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Mr. HALE. Why do you say that!

Mr. Ames. Because our service is known as an inferior service. We have a slow transit time and we have a very high minimum.

Mr. Hale. You have only the route God gives you and the railroads have the route they made.

Mr. Ames. That is right.

Mr. HALE. But for doing business over the routes on which you and the railroads can compete, you can always charge a lower compensatory rate than the railroads; can you not?

Mr. AMEs. We have to charge a lower rate. I don't know how they would figure in the scale of being compensatory. I think our costs are lower, if that is what you mean.

Mr. Hale. What worries you is that the railroad cannot come down to your rate and still charge a compensatory rate. It is just like price cutting-we had this fair-trade legislation in the committee--and the druggists do not like to see price cutting on Dr. Lyons toothpowder, and

you do not want to see the railroads price cutting on rates in order to deprive you of your natural advantage. That is what worries you, is it not?

Mr. AMEs. Yes, sir.

Mr. HALE. You think under the legislation they can do it and they cannot do it now, is that right?

Mr. Ames. I think they could certainly do it under the proposed legislation, and I would think that the Commission would stop them under the present law. We have a forum to which we can go.

Mr. Hale. At the present time you feel that the Commission can and will protect you, and under H. Ř. 6141 it will not?

Mr. AMES. Yes.

Mr. HALE. That is the jist of your whole testimony today, is that right?

Mr. Ames. Yes, sir, with the added admonition that you cannot handle the rate situation by isolating your consideration to one commodity. It just cannot be done.

Mr. HALE. There is one other thing.

If you figure the whole transportation service of the Nation as a big, round pie, the railroad slice has been diminishing for a long time, has it not?

Mr. AMEs. I could not say about that. Do you mean their share of the total transportation?

Mr. HALE. That is right.
Mr. AMES. I don't know. I have not seen any figures.

Mr. Hale. There is no doubt but that the airplane's share has been increasing by leaps and bounds.

Mr. AMEs. Yes. I would say that is right.

Mr. HALE. And the truck share has increased by leaps if not by bounds.

Mr. AMEs. Yes, and so has the general pool of traffic.

Mr. Hale. And the water lines have at least maintained their position, percentagewise, have they not?

Mr. AMES. Yes, I think so.
Mr. HALE. I believe that is all.

Mr. HARRIS. Mr. Ames, I did have this other thing I wanted to inquire about.

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Have you had occasion to consider H. R. 6208, which the Interstate Commerce Commission recommends? Mr. AMEs. That is the circuity four section bill? Mr. HARRIS. Yes.

Mr. AMES. Not in the detail I have considered these bills. I have not given it any consideration at all as to the detail I have given this one here.

Mr. HARRIS. You are not in a position to state, then, whether you oppose or support it? Mr. Ames. I don't know what it is, really, sir.

Mr. HARRIS. Would you care to look at it and consider it and give us the benefit of your views?

Mr. Ames. Do you mean a memorandum on it?
Mr. HARRIS. Yes.
Mr. AMEs. Yes, I will be glad to.
Mr. HARRIS. Thank you very much.
We have enjoyed your presentation.
Mr. AMEs. Thank you.

Mr. HARRIS. At this point, for the record, I have a communication from Mr. Austin L. Roberts, Jr., general solicitor, National Association of Railroad and Utilities Commissioners, together with a resolution adopted by the association in support of H. R. 6208. It may be received for the record at this point. (Informtion referred to follows:) NATIONAL ASSOCIATION OF RAILROAD AND UTILITIES COMMISSIONERS,

Washington, D. C., April 18, 1956. Hon. OREN HARRIS, Chairman, Subcommittee on Transportation and Communication, Interstate and Foreign Commerce Committee,

House of Representatives, Washington, D. C. DEAR CHAIRMAN HARRIS : It is noted that hearings will shortly begin before your subcommittee on H. R. 6141, the so-called omnibus transportation bill. This bill contains a proposed amendment to section 4 of the Interstate Commerce Act. There has also been introduced in the House, H. R. 6208, which would amend section 4 so as to permit the Interstate Commerce Commission to grant relief from that section insofar as it relates to circuitous railroad routes meeting the rates of direct railroad routes.

The National Association of Railroad and Utilities Commissioners has gone on record favoring the enactment of H. R. 6208. To the best of my knowledge there is no opposition to the amendment to section 4 proposed by H. R. 6208. For this reason I write to inquire whether it would be possible to set separate bearings for H. R. 6208 apart from the hearing set for H. R. 6141, or even, in view of the noncontroversial nature of the bill, to have it favorably reported without hearing. Attached hereto is a copy of the resolution duly adopted by this association. Thanking you for your cooperation in this matter, I remain Sincerely yours,

AUSTIN L. ROBERTS, Jr.,

General Solicitor. RESOLUTION FAVORING ENACTMENT OF H. R. 6208, 84TH CONGRESS Whereas this association's special committee on tariff simplification, in confunction with parallel committees representing the National Industrial Traffic League and the railroads of the United States, has made commendable progress toward simplifying and making tariffs of railroad freight rates more clear, definite, and uniform; and

Whereas, as the work of the association's committee progressed, it became increasingly apparent that the program's major progress was being obstructed by the administration of section 4 of the Interstate Commerce Act, as it relates

to circuitous railroad routes meeting the rates of direct railroad routes ; ar

Whereas several individual commissions, members of this association, ar the National Industrial Traffic League supported an application which tł railroads made to the Interstate Commerce Commission for blanket relie from the provisions of section 4, only insofar as it relates to circuitous railroa routes meeting the rates of direct railroad routes; and

Whereas the Interstate Commerce Commission, after due consideration, issue a report and order in which it declared its complete agreement with the obje tives of the application, but found it necessary to deny the relief sought o the ground the Commission does not possess the requisite authority; and

Whereas, at the request of the Interstate Commerce Commission, there ha been introduced in the Congress H. R. 6208 which would amend section 4 o the Interstate Commerce Act so as to permit the Commission to grant th relief sought and to remove the major obstruction to the program of tarii simplification being progressed by this association's special committee on tarit simplification in conjunction with other cooperating committees; and

Whereas the executive committee of this association has been informed then is no objection to H. R. 6208 on the part of any competing forms of transporta tion or on the part of any shipper groups : Now, therefore, be it

Resowed, That the executive committee of the National Association of Rail road and Utilities Commissioners does hereby announce its support of H. R 6208; and be it further

Resolved, That the executive committee authorizes and directs the associa: tion's representatives in the Washington office to advise the appropriate chair men of committees and subcommittees of the House and the Senate that this association supports H. R. 6208 and that it does not feel it necessary, in the public interest, nor desirable to delay consideration of this legislation by holding a public hearing.

Mr. HARRIS. The Chair has a communication from Mr. F. 0. Davis, executive vice president, Potash Company of America, together with a statement which he asks to be included in the record. It will be received. (Statement referred to follows:)

Potash COMPANY OF AMERICA,

Washington D. C., April 27, 1956. Hon. OREN HARRIS, Interstate and Foreign Commerce Committee,

House of Representatives, Washington, D. C. DEAR SIR: There is attached, hereto, a copy of a statement which I have prepared in support of H. R. 6141.

I should greatly appreciate it if you would file this statement in the proceed. ings covering the aforementioned bill and shall further appreciate any consideration which your committee gives the position of my company in this matter. Sincerely yours,

F. 0. Davis,

Executive Vice President. My name is Fred 0. Davis. I am executive vice president, treasurer, and a director of the Potash Company of America. My offices are in Carlsbad, N. Mex. which is the headquarters of that company.

I have been employed by the Potash Company of America continuously for the past 21 years, serving in various capacities. The Potash Company of America is currently the largest producer of refined potash in the world. Approximately 93 percent of the company's potash production, and that of other producers as well, is used to produce fertilizer, so essential to farming. The remaining 7 percent is consumed in the production of various chemicals.

The principal sources of potash production in the United States are Carlsbad, N. Mex., and Trona, Calif. As between these two, Carlsbad accounts for about 3 million tons annually, or approximately 90 percent of the refined potash produced in the United States. Potash produced in Carlsbad moves to refineries almost exclusively by railroad, some 60,000 cars being loaded in the past year.

I mention this fact to show that the potash industry is in the nature of what is sometimes described as a rail-bound industry, which is to say an industry which must rely mainly or exclusively on railroads for its transportation.

Of such industries, it is sometimes said that they would be harmed by the passage of H. R. 6141, and especially by what are described as its ratemaking provisions. Specifically, I have heard it said by interests opposing the bill, that if competition is to be permitted greater play in the making of rates, the tendency would be for railroads to reduce rates on the competitive traffic and make up their alleged losses through the imposition of higher rates on shippers of noncompetitive or rail-bound traffic such as the company I represent.

I cannot agree with those who support this view. The opposite should be true.

When railroads reduce rates on competitive traffic, the objective is to increase their revenue by increasing the traffic volume in an amount sufficient to more than offset the effect of the reduced rate. And when this happens, the result should be to benefit—not harm—the shippers of noncompetitive traffic because it should reduce the burden of overhead and fixed expense which would otherwise have to be borne entirely by the traffic remaining on the rails.

When lower rail rates result in increasing the volume of a particular commodity moving by rail, there should be an impetus toward even lower rates for all commodities which should redound to the benefit of all shippers. This is because added volume to railroads means lower cost per unit of traffic handled. The report of the Presidential Advisory Committee on Transport Policy and Organization, which is the basis of the legislation proposed in H. R. 6141, noted that "other forms of transportation as a rule require additions to equipment in direct ratio to an increase in traffic handled, and this is not the case with the railroad industry."

I therefore concur with those who believe that permitting railroads, and, of course, other carriers as well, to reduce rates on competitive traffic, subject always to the power of the Interstate Commerce Commission to prohibit rates that are noncompensatory or discriminatory, is also in the best interests of the shippers of noncompetitive traffic. What the shippers of noncompetitive traffic have real reason to fear is that the competitive traffic will continue to be drained from the railroads, thereby increasing the burden of fixed expense to be borne by the traffic remaining on the rails.

Mr. HARRIS. Do we have anyone else present today who would like to file a statement?

Is there anyone who has anything to say before we adjourn?

We have received a statement from Mr. A. Wilford Larson, Chief, Transportation Division, Public Service Commission of Wisconsin. It will be received for the record.

(Statement referred to follows:) STATEMENT BY A. WILFORD LARSON, CHIEF, TRANSPORTATION DIVISION, PUBLIO

SERVICE COMMISSION OF WISCONSIN This statement is being filed to set forth the position of the Public Service Commission of Wisconsin as it relates to bill H. R. 6141, now being considered by Subcommittee on Transportation and Communications of the Committee on Interstate and Foreign Commerce, House of Representatives.

The Public Service Commission of Wisconsin is aware that the regulation of transportation agencies cannot be a static thing. There are changing conditions that may warrant changes in the statutes relating to the regulation of transportation industries. It is our position, however, that the proposed legislation in the present form would not be in the public interest. Without any intention of implying that the commission is in accord with all the other provisions of the bill, the critical comments herein will be confined to those sections which seem to merit the most reconsideration, namely:

Section 2, relating to the statement of the national transportation policy in the act.

Section 6, relating to the extension of section 13 of the Interstate Commerce Act.

Section 7 (c), relating to the suspension powers of the Interstate Commerce Commission.

Section 8, which would repeal section 15a and create a new section 15a of the Interstate Commerce Act.

Has the Interstate Commerce Commission administered the act where that policy that I have just stated is carried out! · Mr. Ames. Do you mean preventing somebody from reducing a rate!

Mr. HARRIS. Where it could give it after it was determined that the cost was fully allocated and compensatory to that carrier.

Mr. Ames. I would say no.

Mr. HARRIS. That is what I am trying to find out, whether or not that had been the truth.

Mr. Ames. No, in my judgment it has not. The Commission has stopped that kind of business, and it has considered not only the compensatory feature of the rate, but it has considered the effect on other commodities and on other carriers, which I think the Commission should do. You cannot handle these cases in a vacuum.

The point I make, Mr. Chairman, is that even though the railroads can come out with a fully compensatory rate, they are reducing a rate from a normal level which can't possibly be regarded as excessive, because under that rate structure they have gone to the Commission 10 times since the war to get an increase.

If you will read that Petroleum case (234 I. C. C.) which I have cited here, and the Coke case, I think you will get the Commission's philosophy. It is not to prevent a rail carrier from making a redue. tion where a reduction is in order. It is to try to protect the rate structure and the transportation systems as a whole, and I don't think the Commission has ever had any other idea in mind in administering this law.

Mr. HARRIS. Those who prepared this Cabinet Committee report under the direction of the Secretary of Commerce, contend that that is the effect of the administration of the Transportation Act of 1940.

If they are right-and you say they are not=do you then say that that is a good policy?

Mr. A mes. If they are right in criticizing the Commission!

Mr. Harris. No, if they are right in their contention that the administration of the Transportation Act of 1940 is such that maintains higher rates, and that if a carrier is able and can give a lower rate it cannot do it because of the effect on some other mode of transportation. Then do you say that that is a good policy!

Mr. AMES. Stated that way, I could not
Mr. HARRIS. Of course not.

Mr. Ames. But as I said a while ago, you cannot handle this situstion in a vacuum.

And here is another thing I want to call your attention to: They talk about rates being fully compensatory. How do they know they are fully compensatory! It is the hardest thing in the world to prove the costs.

Mr. HARRIs. I am getting to that just now.

If you will permit me to ask you a few questions on this so I can get some answers from you, it might help me a little bit.

Mr. AMES. Surely.

Mr. Harris. On page 10 of your statement, you say--and this is in view of our colloquy here, the questions and answers

The rate of the water carrier between its ports must be a complete rate. That is, it must reflect in full the cost of operation, the investment in equipment, taxes, and a profit.

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