Part of the original purpose of our national transportation policy was to stimulate the growth of service and service techniques by all modes of transportation to achieve a balanced transport system. Naturally the carrier hauling the biggest load had to level off if the policy worked, and it did. However, the transport system that formerly hauled the biggest load of commerce still carries the biggest load, and it is far from a sick industry with regard to its freight handling operations.

The barge and towing vessel industry has also prospered, as evidenced by the steady growth in commerce handled since 1945. Its percentage of the total transportation is still a small 7.3 percent, on the basis of 1954 figures, but that was a full 1 percent increase over the previous year. When we compare the 1954 total of 7.3 percent with the average of 4.4 percent for the last 16 years, we find evidence of healthy growth.

The industry's ability to attract financing for capital expenditures continues to be good. It has enabled the industry to effect an almost complete transition from slow, small-powered steamboats to faster, high-powered diesel boats, capable of efficient and economical operations. Barge building has undergone a steady increase in unit capacity, and brilliant innovations have been achieved to develop barge and terminal facilities for adapting barge service to meet specialized needs of many industries. Adaptation of barges for multipurpose usage has added to the efficiency of the services offered. A tremendous building program is under way to add additional barges and towboats to the inland fleet, probably the biggest building program in the history of the industry. Even though it is seriously hampered by a severe steel shortage, financing is readily available for it.

These waterways over which commerce moves, and adjacent to which is located a major portion of the industrial production facilities of the United States, as well as our heaviest concentrations of urban population, belong to the people of the United States. The benefits from the development and use of their inherent natural resources must, by the terms of historical edict, accrue to the people of the United States in general.

These navigable inland waterways of the United States comprise 29,000 miles of usable channels, which represent only about half of the channels that could be used if they were developed for commerce. Plying the navigable inland waterways of this country today are approximately 4,300 towing vessels, averaging 2,000 to 5,000 horsepower, the smallest of which are from 200 to 500 horsepower; 12,000 dry-cargo barges and scows, with a total carrying capacity of 8,311,215 tons; and 2,175 tank barges for the carriage of bulk liquid cargoes, with an aggregate of approximately 3,072,920 tons.

The total combined capacity of the inland waterways barge fleet is 11,384,135 tons of cargo, the handling of which would require 210,817 railroad cars loaded to an average maximum capacity.

To indicate the growth of the inland fleet in the past decade, let me call attention to the fact that in 1945 it consisted of approximately 3,500 towing vessels, from 350 to a maximum of 3,600 horsepower; 10,000 dry-cargo barges and scows, with a carrying capacity of about 6,500,000 tons; and tank barges with total carrying capacities of 2,500,000 tons.

These figures clearly demonstrate the ability of the waterways fleet to carry maximum cargoes with a minimum of equipment; to provide the great bulk-material-handling capacity required by this Nation in mass production, whether it be for peaceful economical living or for the emergencies of war. Demonstrative of the capabilities of the barge and towing-vessel industry is the fact that tows regularly move over the rivers, canals, and intracoastal waterways that are physically longer than the Queen Mary and carrying cargoes in excess of that which could be moved by two World War II Liberty ships.

We have said that the barge and towing-vessel industry is an important element in the national-defense program. In that connection, I think it is pertinent to quickly examine some phases of the services: rendered by the industry in World War II. From December 1941. through August 1945 the industry moved over the protected inlandwaterway channels of the United States 1,731,030,480 barrels of vitally needed petroleum products. By comparison, this aggregate barge loads of petroleum products was equal to 7,273,239 tank-car loads based on 10,000 gallons per car, or 72,733 trains of 100 cars each.

Admittedly, the whole transportation system of the United States was taxed to supply the wartime efforts; but if that load of petroleum products alone had to be moved by other modes of transportation, it is seriously doubted that they could have carried it. This is only one example of the great volume of commerce the waterways industry handled in that war period. It also moved great volumes of sulfur, bauxite, scrap iron and steel products, chemicals, alcohol, acids, grains, and sand and gravel products.

The inland waterways performed another vital service during World War II that we are prone to overlook or forget. From January 1942, through December 1945, inland shipyards built over 4,000 vessels for use by the Armed Forces, principally for assault operations. These vessels moved from the inland shipyards over the inland waterways system to the seaports for further transit to the points where they were needed. The capability for building vessels for war use in the protected inland areas of the United States was possible only because there was a network of navigable channels and a nucleus of inland shipyard facilities that had been built to serve the domestic inland waterways transportation industry.

These shipyards, located on our inland waterways system, have greatly increased their capabilities since the end of World War II. This is true because we have continued to build a fleet of inland waterway carriers for a growing industry. Not only is the fleet of tremendous value in our continuing defense effort, but also the capabilities of our inland shipyards, which are nurtured, maintained, and increased in proportion to the progress and well-being of the fleet it serves. There is no question of the ability of any potential enemy to strike our seacoasts. This threat makes it even more necessary that there be as much inland shipyard capacity as possible. If shrinkage of the barge and towing vessel industry is accomplished, as it undoubtedly would be if the proposed legislation under consideration is enacted, our inland shipyard capacity would also shrink.

The investment in new industrial plants of almost every type and the expansion of existing plant facilities on water-connected sites, plus the constant search by industry for more waterway sites, are all in

dicative of the success of our present national transportation policy in preserving the advantages and fostering sound growth of transport by inland waterway carriers.

The location of many industries, vital to the present peacetime economy and equally so to the national-defense effort, along the improved inland waterways is of interest from another point. As a part of our continuing defense program the Government, with the cooperation of industry itself, has sought to disperse essential industries and services throughout the Nation. The success of that program has been aided materially by the existence of navigable infand channels and by the availability of an operating fleet thereon of towboats and barges. In the Ohio Valley alone in the last 5 or 6 years, new and added industrial plant facilities have approximated an investment of about $5.3 billion covering 135 installations and involving the production and distribution of 35 different commodities. The Government alone has 9 installations in the Ohio Valley, involving an investment of $3 billion.

Incidentally, I want to take strong exception to a finding in the report of the Presidential Advisory Committee on Transport Policy and Organization, inasmuch as that report is responsible for the proposed legislation now being considered. By direct charge and implication, the Committee reported that only the common-carrier industry could be relied upon to furnish the necessary transportation if this Nation were again called to mobilize and prosecute a war. The barge and towing vessel industry, consists of regulated common and contract carriers, unregulated carriers, and private carriers, with the latter three predominating numerically. No industry could be more quickly mobilized and meshed into a major war effort than the barge and towing vessel industry, as a whole, because the services it performs and the commodities it carriers in peacetime would be essential in wartime as well. It is that basic and fundamental to the industrial and commercial structure of the United States.

Has the present_national_transportation policy, and its administration, encouraged the establishment and maintenance of reasonable charges for transportation services? The answer exists in a comparison of the overall national economic well-being and the relationship of the economic well-being of the transport industry as a whole. In other words, are all levels of our economic structure progressing on a sound basis? If so, is the transport industry, as a whole, keeping pace economically on a general level with other phases of business? If the general situation is good, business must be able to pay the transportation charges that result from rate structures; and, if the transport industry is economically sound, various modes of transportation must be getting reasonable returns.

If unjust discriminations, undue preferences or advantages, or unfair or destructive competitive practices exist that warrant kicking out our time-tested national transportation policy and substituting a whole new transportation policy concept, then most certainly they should be brought to light. Since only the railroads are insisting that the present policy hurts them, let us examine the relationship of barge and rail transport.

The barge and towing vessel industry has only approximately 29,000 miles of channels over which to operate, while the railroads, by com

parison, have 221,000 miles of main-line tracks. Generally our industry attracts only commerce that can move in lots of 500 tons or more and which can move from point of origin to point of destination, while the railroads can handle 5 pounds or 500 tons. We move no people as passengers, no poultry, livestock, nor perishable goods, as the railroads do. They can move everything à barge can, plus many commodities barges cannot move.

Basically, can the barge and towing vessel industry practice discrimination and destructive competition against the railroads? They cannot. They never have and never will. The railroads, however, once did employ destructive competitive practices to sweep the rivers clean of commerce. It is our considered opinion that they now seek authority to do it again and that such authority is embodied in the proposed legislation now under consideration.

The basic precept of regulation, together with the specific exemptions from regulations, is for the purpose of safeguarding the public interest in maintaining a carrier system and for safeguarding the carriers themselves. It is neither a totally free industry, nor is it totally regulated.

For that part of the transportation industry coming under the purview of existing law for purposes of economic regulation, ultimate boundaries are provided beyond which individual carriers cannot go in such matters as ratemaking. Until the carrier approaches or reaches those boundaries, it is free to exercise managerial discretion. For instance, only a very small percentage of the rates now in effect have been made effective by direct application of the law. The vast majority of rates were set by the carriers and allowed to become effective without action by the Interstate Commerce Commission. In other words, these rates did not go beyond the known and acknowledged limits. In the first 9 months of 1955, rail carriers sought to go beyond those limits in 1,700 fourth section appeals, and in 1,400 cases they were allowed to do so without formal hearing.

The extreme limits of regulatory control are defined in existing law to keep transportation operations within normal bounds, to preserve all modes of transportation, and to protect the public interest. Only one mode of transportation-the railroad industry-seeks to remove those limits; especially the precise limits now set for ratemaking purposes.

The railroads plead that managerial discretion is stifled. They ask that pervasive, dynamic competition be allowed to become the dominant controlling factor in ratemaking. Competent witnesses appearing before the Interstate Commerce Commission in opposition to several of the so-called general increase cases have given testimony on this point. In many cases they have demonstrated that rail lines are continuously weakening their financial position by improper exercise of managerial judgment, by failure to effectuate obvious possible economies (particularly in terminal operations), and by failure to readjust their capital structures.

These witnesses have also pointed out that rail lines are constantly throwing away revenue by making extensive, unwarranted point-topoint or area wide so-called competitive reductions, far below those necessary to meet alleged competition, with the result that on an overall basis their needed revenues are reduced rather than increased.

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 competition 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