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TRANSPORTATION POLICY

WEDNESDAY, JUNE 20, 1956

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON TRANSPORTATION AND COMMUNICATIONS,
OF THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D.C. The subcommittee met at 10 a. m., pursuant to recess, in room 1334, New House Office Building, Hon. Oren Harris (chairman of the subcommittee) presiding.

Mr. HARRIS. Let the committee come to order, please. When the committee adjourned last Thursday, we announced that we would meet today by prearrangement with the Secretary of Commerce for the purpose of permitting the Secretary and his associates to return, as was requested at the outset of these hearings in April, for further comments. We are glad to have Mr. Weeks, the Secretary, back with us, Mr. Rothschild, Mr. Ray, and others who are here with him and who appeared with him at the outset of these hearings.

It will be noted, of course, that we have had rather lengthy and thorough hearings on the entire subject. There are many highly important and difficult problems involved. There are many important issues to a sound transportation policy which this committee must consider, and of course we are seeking the advice, help, and information from all sources in order that we can take the best action, in the interest of the general public in furtherance of a sound transportation policy for the United States.

Mr. Weeks, we have heard many witnesses since you were here. We have had much testimony presented, and developed a rather voluminous record. I doubt very seriously if you have had an opportunity to digest or even analyze all of the information that has been presented, but I am sure the major points of discussion have been called to your attention and, therefore, we are glad to have you back with us this morning.

STATEMENT OF HON. SINCLAIR WEEKS, SECRETARY OF COMMERCE; ACCOMPANIED BY LOUIS S. ROTHSCHILD, UNDER SECRETARY FOR TRANSPORTATION, AND PHILIP A. RAY, GENERAL COUNSEL, DEPARTMENT OF COMMERCE

Secretary WEEKS. Thank you, Mr. Chairman. May I say that we do know very well the time and effort that the committee has put into these hearings. May I make this comment: You were referring to an opportunity to keep caught up with the daily testimony. We have attempted to follow the testimony with

some care and there has been a daily digest of each day's testimony placed on my desk, most of which I have

gone over personally. As you have suggested, Mr. Chairman,

my further appearance here today, together with my associates, Mr. Rothschild, Under Secretary for Transportation, and Mr. Ray, General Counsel for the Department of Commerce, and Mr. Smith, Director of Transportation, Department of Defense, is in response to your acknowledgment of our request for an opportunity, at the close of the hearings, to present additional material by way of clarification or in response to specific matters which have been brought to our attention since we presented the Department's views at the beginning of these hearings. We greatly appreciate this opportunity.

commend and thank the members of this committee for hearing, receiving, and studying the views of all persons and groups who have expressed an interest in the transportation recommendations made by the President's Advisory Committee.

I should like also to compliment those who have appeared before this committee for their well prepared and ably presented views. I believe the quality of these presentations was influenced by the committee's sincere desire to explore this matter thoroughly and objectively.

We are confident that through the combined efforts of the Congress, the executive branch, the transportation industry and its customers, the shippers and the public at large, there will be developed a transportation regulatory policy that is truly responsive to today's national economic and security requirements.

May I say parenthetically that my testimony today is in a sense a summary, not a complete summary of course, but a pulling together of certain comments with our responses, comments made by the various segments of the using public and the transportation industry. Obviously we disagree with some of the conclusions and we agree with others. We have changed our viewpoint in one or two instances, as it will develop during my testimony.

AGREEMENT WITH GENERAL PRINCIPLES OF THE REPORT The great majority of those who have testified on H. R. 6141 and H. R. 6142 agree that some change in transportation regulatory policy is necessary. The National Industrial Traffic

League, which is the largest national organization representing those directly and individually engaged in shipment and receipt of commodities, expresses its general agreement in these terms:

If [the National Industrial Traffic League) is in general agreement with the theory and underlying philosophy of those recommendations and strongly supports them." The Association of American Railroads said:

* the railroad industry endorses and supports, in general, with certain reservations * * * the purposes and objectives of the several recommendations of the Presidential Advisory Committee on Transport Policy and Organization as those recommendations are proposed to be implemented by the provisions of the identical bills, H. R. 6141 and H. R. 6142.

1 P. 1, statement of William H. Ott. *P. 2, statement of J. Carter Fort.

The Federation of Railway Progress, which organization represents individual and corporate members having an interest in the progress of American railroads, such as banks and other financial institutions, concerns selling their products to railroads, and companies dependent on railroads for transportation, said:

We favor in principle the main recommendations of the so-called Cabinet Committee report on transportation policy-and the proposed legislation now being considered by your committee of the Congress, designed to give effect to the recommendations of the Cabinet Committee report."

The Interstate Commerce Commission expresses itself as being in full accord with those recommendations of the Advisory Committee's report concerning a strong system of common-carrier transportation.

As a matter of fact, its letter of December 22, 1955, recommends additional ways which it believes possible to strengthen the industry. The Interstate Commerce Commission, however, voices reservation with respect to those recommendations which would amend the Interstate Commerce Act so as to provide for increased reliance on competition in ratemaking.

At the same time, the Commission details at some length the increasingly important part that competition is playing in the making of common-carrier rates. This detailed statement was summarized by the Commission in saying:

Greater emphasis must now be placed upon cost and competitive considerations.

The Commission goes on to say, however, that the full effect of cost and competitive considerations upon ratemaking today can be secured without changes in the present laws.

These expressions are gratifying, for they show an awareness of a need for changes in regulatory policy and their general tenor constitutes substantial endorsement of the major policy principles recommended to the President by the Advisory Committee.

Even carriers who oppose the Cabinet Committee's recommendations in their entirety admit to the existence of problems within the regulatory area. The American Waterways Operators, Inc., in their statement discussing present problems in the field of regulation stated :

While generally satisfied with the present law, there is widespread dissatisfaction within the industry over its administration.

The American Trucking Association in the September hearings testified that:

Many of our conferences' in the ATA, for differing reasons, believe that the law governing private contract, and exempt commodities should be changed (p. 160, September hearings).

Again alluding to these problems, in the recent hearings the ATA stated that: We do not feel that this is the occasion to deal with these issues.

Implicit in these statements is a clear recognition of a need for changes in regulatory policy.

Despite this substantial agreement on the basic issues, the hearings have disclosed certain differences of opinion on how these concepts might be translated into law.

* P. 2, statement of James G. Lyne. •P. 5, ICC statement, December 22, 1955. *P. 31, statement of Chester C. Thompson. .P. 3, statement of James F. Pinkney.

Nearly all of the specific amendments have had some support from individuals interests. But, as we anticipated, such support in some instances has been conditioned on amendatory language. Others, while supporting specific amendments in principle, have expressed the view that the change could be accomplished either through amendments or through changes in present administrative policy.

As I indicated in my previous testimony, the Advisory Committee has no pride of authorship. We stand ready to assist the committee and its staff in any way it deems appropriate in working out language that will bring about the desired results.

Needless to say, the Advisory Committee and the Department, too, have gained greater knowledge and insight into the issues here involved from its analysis of the various viewpoints expressed during the hearings. We remain convinced that the proposals are basically sound.

RELIANCE ON COMPETITION Squarely presented for consideration by this committee is the iss to what extent should we rely on competitive forces in transportation!

The Advisory Committee believes that the widespread competition that exists in the transportation industry today, properly harnessed to avoid unjust discriminations and unreasonable extremes, can be made to work for better and more efficient transportation for the consuming public.

Economic necessity, with appropriate safeguards for the public, we feel

will better serve to spur progress in transportation and to allocate traffic among carriers in accordance with true capabilities. To accomplish this objective we propose:

(1) A revised declaration of transportation policy which emphasizes that carriers shall have greater freedom for competitive pricing, reduces economic regulation to the minimum consistent with public interest, and eliminates from the present declaration of policy language which has been construed to offset the benefits of price competition to the public, and

(2) Revisions in substantive ratemaking provisions of the act to assure relatively greater freedom for carriers to fix competitive rates.

The ICC characterized the recommended regulatory concept in these words:

The key to the whole thing, in our opinion, is the elimination of the words "unfair and destructive practices” from the present declaration of policy."

The Interstate Commerce Commission, in developing the reasons why the present concept should not be changed, stated that its obligation is to insure:

* * * that competition does not get to the point where it destroys the ability of the carrier to stay in business and improve and innovate and that is the danger line.

For example, in reference to the Motor Carrier Act of 1935, it was explained that the objective was not entirely to benefit the carriers as such:

If a carrier benefits from the stability which regulation offers; if the other competition is foreclosed out; it is not because you want to benefit them par

? Transcript, p. 260, Chairman Arpaia. & Transcript, p. 275, Chairman Arpaia.

ticularly; it is because the public depends upon reliable, continuing transportation services, and cannot allow it to break down.'

You will recall that in my statement on April 24 I discussed this matter of the ratemaking processes of the carriers and made the following observation:

In the channels of commerce we exercise vigilance under antitrust laws to prerent 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 capibilities and to a large extent substitute Government flat for free market judgment."

It was due to the existence of this state of affairs that I stated to you that the proposed change in basic policy was for:

The public interest—the interest of all our citizens in the best kind of transport service our economy can provide at the least cost."

I stated further in reply to your question that: The whole premise of our proposal is that if a given segment of the transportation industry can offer a better rate, the shipper and the general public are entitled to the service that is provided by that better rate."

DECLARATION OF TRANSPORTATION POLICY Agreeing that the proposed emphasis of the report was the referredto changes in the declaration of policy, the chairman of the Federation for Railway Progress stated why it is necessary in the public interest to adopt the new concept:

If carriers of any kind can afford to offer a lower price for their services than a competing type of transportation can make then the carrier that can offer the public that kind of a bargain ought to be permitted to do so. Otherwise the public is going to have to pay more for its transportation service than there is any good reason for its paying. If the trucks are not going to be able to compete with the railroads when truck costs are lower than railroads' cost--and vice versa—then where is the incentive for either the railroads or the truck operators to try to improve their efficiency and decrease their costs? If some form of transportation is to be protected by the regulators not allowing its competitors to underprice it, then the transportation industry is bound to become stagnant."

The carrier industries generally have expressed opposition to amendment of the declaration of national transportation policy. Motor and water carriers object strenuously to elimination of the phraseology referring to "inherent advantages" and "destructive competition.”

The water-carrier industry, which at present is 90 percent exempt from regulation, apparently believes that the present national transportation policy declaration is its primary safeguard against railroad competition, for they state:

After careful study of the pending legislation, it is our opinion that the rail. roads seek the right to destroy barge competition by destroying the present national transportation policy safeguards which directly preserve the inherent advantages of the various modes of transportation by prohibiting unfair and destructive competitive practices." * Transcript, p. 278. Chairman Arpaia. **P. 4, statement, Secretary

Weeks. P. 3, statement, Secretary Weeks. * Transcript, p. 163, Secretary Weeks. WP. 2, statement of James G. Lyne. ** Pp. 8-9, statement

of Chester C. Thompson.

78476-- 54 --pt. 3-30

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