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 The only solution is to have it repealed.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, 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; 138 110 127 110 118 110 and also the tremendous demands that would be made upon an organization that attempted to protect the area in the event the rails are freed from the present restraints of section 4. I would like to cite you one extreme example of rate discrimination which existed in 1907 and which is outlined in the Reno Chamber of Commerce's statement to the Nevada Public Service Commission. In 1907 the carload rate on structural steel from Chicago to San Francisco was 75 cents per hundred pounds, and from Chicago to Reno was $1.34 per hundred pounds. At that time the differential between Reno and San Francisco was 100 percent of the local rate from San Francisco to Reno-59 cents per hundred pounds. That 59-cent local rate also applied to points east of Reno as well. Consequently, the Reno jobbers could not meet competition from San Francisco to points east of Reno, to say nothing of points between Reno and San Francisco, because of the very obvious discrimination. Some relief from the 100-percent differential to the intermountain area was secured prior to 1918. These adverse freight rates had an impact upon the growth and development of the entire mountain area. Prior to 1910 Spokane had made a substantial growth, primarily because of the exploitation of its agricultural, mining, and lumbering resources. The population attained at that time apparently was a maximum number that could be supported by a raw materials economy, since the population of the decade 1910-20 increased only slightly. Because of discriminatory long-short haul freight rates, and they were in effect at that time, commercial and industrial development were retarded. Protection was granted that area, however, by the March 15, 1918, decision of the Interstate Commerce Commission granting terminal rates to the intermountain territory and by the adoption of the reasonably compensatory amendment to the fourth section of the act in 1920. With this protection, the area again started to develop commercially and industrially, and the population of Spokane has grown from 104,430 in 1920 to an estimated 186,000 today. The fourth section of the act as amended has been attacked on various occasions and, as I mentioned previously, a major effort was made to amend it by the Pettengill bill which was before Congress in 1937 and 1938. This bill was defeated and equality of rates for the intermountain area was protected. It is interesting to note that the arguments that were advanced by proponents of the Pettengill bill are the same arguments that have been advanced by the present proponents of revision. They are based upon the need of more flexibility in rate making by the rails so that they can escape bankruptcy and remain in private ownership. They were advanced in 1937 so that the carriers could meet waterborne competition or market competition. Today they are advanced so that the rails can meet motor-carrier competition. We do not believe that the arguments that the proponents of revision have been advocating were valid in 1937, and we do not believe that they are valid today. We contend that the rails have ample flexibility in securing relief under section 4, in the relief clause of the act; that the general public and the national interest demand that the burden of proof be on the rails to support any reduction in longhaul rates, and that the present form of petitioning be retained. We |