This is due to their present policy of making competitive rates on an out-of-pocket basis, the same basis on which they seek to establish a criteria for the establishment of a minimum-maximum rate structure in the proposed legislation now under consideration by this subcommittee.

There have been public pronouncements by several railroad presidents, in which they severely criticize their own industry for failure to apply needed reforms to effect a better financial and service position for the rail carriers. Managerial discretion within the transportation industry is possible to effect many needed reforms, but the railroads have not pursued that avenue. Apparently they want legal authority to apply such discretion to only that area of their operations where there is competition with other modes of transportation, and particularly the inland waterway industry.

If the characteristics of the various modes of transportation were equal or nearly equal, if they had the inherent abilities to perform equally at all levels of service, and were equally competitive as to equipment and geographical distribution of services, if these things were true, there might be a valid basis for removal of the economic regulatory restraints now imposed. But they are not equal.

It was decided in 1887 that equality of service was not sufficient to allow the various modes of transportation to operate in open, unrestrained competition with each other. Their inherent characteristics have not changed and will not change to make them equal for competitive purposes. The railroads are still tied to their rail systems. They must interchange service and equipment, by which interchange they pervade the entire 48 States. They also must operate multipleunit carriers. Trucks are single-unit operations. Trucklines seldom interchange equipment and services, and they have definite load limits. Barges and towboats are tied to the rivers, canals, and intercoastal waterways. They are slow and their minimum unit load is equal to the average load of 20 freight cars. They seldom exchange equipment and services.

Freedom to exercise unrestrained competition between these various modes of transportation gives a license to the railroads, as the dominant, all-pervasive mode of transportation, to destroy their competi tion as they see fit to do so. They plead that such is not their intention, but why do they seek a legal right to do so?

The expressed intent of Congress, in enacting the 1940 Declaration of National Transportation Policy, was to have the Interstate Commerce Commission umpire competitive practices as a part of the overall regulation in regard to those carriers subject to other forms of regulation by the Commission. The policy declaration proposed in H. R. 6141 and H. R. 6142 not only removes the safeguard against destructive competition but actually seeks "to encourage and promote full competition between modes of transportation," while retaining the general framework of regulation. This is done under the concept, as stated in the first sentence of the declaration, that the transportation industry should develop under the "free enterprise system."

Economic regulation by law, as we have it with regard to certain segments of the transportation industry, and the "free enterprise system" are incompatible to the extent that an industry cannot be both free and regulated. Congress recognized that in enacting the first Interstate Commerce Act and reemphasized it in the policy declaration

of the 1940 act. There can be an area of freedom within regulation limits, but that free area must be definitely defined. It is defined in the present law.

The general position of the barge and towing vessel industry is that if there is to be economic regulation of the transportation industry, as apparently there is, then with some minor changes the present regulatory law, properly administered, is sufficient to meet the needs of the industry and the public. However, water carriers are suffering because of various interpretations of the law by the Interstate Commerce Commission as to its duties under the national transportation policy (sec. 4 of the Interstate Commerce Act) and the ratemaking sec. (15a)).

The Commission, in the exercise of discretionary authority in the interpretation and application of these two sections in particular, is imposing unnecessary hardship upon the water carrier industry. While generally satisfied with the present law, there is widespread dissatisfaction within the industry over its administration; it does not desire to have application of the law or of regulatory authority extended, but rather to have the present law strengthened by more definitive legislation to guide the Commission in its interpretation and application.

As an example of the inequalities that result from present application of the law by the Commission, railroad interests have appeared approximately 12 times in the last 10 years seeking general horizontal increases to offset increased operating costs, and they have obtained from the Commission substantially what they sought. Simultaneously they also sought and received authority to place maximum holddowns, thus limiting the increase on certain specified commodities invariably best suited to and which move largely by carriers on the inland waterways, such as sulfur, coal, iron, and steel products. This was done in face of the fact that the increased operating costs sought to offset general rate increases were in no way peculiar to the railroad industry but also applied to the barge and towing-vessel industry. The railroads have followed a theory in such cases of seeking rate increases on noncompetitive commerce, while seeking holddowns on competitive commerce. As a result, our industry has suffered unnecessarily.

During the period the railroads sought and received these 12 general rate increases, representatives of the same rail interests were seeking authority from the Interstate Commerce Commission to cut specific rates, in an effort to eliminate water-carrier competition, and authority was obtained to cut many such rates. Undoubtedly some, if not all, of these competitive rate cuts were on a deficit basis, but they were offset by revenue from general increases or rates applied to noncompetitive traffic.

The rail lines have been eminently successful in this dual role of working with one hand to raise rates in general and apply holddowns, while working with the other hand to obtain specific rate reductions where their traffic competed or allegedly competed-with water carriers. Their success is demonstrated in the records that show a decrease on some of their competitive rates of as much as 60 percent, while at the same time they obtained increases on commodities in general of as much as 10 to 20 percent. Many of the reduced rates,

specifically authorized by the Commission, are below the actual costs of water carriers.

According to Interstate Commerce Commissioner Clarke, most of the railroads' fourth section applications filed between January 1955, and October 1956, were granted without any formal proceedings, thus allowing railroad rate decreases on competitive traffic to become effective. It is not believed that it was the intent of the Congress, in providing fourth section relief, to have such relief become effective without formal review by the agency charged with the administration of the Interstate Commerce Act.

It would be impossible, timewise, to point out the particular objections the barge and towing-vessel industry has to all points in this proposed legislation. Therefore, this statement will be confined to its most objectionable features. It should be clearly understood, however, that in no way does this infer approval or support of any portion of the bills to which specific objection is not raised.

If one were to single out the most objectionable part of the bill, there would be no choice other than to select the new proposed national transportation policy, which "grows" directly from the Cabinet Committee report. This report discussed the railroad monopoly that existed when the original Interstate Commerce Act became law in 1887 and admitted a continuing rail monopoly as late as 1920. However, it immediately fell into error by reaching the conclusion that such monopoly no longer exists but that competition is the highlight of today's transportation problem. If monopoly does not exist, it is because of the Interstate Commerce Act; but that does not mean that the railroads have not retained within themselves all elements of monopoly that existed in 1887 and 1920.

The railroads claim that the present Government policy of regulation severely limits the realization of the most economic use of our transportation system. Insofar as the railroads are concerned, they have been given a very wide area by the Interstate Commerce Commission within which to exercise their managerial discretion. As pointed out, they have been permitted to obtain substantial general increases and at the same time to reduce rates on a selective basis. Thus, in one area at least, they seem to be in a position to have most of the advantages of free enterprise under a regulated system.

The policy proposed is necessarily the focal point of attack on these bills because the concept of dynamic competition, from which it proceeds, runs through all of the subsequent sections having to do with economic regulation. Furthermore, the proposed new policy is poorly conceived. Since it is the controlling philosophy of this bill it cannot, as a policy, be given the necessary weight due it because it is not a substantive part of the proposed act.

There is one basic and fundamental change controlling all others occurring in the new policy, which distinguishes it clearly from the present law. Briefly, it can be said that the purpose of the present law is to require the Interstate Commerce Commission to act in a manner so as to bring about a well-rounded and coordinated system of transportation of all forms. In short, it is directed to so control competition that water carriers, motor carriers, and the rail carriers, are permitted to fluorish extensively and build themselves up in an orthodox legal manner to perform the best possible service for the general public.

The great change from the present policy comes about through the keynote sounded in the new policy by the words "dynamic competition." These words appear in the first paragraph and, reading that paragraph as a whole, one is compelled to see that when taken together with the four succeeding paragraphs of the new policy, it contains no curb whatever on destructive or unfair competitive practices between the several forms of transportation.

Actually this new policy is an invitation to the economically strongest form of transportation to take off on a program of "rate slashing" and, as the Interstate Commerce Commission itself has said, thus return to the "law of the jungle," the "survival of the fittest," so that eventually the water carrier industry would be entirely eliminated. Under such policy, the Interstate Commerce Commission is virtually powerless to prevent warfare between the various modes of transportation, even where it is obvious that the protagonist is bleeding itself to death though perhaps more slowly than its opponent. Thus far I have outlined in general terms the objections of inland water carriers to the drastically changed national transportation policy, contemplated by H. R. 6141 and H. R. 6142. As I am not an attorney, such discussion has been strictly from a layman's point of view. Many important legal questions and complications are involved in the proposed new national transportation policy, and they will be discussed by eminent attorneys who are familiar with the problems-legal and otherwise of the inland water transportation industry.

Not only are inland water carriers opposed to this change of national transportation policy, but to other recommendations of the Presidential Advisory Committee embodied in the legislation now pending before this subcommittee. These are as follows:

(1) The limiting of authority of the Interstate Commerce Commission to the establishment of only minimum and maximum freight rates;

(2) The proposed amendments to section 4 of the Interstate Commerce Act;

(3) The limiting of the rate suspension powers of the Interstate Commerce Commission;

(4) The granting of authority to rail carriers to publish and charge volume freight rates; and

(5) The proposed redefinition of contract water carriers.

These legislative proposals, being of a legal nature, and other provisions of the legislation that are considered objectionable to our industry, will be discussed, as I have said, by the attorneys representing inland water transportation.

Section 14 of H. R. 6141 and H. R. 6142 provides for the repeal of section 303 (b) of the Interstate Commerce Act, as amended, or the so-called dry bulk exemption. This removes from the jurisdiction of the Interstate Commerce Commission the economic regulation of waterborne transportation of dry bulk cargo when not more than three bulk commodities are moved in a single vessel or tow.

Admittedly, this proposal is highly controversial among the water carriers. Numerically a substantial majority oppose the repeal of section 303 (b) of the Interstate Commerce Act; however, many common carriers by water with the largest fleets of barges and towing ves

sels favor such repeal. As the subcommittee undoubtedly knows, separate legislation is pending in the Senate to accomplish this repeal but at this time no hearings have been scheduled.

The American Waterways Operators, Inc., which I represent, by virtue of a poll of its members conducted under an association policy, early in 1955 voted better than 5 to 1 to oppose any repeal of this exemption. Thus, my organization is firmly opposed to section 14 of the pending bills. The Congress, in including this exemption in the Transportation Act of 1940, considered all arguments and facts concerning the wisdom of it, and they would appear to be just as valid in 1956 as they were in 1939 and 1940.

This issue involves competition in transportation of bulk commodities by water between "for hire" contract carriers and private or captive carriers by water. There appears to be legal doubt that Congress can economically regulate bona fide private transportation by water or authorize the Interstate Commerce Commission to do so. There are other factors involved in this issue, including, of course, the relationship between common and exempt carriers as to "grandfather rights” and, to some extent, foreign competition.

Earlier in this statement attention of the committee was called to the steady growth of inland water transportation during the period 1939 through 1954. There can be no doubt that the major expansion of this waterborne commerce resulted from increased movements of bulk commodities-both dry and liquid. Because of a change in the method of computation of inland water tonnages by the Corps of Engineers, it is not possible to state comparable tonnage figures for the years before 1947.

In the case of bituminous coal, barge transportation on the inland waterways of the Nation increased from approximately 65 million net tons in 1947 to nearly 111 million tons in 1954. The inland water movement of grain and grain products in bulk increased nearly twofold between 1947 and 1954, or from 2.3 million tons to 4.5 million tons. Barge transportation of chemicals increased from 1.9 million tons in 1947 to 4.1 million tons in 1954. Bulk cement also increased from less than 400,000 tons in 1947 to 114 million tons in 1954. Petroleum-both crude and its products-increased from 85 million tons in 1947 to nearly 111 million tons 7 years later.

While no official tonnage figures are available for 1955, the traffic in bulk commodities continued to increase over the previous year, and that trend was still evident in the first quarter of 1956.

Obviously it was necessary to expand not only the inland fleet but the shore loading and unloading facilities as well, to move this greatly accelerated tonnage. Hundreds of new coal docks, grain elevators, and facilities for the handling of other bulk commodities have been built or are now under construction on all segments of the inland waterways of the Nation. This has likewise been true of petroleum terminals.

Much technological development has occurred on the inland waterways since the end of World War II, especially with respect to the handling of bulk commodities. As stated, towing vessels are more powerful and, almost without exception, are powered by diesel engines. Improvements in hull design of both towing vessels and barges have been accomplished, resulting in less water resistance and thus more