PROPOSED NATIONAL TRANSPORTATION POLICY

It is hereby declared to be the national transportation policy of the Congress(1) to provide for and develop, under the free enterprise system [of dynamic competition] a strong, efficient, and financially sound national transportation industry by water, highway, and rail, as well as other means, which [is and] will at all times remain fully adequate for national defense, the postal service and commerce,

(2) to encourage [and promote full] competition between modes of transportation as well as among carriers of each mode at charges not less than reasonable minimum charges, nor more than reasonable maximum charges, so as to encourage technical innovations, the development of new rate and service techniques, and the increase of operating and managerial efficiency, [full use of facilities and equipment] and the highest standards of service, safety, economy, efficiency, [and benefit to the transportation user and the ultimate consumer,] but without unjust discrimination, undue preference or advantage, or undue prejudice, and without excessive or unreasonable charges on [noncompetitive] any traffic;

(3) to cooperate with the several States and the duly authorized officials thereof; [and to encourage fair wages and equitable working conditions;] (4) to reduce economic regulation of the transportation industry to the minimum consistent with the public interest and to the end that the inherent economic advantages, including cost and service advantages, of each mode of transportation may be fully realized in such a manner as to reflect its full competitive economic capabilities; and

(5) To require that such minimum economic regulation be fair and impartial, without special restrictions, conditions, or limitations on individual modes of transport.

[All the provisions of this act shall be construed, administered, and enforced with a view of carrying out the above declaration of policy.]

The foregoing declaration of national transportation policy does not confer any authority or impose any restriction on the Commission which is not provided in the substantive provisions of the Act and is to be used solely as a statement of congressional intention for guidance in the interpretation, administration, and enforcement of the Act. (R. 454.)

Additional proponents

Brotherhood of Locomotive Engineers, Guy L. Brown (R. 1684). Equitable Life Assurance Society of the United States, Hunter Holding (R. 1847).

Fairmont Foods Co., Lloyd C. Dell (R. 1581).

National Association of Mutual Savings Banks, R. Stuart Rauch, Jr. (R. 1126-1127).

rance

New York Life Insurance Co., H. Everett Woodruff (R. 1125). Opponents

AMERICAN ASSOCIATION OF PORT AUTHORITIES, NORTH ATLANTIC PORTS ASSOCIATIONS, INC.

(Charles R. Seal)

While it is agreed that competition is more severe now than 30 years ago, that fact is one of the strongest arguments against removing existing control over competitive practices of carriers. Largely uncontrolled competition, which the proposals would permit, is as dangerous a threat to the public interest as could exist. The proposed policy is contradictory in recommending abandonment of the prohibition against destructive competition while unleashing the full force of "dynamic competition" (R. 992).

AMERICAN BARGE LINES, INC., COMMERCIAL BARGE LINES. INC., COMMERCIAL TRANSPORT CORP., INC., UNION BARGE LINE CORP.

(J. Haden Alldredge)

The proposal is radically to change the law and the policy behind the law with the expectation and hope, as expressed by the advocates of the changes, that better results will be accomplished in the future than if the present statutes are allowed to remain in effect. It is proposed that the Government rely upon competition to protect the public interest rather than upon regulation. If this philosophy had not been tried in the past and found wanting it might have more appeal than it does now. It has been amply demonstrated, however, that competition is not an adequate protector of the public interest in the field of transportation-in fact, it has some destructive potentialities, not only for the carriers themselves but for various segments of the public which must use transportation, as well as for communities, sections, and regions directly and indirectly affected by transportation practices. If the new version should be adopted by Congress, the prior Commission and court precedents will be nullified or seriously impaired, and perhaps a decade of litigation will ensue before the administrative agency can get its bearings (R. 1697).

AMERICAN TRUCKING ASSOCIATIONS, INC.

(Dr. John H. Frederick)

With the development of motor and air transportation, and the revival of inland waterway transportation a new transportation policy developed which encouraged competition between the various forms of transportation on the assumption that competition would result in a more economical service to the public. As the industry grew, it became apparent that existing laws were not adequate. Thereafter, the Transportation Act of 1940 was passed, which permitted the most use of transportation resources, and recognized the need to preserve the inherent advantages of each mode of transtortation. Although the primary objective of regulation is to protect the shipping public, the new policy recognized the needs of the transportation industry, and placed the Federal Government in a position to promote competition on the one hand, and, on the other, to restrict it by limiting the entry of carriers into the business and by the exercise of the minimum-rate authority (R. 726-728).

The implications of the new doctrine of "dynamic completion" as reflected in the proposed policy, are a cause of concern. Competition in economic parlance is the inability of an economic unit, firm or individual, to control price. Dynamic economics is a study of processes whereby economic factors such as prices and quantities ultimately reach an equilibrium in a static economy. "Dynamic," therefore, is a misnomer when coupled with the word "competition" because in economics the term is associated with an economy from which competition is absent. Unless the new doctrine can be precisely defined, it would be hazardous to discard 70 years of transportation experience and to destroy the policy under which the industry has developed.

The present national transportation policy is keeping pace with the growing needs and demands of the transportation industry, and ef

fective administration of this policy could never result in static regulation (R. 728-730).

AMERICAN TRUCKING ASSOCIATIONS, INC.

(James F. Pinkney)

The present national transportation policy as adopted in 1940, is favored, and the proposed removal from that policy of the inherentadvantages clause is opposed since it would, among many other things, have the effect of altering the policy in favor of the independent control of the several modes of transportation. It would have the effect of relaxing the present policy which attempts to prevent the unrestricted operation of trucklines by railroads. Deletion of the provision condemning unfair or destructive competitive practices, and elimination of the provision charging the Commission to promote sound conditions in transportation, could set the entire transportation system and its regulation back to the pre-1920 days (R. 833).

AMERICAN WATERWAYS OPERATORS, INC.

(Chester C. Thompson)

Congress, in 1887, decided that segments of the transportation industry required economic regulation to safeguard the public interest. By the 1940 amendments, Congress further defined the areas and limits for regulation and at the same time enacted the national transportation policy which recognizes the need to preserve the inherent advantages of each mode of transportation and to encourage the maintenance of reasonable charges for transportation services, without unjust discriminations, undue preferences, or unfair or destructive competitive practices. This redefined and strengthened the policy instituted by the original act of 1887 (R. 458–459).

Before discarding 69 years of transportation experience and destroying the policy under which it was built, it must be ascertained whether the aims of Congress have been accomplished. Under the existing policy, all modes of transportation have prospered. The railroads financed the transition from steam to diesel power, from manual to mechanized roadbed maintenance, and from manual to pushbutton yard operations. While they have carried more traffic since 1942 than ever before, their portion of the total traffic has declined from the high of over 70 percent in 1943, due to the expanding fleets and new service techniques of other modes.

The barge and towing vessel industry has grown proportionately since 1945. Based on transportation figures, this industry handled in 1954, 7.3 percent of total traffic, as compared with an average of 4.4 percent over the last 16 years. It has been able to attract financing, and has successfully made a transition from small-powered boats to high-powered diesel boats. The industry fleet has increased from 3,500 towing vessels, 10,000 dry-cargo barges, with a carrying capacity of 6.5 million tons, and tank-barge capacity of 2.5 million tons in 1945, to 4,300 towing vessels, 12,000 barges and scows, with a carrying capacity in excess of 8.25 million tons, and tank-barge capacity of 3 million tons (R. 459-460).

The industry is an important factor in national defense. During World War II, it transported over 1.7 billion barrels of petroleum products through the inland waterways. Inland shipyards built over 4,000 attack vessels for the Armed Forces. If shrinkage of the barge and towing vessel industry is accomplished, as it undoubtedly would be if the proposed legislation is enacted, our inland shipyard capacity would also shrink. The success of industries locating in the Ohio Valley under Government suggestions for dispersal of vital industries, has been materially aided by the existence of navigable inland channels and the inland water fleet. Strong exception is taken to the findings in the report of the Presidential Advisory Committee that only common carriers can be relied upon to furnish transportation in the event of a future war, since the services the industry performs and the commodities it carries in peacetime would also be essential in wartime (R. 461-462).

If the transportation industry is generally keeping pace with the growth of the national economy and is economically sound, the various modes of transport must be getting reasonable returns, and the national transportation policy of encouraging reasonable charges must be successful. Only the railroads insist that the present policy hurts them. The present law permits carriers to exercise managerial discretion within certain boundaries in matters of ratemaking. They now seek to remove these boundaries by the legislation under consideration, recommending that persuasive, dynamic competition be allowed to become the dominant factor in ratemaking. Managerial discretion has not been used effectively by the railroads. Their present policy of making competitive rates on an out-of-pocket cost basis has resulted in unwarranted dissipation of revenues, yet they ask the Congress to enact the same basis as the criteria for establishing minimum-maximum rates. Since all modes of transportation are not equal at all levels of service, equipment, and geographical distribution, economic restraints are essential. Congress has recognized that certain safeguards must be established to protect the public and the transportation industry as a whole, and the area of freedom within regulation limits is defined in the present statement of policy (R. 462-465). The present regulatory law, properly administered, is sufficient to meet the needs of the industry and the public. However, the industry would like to see some minor changes in existing law to curb the granting of relief under section 4 without formal proceedings, and the relief from general rate increases on selective commodities which invariably are best suited for inland waterway movement. But the proposed legislation is objectionable, especially the proposal to change the national transportation policy.

The purpose of existing law is to so control competition that rail, water, and motor carriers are permitted to flourish and to provide the best possible service to the public. The proposed new policy, placing great emphasis on "dynamic competition," is an invitation to the economically strongest form of transportation to take off on a program of rate slashing, and, as the Interstate Commerce Commission. itself has said, thus return to the "law of the jungle," the "survival of the fittest," so that eventually the water carrier industry would be entirely eliminated (R. 465-467).

ASSOCIATION OF AMERICAN RAILROADS

(Jervis Langdon, Jr.)

The difficulty with the present statement of national transportation policy is not its language, but the interpretation given to it by the ICC. If the application of "unfair or destructive competitive practices" were limited to rates which are noncompensatory, there would be no occasion to change the language and the proposed change in the statement of policy will be unnecessary to achieve the basic proposal of the Cabinet Committee (R. 539–540).

The railroads believe that such a revised interpretation of the present policy would follow as a matter of course if the three shall-nots as previously identified were enacted into law. For as we have seen, they would constitute a positive command to the ICC to exclude a faulty standard in its review of competitive rates, and such a mandate, in the form of a provision of substantive law, would necessarily modify the ICC's definition of an "unfair or destructive competitive practice. Otherwise stated, if the ICC, in passing upon rates designed to meet the competition of another form could not take into account their effect upon such other form but was confined to a consideration of whether the proposed rates were reasonable per se and nondiscriminatory, it is not likely that the present policy prohibition against "unfair or destructive competitive practices" would constitute an obstacle or otherwise jeopardize this basic recommendation of the Cabinet Committee.

It is the position of the railroads that a change in the national transportation policy is not necessary to achieve the basic proposal of the Cabinet Committee (R. 540).

The witness responded to certain questions as follows:

The Commission relies upon the "unfair or destructive competitive practices" provision of the national transportation policy in determining the economic effect which proposed rates would have on another mode of transportation. In certain decisions the ICC has found that proposed rail rates would be reasonably compensatory and yet condemned the rates because they would have an adverse effect on another mode of transportation. The proposed rule of ratemaking would prevent the Commission from relying on the "unfair or destructive competitive practices" provision of the policy to condemn compensatory rates (R. 553-554).

The Transportation Act of 1940 amended the ratemaking rule in each part of the Interstate Commerce Act so that the ICC could consider the effect of proposed rates on the movement of traffic of the proponent carriers, but not other carriers. It also amended the antipreference provisions of each part of the act so that they would not apply to the traffic of any other mode of transportation. Congress rejected a proposed amendment which would have compelled the Commission to approve, in all cases, compensatory rates proposed by one form of transportation, apparently because the ICC said, in effect, that it was unnecessary since that would be done in any event. In decisions immediately after the act of 1940, the Commission concluded that rates found to be compensatory should not be condemned because of their effect on another form of transportation. However, since 1945 the ICC has frequently deviated from this position (R. 555-556).