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tion-well, the major farm organizations in the country, the Farm Bureau, the Grange, the National Farmers Union and the National Council of Farm Cooperatives expressing great satisfaction with the operation of this segment of the industry, that is the exempt segment of the trucking industry. Has that been called to your attention?

Secretary WEEKS. I think not, but I would expect them to express that satisfaction. I am sure the industry, the transportation industry, has been serving them well in this exempt field and what they have been doing for the farmer would be satisfactory. But you also find the hauling of certain things like cocoa beans falling within the field of agricultural exemption. Such products do not concern any farmer in the country.

Mr. ADAMS. Cocoa beans are a foreign product. We will leave them out of consideration. For any domestic product you feel the farmer, as a rational consumer, knows what is in his best interest?

Secretary WEEKS. Certainly.

Mr. ADAMS. And he is satisfied with the agricultural exemption, is that correct? Secretary WEEKS. If he came here and said so, he must be.

Mr. ADAMS. And you would accept that as a rational judgement about the performance of an industry?

Secretary WEEKS. I am sure there is no problem to this except as to where Congress wants the exemptions to start and to stop. That is all there is to this problem.

Mr. ADAMS. I just have two more brief questions.

If this exempt segment of the trucking industry is operating to the great satisfaction of shippers-in this case, farmers-do you suppose that we might experi ment with an extension of the exemption to shippers who are producers of manufactured products?

Secretary WEEKS. I don't think I should guess today. Any properly authorized contract carrier can pick up a load from a manufacturer.

Mr. STULTS. If he has the route structure, I think; is that right?
Secretary WEEKS. If he has the route structure.

Mr. STULTS. Yes.

Secretary WEEKS. Yes. But again I say any encroachments on the commoncarrier field I think are bad.

Mr. ADAMS. Generally, then, you would agree that competition means rivalry among individuals over such questions as rates, for example, and service? Secretary WEEKS. Yes.

Mr. ADAMS. And a competitive industry is also one which provides competitive opportunity; is that right?

Secretary WEEKS. Yes.

Mr. ADAMS. That is people are free to get into the industry?

Secretary WEEKS. Well, if you are going to have any regulation whatever, you should have a certain certificate from the regulatory body. Any attempt I think to liken the competition in this field with competition within a given manufacturing industry, any attempt to create an analogy there, I think, is not on sound ground, because you must have regulation in the transportation field and you must have a certification to go into the business and so on and I think all you. have to do is give it as much competition as you can.

Mr. ADAMS. In other words, there ought to be licensing by this Government agency to determine if the applicant is fit, willing, and able to provide a particular service, that would be part of the regulation wouldn't it? Is that right?

Secretary WEEKS. Yes.

Mr. ADAMS. And then also you would agree that we ought to get as many people in as possible. That is, an application ought to be approved in that respect unless there is a showing that it is against the public interest. Would you say that is right as a matter of policy?

Secretary WEEKS. That is right.

Mr. ADAMS. Thank you, that is all, Mr. Secretary.

Senator DUFF. This record will be kept open for 2 weeks to allow anyone who desires to make a further written statement for the record and that will include your opportunity to make a rejoinder to this statement made this morning. Secretary WEEKS. Thank you, Mr. Chairman.

(Whereupon at 3:10 p. m. the hearing was closed.)

Secretary WEEKS. I wish to affirm the position taken by the Department as presented in these statements. I am as thoroughly convinced

now as I was a year ago when the report was submitted to the President that our transportation regulatory policy is urgently in need of revision if our transportation services are to continue to flourish and expand.

From a broad standpoint, there are two basic revisions that the committee found to be urgently needed and which have been incorporated in this legislation. First, we felt that common carrier managers are unduly restricted in the exercise of discretion in pricemaking. As a result, they are denied opportunity to reflect in their rates the true cost and service characteristics of their properties. To correct this situation, we propose that the present declaration of policy be restated to emphasize reliance on competitive forces in ratemaking and to make it plain that Government economic regulation shall be held to the minimum consistent with the public interest. In addition we propose that Congress effectuate such a policy by redefining particular substantive provisions of the Interstate Commerce Act having to do with

rates.

Second, the diversion of profitable traffic to exempt public carriers poses a serious threat to the maintenance of a financially strong and progressive common carrier system. In addition, certain common carriers suffer large and debilitating deficits from the enforced operation of unprofitable services.

These threats to a stable and sound common carrier system, we believe, result in part from a lack of clarity in the present statute and a lack of equality in the regulation of those who render similar public transportation services. We propose, therefore, a series of amendments which would reduce some of these exemptions in the case of operations which are essentially public in character, would redefine private and contract transportation, and would provide the Interstate Commerce Commission with definite standards to cope more effectively with these troublesome problems.

It is, I think, a fair question to ask why the advisory committee has recommended these basic revisions in our national transportation regulatory policy. The answer as plainly as I can put it is the public interest the interest of all our citizens in the best kind of transport service our economy can provide at the least cost.

The transportation industry is a large and important segment of the Nation's economy, representing many billions of dollars of invested capital, employing millions of workers, and consuming billions of dollars of materials and supplies. Such services are vital to industry, to commerce, to agriculture, and to national security. They greatly influence cultural as well as economic development and contribute importantly to the Nation's recreation.

Consequently, our transportation regulatory policy is of great public moment, for it must foster the development and maintenance of adequate facilities, assure that such facilities are operated with economy and efficiency, and without undue discrimination, and without undue preference or prejudice.

Consider first our proposed revision of rate regulatory policy. Our dynamic economy can ill afford the burden of high costs which will result from restraint of competition.

The policy of regulation was originally designed to protect the public from abuses resulting from near monopoly conditions. Yet

today widespread competition exists between and among the many transport agencies. As we stated in the report:

* there is available today a wide selection of transport methods for the movement of goods and people from one place to another with economy, expedi tion, and safety. The individual, whether traveling for recreation or business purposes, has a choice as between the private automobile, intercity bus transporta tion, air transportation, and railroad travel. The shipper, distributing finished products to a nationwide market, is free to elect the use of his own trucks, common or contract carriers by highway, a continental and physically integrated system of common carrier transportation by railroad, pipelines, coastal and intercoastal services, inland water transportation, or the rapidly developing air cargo services.

In the channels of commerce, we exercise vigilance under antitrust laws to prevent combinations which throttle competition. But in transportation, instead of using competition to spur the carriers to greater efficiency, we impose ratemaking restraints that inhibit the carriers from demonstrating true cost and service capabilities and to a large extent substitute government fiat for free market judgment. The objective of our proposal, therefore, is to embody this proven concept of competition insofar as feasible in the economic regulation of common carriers. We conceive that the proper role of rate regulatory policy is to establish reasonable bounds within which common carrier management is free to compete on a price as well as a service basis without undue governmental interference, provided no customer or area is discriminated against or unduly preferred or prejudiced. The reasonable minimum and maximum bound would continue subject to supervision of the expert regulatory body.

Because competition is to be encouraged under the revised declaration of policy, we would remove the present requirement that the Interstate Commerce Commission condemn rates merely because of their effect on competing carriers. The power of the Interstate Commerce Commission over minimum rates would not otherwise be changed. We would also continue the ICC's maximum rate authority to prevent any common carrier from charging unreasonably high or excessive rates. No change whatever is intended in the ICC's power to correct unjustly discriminatory prices or practices.

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We see no reason why intercity carriers should not compete for intercity traffic without any regulation requiring the Interstate Commerce Commission to determine what share each should have. sharing of the market arranged by regulation is the same in effect as a sharing arranged by competitors in other fields of endeavor. Neither should be sanctioned by law, since both are opposed to the fundamenta American theory of fair competition.

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Each form of transportation has its particular advantages. respect to trucks, for example, they have very special advantages in that they can carry less than rail-car lots which means smaller inven tories and benefits many small shippers and they make deliveries wher the railroads and water carriers do not. There is not the slightes chance that the measure will deprive the American public of the truc services, local and intercity, which the public interest requires.

It has been suggested that the railroads can and will reduce rate below the compensation level, drive the trucks off the roads, and the put the rates up again to the public disadvantage.

In the first place, the proposed legislation leaves the Commission every substantive power it ever had with regard to rates which are less than a reasonable minimum.

Secondly, whenever a railroad raises rates so that truck prices are cheaper (service considered) the trucks can move in. The roads are there, and the flexibility of the trucking business is such that I doubt if any important freight could be offered for 48 hours and no truck, contract or common carrier, be on hand to bid for it.

The measure does free all intercity carriers to compete. For example, most of the vast volume of traffic the motor carriers have acquired in recent years is theirs by virtue of rates and service, and they will keep it and it will grow. Some of the competitive traffic which they have enjoyed under past regulatory policies they may lose, and on the other hand, some of the traffic which the rails have gotten under the division of traffic theory, the trucks may get.

Each type of carrier will get what it deserves in competition, without preference or discrimination. This is in the public interest because in the last analysis the public pays all the bills and under the present policies the bills are undoubtedly higher than under the more competitive philosophy which we advocate.

We are not proposing any change in the general pattern of regulation by the Interstate Commerce Commission. We believe release of restraints on competition between the various modes of transportation will reduce the litigation before the Interstate Commerce Commission, improve carrier economy and efficiency and materially benefit the public interest. The principal change is to restore to carrier management the prerogative and privilege of deciding the level of rates, within bounds of reasonableness, which will best serve its needs, and hence the needs of the public. Under the existing system rate-fixing responsibility has always belonged initially and primarily with the carriers. However, the exercise of this responsibility is now frequently frustrated by a policy which encourages and even demands extensive intercarrier litigation before the Interstate Commerce Commission. Revesting in the carriers their historic responsibility will encourage them to experiment with new concepts in rates and services, stimulate and accelerate technical innovation, and promote greater efficiency in management.

We have seen the fruits of hard but fair competition in the economy generally. The public can enjoy like beneficial results in transportation if we give competition adequate leeway.

Let me turn now to the second basic revision in transportation policy which is to maintain and strengthen the common carrier sys

tem.

We should never lose sight of the fact that there can never be a truly adequate transportation system as a whole without having available a financially strong and technically progressive common carrier system. The Nation's economy, organized as it is on a mass production system with distribution effected throughout a continental market, depends primarily on a highly integrated, readily available, and responsible common carrier system for transportation. The common law and our statutory processes, in their wisdom, dictate that we strive to maintain common carrier services by imposing restrictions and disciplines on such carriers and, in exchange, granting special rights and privileges

to them, such as the right of eminent domain to railroads and pipelines, the right to operate over the public ways by truck, bus, and waterlines and a protected right to service a particular route or area. We grant these public rights and privileges to common carriers because they are expected and required to serve the public at all times to the limit of their facilities, at known and reasonable prices, on known and regular schedules, and without discrimination, preference or prejudice.

These heavy duties so to serve require, in justice, some measure of protection against the competition of carriers which do not bear similar obligations. Yet in recent years, the common carriers' share of the available traffic has trended downward while transportation and traffic exempted in whole or in part from regulation has increased markedly. Part of this, it is realized, results from the superior cost and service characteristics of these latter operations under particula circumstances. But in important respects the traffic erosion is the result of unevenness in the degree of regulation which is imposed on the various types of transportation competing for the same traffic Unintentionally, we believe, but nonetheless forcibly, certain provisions of the law as interpreted tend to stimulate the growth of trans portation exempt from regulation or only nominally regulated so as to undermine the stability of the common carried industry.

The committee's recommendations and the amendments to the Inter state Commerce Act proposed in these bills are intended therefore to equalize the opportunity for common carriers to compete with each other as well as with other types of transportation for traffic which could move economically over their lines.

Legitimate private transportation would not be affected by the amendments. Lessening ICC control over common carrier rates and imposing regulation on other forms of public transportation is, we be lieve, entirely consistent. In both instances, the regulatory environ ment is modified to engender competition on a fair and economic basis which indeed is the heart of the transportation regulatory policy we are here advocating.

It seems obvious to me that unless our privately owned common carriers, who serve the public at large and particularly the small shippers are afforded freedom to compete for traffic carried by private and unregulated carriers, then in the final analysis we will destroy our common carriers financially. The economy of the country cannot get along without common carriage.

Break down the common carrier and the next step is government ownership. This happened in Great Britain, and today in that coun try the railroads (Government owned) operate with secret rates and discriminatory rates. This means that the privately owned trucks and other carriers operate in the dark under difficult if not impossible competitive conditions. It also means that the shippers have lost protection against discrimination. I think we hardly want to risk that happening here.

This subcommittee undoubtedly wants to have a more detailed explanation of the individual recommendations and amendments. The Under Secretary of Commerce for Transportation, Louis S. Rothschild, and the General Counsel, Philip A. Ray, are prepared to proceed with such detailed comments. Earl B. Smith, Director, Trans

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