before this committee on behalf of the association as well as on behalf of the Spokane Chamber of Commerce.

Prior to 1918 discriminatory long-short haul practices were so prevalent that wholesalers and manufacturers of the intermountain area were heavily penalized. A classic example from those days was the freight rate on canned goods from the east coast to the mountain area. It was cheaper at that time to ship a car of canned goods from Boston to Seattle and back to Boston again than to ship the same car of canned goods from Boston to Granger, Wyo. This shipment I am referring to was by rail. Here are a few examples of rate discriminations that were prevalent as late as August 1915:

You may reason that these examples I am citing are all miscellaneous items that did not brook large in our economic life. I am citing them deliberately to show how widespread discrimination was;