G. H. Schmidt, traffic manager, marine transportation, Phillips Petroleum Co., Bartlesville, Okla.

ITF

Ira U. Cobleigh, president and secretary, The Wright & Cobb Lighterage Co., 19 Rector Street, New York, N. Y.

N. W. Edmunds, Philadelphia manager, Spentonbush Fuel Transport Service, Inc., 1700 Sansom Street, Philadelphia, Pa.

Capt. J. W. Banta, president, Plaquemine Towing Corp., Post Office Box 66, Plaquemine, La.

Weston B. Grimes, counsel, Cargill, Inc.

Floyd A. Mechlind, president, Mechling Barge Lines.

Capt. Thornton D. Hooper, Sr., chairman of the board, Interstate Oil & Transport Co., 2101 Sansom Street, Philadelphia, Pa.

Lloyd L. Leonard, traffic manager, Sioux City and New Orleans Barge Lines, Ine., Board of Trade Building, Kansas City, Mo.

J. E. Graham, Secretary, Industrial Marine Service, Inc., Post Office Box 1188, 1177 North Second Street, Memphis, Tenn.

Mr. WRIGHT. Thank you very much, Mr. Chairman. In addition to the names that appeared on the mimeographed list, there are several others, some of whom I have named.

Mr. HARRIS. Yes. You may submit any additional names you may have for the record.

Mr. WRIGHT. I regret that there is no one here from Arkansas. Mr. HARRIS. You have someone up here from Arkansas. Mr. WRIGHT. Which I feel adequately covers the situation. Mr. HARRIS. I might also say that you requested a moment ago that your statement be included in the record, and that you would discuss the points that you wanted to emphasize. That may be done. Mr. WRIGHT. Thank you, sir.

I should like also to say that it was our original plan to have testimony from three technical experts in support of key parts of my general statement. These are Dr. John H. Frederick, professor of transportation of the University of Maryland, Mr. Harry Dyer of the Nashville Bridge Co., Nashville, Tenn., and Mr. James K. Knudson of Washington, D. C. In order to conserve the committee's time this morning we shall offer for insertion in the record written statements on behalf of Dr. Frederick and Mr. Dyer, both of whom are present. During the course of my testimony I shall allude briefly and in summary fashion to their statements. Immediately following my statement, I hope the committee will hear from Mr. James K. Knudson, who is here to discuss specifically the impact of regulation extension on the restriction of competition under the laws and procedures of the Interstate Commerce Act, with particular reference to the smaller exempt carriers and the business structure of the water transpotration industry.

Mr. HARRIS. We will be glad to receive the statements. We will be glad to receive the statement from Dr. Frederick. Dr. Frederick has already appeared as a witness in the couse of these hearings. I assume that this is a summary statement.

Mr. WRIGHT. Dr. Frederick, I believe, appeared earlier in behalf of the trucking industry.

Mr. HARRIS. That is true.

Mr. WRIGHT. His statement today, which will be submitted, will deal with the public effect upon the extension of the water transportation industry.

Mr. HARRIS. We will be very glad to have his additional statement and also that of Mr. Dyer.

I observe here that you have rather voluminous exhibits attached to your statement. Do you desire that they be included with your statement? Or are they of such a nature that it is desirable to have them as a part of the record?

Mr. WRIGHT. It is; yes, sir. It will not be necessary to take time to go into detail on them except in one case, which will only take

a minute or two.

Mr. HARRIS. I observe that you have exhibits here in the form of advertising and various things like that. It would be very difficult for us to put that in the record. I wonder if we may not receive them for our files and let the staff go through them and determine which ones should go into the record.

Mr. WRIGHT. The advertising, I think you refer to, appears-incidentally, it is not a part of the exhibit, it is an article appearing in Barron's magazine, to which we particularly want to call the committee's attention. The contents of that article are of great importance.

Mr. HARRIS. We will let the entire exhibit be received for the files, and we will determine what will go into the record. After all, we are going to have such a voluminous record that we will have to go over. Mr. WRIGHT. Yes.

Mr. HARRIS. We will receive it for the benefit of the committee and then determine which part of it should be included.

Mr. WRIGHT. Thank you very much.

I will confine and limit my statement to section 14 and related sections 13, 16, and 18 of H. R. 6141, or similar legislation, because our organization has as its sole purpose the opposition to regulation extension.

I believe it appropriate at this point to offer as an exhibit copies of the resolutions of the organization enacted at its annual meetings in 1954 and 1955. These indicate my authority to oppose these portions of the bill and underline the limitations of my authority to speak for the organization to the sections referred to above. I say this so that the committee will understand why I do not deal with many other aspects of the bill on which various categories of our membership have various views which will be adequately presented to the committee through other associations, just as Mr. Thompson has spoken for the water carrier industry as a whole.

There are five main reasons why the Waterways Council is opposed to legislation eliminating the bulk commodity exemption and why we submit that Congress should refuse to enact section 14 of H. R. 6141 and the related sections mentioned or any legislation implementing that proposal of the Advisory Committee on Transport Policy and Organization which call for the repeal of of the bulk commodity exemption afforded by section 303 (b) of the Interstate Commerce Act of 1940. The five propositions to be discussed are:

I. The results beneficial to the public interest of the bulk commodity exemption in the Transportation Act of 1940 justify its retention.

II. None of the conditions or reasons which led Congress in 1940 to enact the bulk commodity exemption has changed in the intervening 16 years so as to justify the elimination of the exemption.

III. The extension of regulation on our inland waterways would substitute a regulated cartel for a system of free competitive enter

prise in the bulk commodity transportation which is serving the public interest well.

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IV. No appropriate public interest is suffering injury because of the exemption of bulk carriers on inland waterways from ICC regulation.

V. Many substantial public interests would be damaged should the exemption from ICC regulation of dry bulk movements by water be repealed as proposed by section 14 in H. R. 6141.

With your permission I shall develop briefly and in summary fashion the facts and arguments underlining each of these major propositions.

I. THE RESULTS BENEFICIAL TO THE PUBLIC INTEREST OF THE BULK COMMODITY EXEMPTION IN THE TRANSPORTATION ACT OF 1940 JUSTIFY

ITS RETENTION

My first point is the following: I. The results beneficial to the public interest of the bulk commodity exemption in the Transportation Act of 1940 justify its retention.

The system of free competitive enterprise in the movement of bulk commodities in the inland waterways is resulting in a very dynamic growth of this traffic. This growth has reflected consequent substantial savings of a direct nature to many processors and consumers who utilize bulk commodities that move on these waterways. The pervasive competition among these processors of our basic bulk materials has insured that these savings and benefits have been passed on to the public. Inland waterways traffic, exclusive of the Great Lakes, has grown from 20 billion ton-miles in 1939 to an estimated 87.5 billion in 1955.

It follows from this very fact of substantial and rapid growth that shippers have moved to utilize water transportation rather than other forms because they were able to get this service substantially cheaper from water transportation than from the other services. Water transportation has been able to maintain its margin of price or rate superiority in spite of steadily mounting costs of labor, construction, fuel, and supplies. In the face of these rapidly mounting costs and rates which have affected all forms of transportation, we believe that the freedom and competition which have typified the movement of bulk commodities on the inland waterways have resulted in lower and more stable rates to shippers than those rates which have prevailed for regulated movements.

The expert testimony submitted in the statement of Dr. John H. Frederick, the experience of shippers in paying rates for transportation for the various classes of commodities referred to as unregulated, and those which fall within the regulated category will be compared. This testimony will make clear what is evident from the very choice by the shippers of water transportation, where available, as expressed in the growth figures cited, namely, that exempt movement of bulk commodities by water is cheap.

In addition to freedom and competition in this field providing the incentive and opportunity to combat increased costs, they have also provided an atmosphere that has induced a constantly improved quality in the transportation service afforded bulk commodities.

The rapid and substantial technological development in the types of barge and towing equipment and techniques of service, which have characterized the last decade will be the subject of expert testimony in the statement of Mr. Harry Dyer.

Another manifestation of the system of free competitive enterprise on the movement of bulk commodities on the inland waterways in the period since the Transportation Act of 1940 is the continued entry and development in this business of many hundreds of new carriers including many smaller ones. Accurate and official figures for comparative purposes do not exist for the period before 1945. In 1945, according to the reports of the Corps of Engineers, there were a total of 1,343 carriers operating on the inland waterways other than the Great Lakes, including 257 common carriers, 600 contract carriers, both regulated and exempt, and 486 private carriers. According to recent information for 1954 issued by the Corps of Engineers there were present in that year, some 9 years later, a total of 1,732 carriers, including 163 certificated common carriers, 1,048 contract carriers, of which 41 were regulated, and 521 private carriers.

I submit, herewith, an exhibit showing the number of various types of regulated and unregulated operators and their varying size as reflected by the equipment that they own.

Information concerning increase in tonnages of barge and towing equipment available in this fleet since 1946 has already been provided by Mr. Chester Thompson in his statement.

The constant infusion of this new blood into the stream of competition, accompanied by the growth and development of already existing concerns in a competitive atmosphere, has resulted in the utilization of new techniques of business, barge and port operation, and new forms of equipment with consequent benefits to the shipping community. This has been the kind of performance which the textbook writers and many public speakers have in mind when they extoll the advantages of free competitive enterprise.

The reliability and availability of service, and in particular the frequency of service has improved with the increasing number of operators, and the new types of highly specialized physical equipment used or introduced. The improving quality of service, together with the maintenance of its low cost, has made the service attractive to an increasing number of shippers, to their advantage. An additional byproduct advantage to the private carriers has been the increased opportunities for integration of their operations with those of contract carriers to handle peak seasonal demands.

These results of the bulk commodity exemption explain the phenomenon that these hearings are making readily apparent; namely, that the public and the shippers that are being served by the water transportation industry want the exemption maintained. These results also cast a strange light on the recommendation of the Advisory Committee on Transport Policy and Organization that the bulk commodity exemption be removed which is so out of character with the remainder of the report's protestations that it seeks to further a policy of "dynamic composition." In this connection, may I invite the committee's attention to an eloquent statement by Under Secretary of Commerce for Transportation, Louis Rothschild, who, in his appear

ance before this committee, advocated relaxation of the Commission's authority over rates of presently regulated carriers; he said:

We believe that carriers' self-interest tempered by the dictates of competitive enterprise is capable of producing a sounder rate structure than that which can be imposed by a regulatory agency required to exercise judgments in areas normally reserved to managerial discretion.

I plead guilty to lifting Mr. Rothschild's statement out of context because I have not yet been able to find a more eloquent statement of why we in the Waterways Council believe that the bulk commodity exemption should be retained. We only wonder how Mr. Rothschild's philosophy permitted him and his Department to espouse the substitution of ICC regulation for the managerial discretion and carrier selfinterest tempered by the dictates of competitive enterprise that characterize the movement of dry bulk commodities on the inland water

ways.

Opposed to the proposed extension of regulation because they view it to be a threat to the cheapness and constantly improving quality of service that the exemption has afforded, the committee will find the users of this transportation-the shippers of coal, grain, chemicals, fertilizer, sand and gravel, and the industrial and agricultural groups which represent them. Why is this so? Surely such a radical change in what seems to be a situation satisfactory to the shipping public should cause this committee to examine carefully, before recommending this change, the conditions or reasons which led the earlier Congress in 1940 to enact the bulk commodity exemption. It should seek to ascertain whether these conditions or reasons have changed so as to justify an opposite conclusion.

II. NONE OF THE CONDITIONS OR REASONS WHICH LED CONGRESS IN 1940 TO ENACT THE BULK COMMODITY EXEMPTION HAS CHANGED IN THE INTERVENING 16 YEARS SO AS TO JUSTIFY THE ELIMINATION OF THE EXEMPTION

My second point is none of the conditions or reasons which led Congress in 1940 to enact the bulk commodity exemption has changed in the intervening 16 years so as to justify the elimination of the exemption.

The section of the report of the Presidential Advisory Committee on Transport Policy and Organization dealing with repeal of the bulk commodity exemption is silent on the legislative history of section 303 (b) of the Interstate Commerce Act. It does not reflect any awareness either of the lengthy deliberations by the Congress which preceded the enactment of this exemption in 1940 or of the reasons the committees of Congress developed for the action.

This committee, in its careful approach to this vital problem, will consider the 7 years of legislative examination which led to the enactment of the exemption at the very time Congress was engaged in a wholesale revision of transportation legislation including the integration of the regulation of rail with water transportation.

We have prepared and wish to submit as an exhibit herewith a brief entitled "Analysis of Legislative History of Section 303 (b) of the Transportation Act of 1940." This brief includes 16 pages of our own analysis of this legislative history and a further 16-page appendix