Definitely not. A simple comparison of the rate of rise in real national income with the total intercity ton-miles of freight traffic clearly demonstrates that the need for transportation service has paralleled closely the growth of our economy. But in spite of a continuing and growing need for transportation service, the participation of common carriers in total transportation has declined.

This decline has shown a tendency to accelerate in recent years. The combined share of total traffic for rail and motor common carriers was 65 percent in the years just preceding World War II. During the war it increased to over 70 percent. Since then there has been a rapid decline to 55 percent in 1954, the latest year for which data are available. In some years since 1950, both rail and motor common carriers have contributed to this proportionate decline in common carrier ton-miles.

The relative decline in rail ton-miles of total freight ton-miles is a familiar story. It is also generally known that the motor common carriers have made great absolute gains in the postwar period due to the great surge in demand for motor-carrier service. But since 1950, the proportion of regulated motor common carrier ton-miles to all intercity ton-miles has shown some tendency to drop off. This could well be explained by the fact that motor common carriers have not kept pace with the growth experienced in all motor freight transportation. During the war, common carriers by motor vehicle carried nearly one-half of the total intercity motor freight. Today they carry about 28 percent, which is about their prewar level. There is evidence that further declines may be in store due to the growth of unregulated motor carriage which is well ahead of its prewar share.

Water common carriers in the coastwise and intercoastal trades have experienced extreme difficulties in the postwar era. This story is documented in a recent study by the Maritime Administration entitled, "A Review of the Coastwise and Intercoastal Shipping Trades." I would like to offer this report for the record at this time. Mr. HARRIS. Very well, it will be received.

(The report is as follows:)

Prepared by

MARITIME ADMINISTRATION, Clarence G. Morse, Administrator
U. S. DEPARTMENT OF COMMERCE, Sinclair Weeks, Secretary

INTRODUCTION

An Economic Survey of Coastwise and Intercoastal Shipping was published by the Maritime Commission in 1939. In summary, this Survey found the fundamental difficulty of our domestic shipping to be an economic squeeze between rising operating costs and inadequate revenues, the latter adversely arrected by allegedly inequitable competing inland carrier freight rates. The complex subject of rate-making was discussed at some length, and the major element of operating expense was identified as labor costs, particularly cargohandling expense. There was a snip replacement problem. The costs of new construction had risen considerably above the prices at which the active snips were built or bought from the government. Lack of confidence in the future discouraged new construction at nigher costs. It was noted that the problem centered in the dry-cargo trade, particularly in break-bulk operations involvin substantial and increasing cargo-handling costs.

A review of the present picture of the coastwise-intercoastal fleet with very minor exception re-emphasizes the problems facing the industry at the time of the 1939 Survey. 1 There have been changes since 1959 but they have been changes in degree rather than in substance.

The government took over all vessels in the coastwise-intercoastal trade during World War II and the inland carriers, principally the railroads, absorbed the domestic traffic formerly carried by sea. After the war, domestic operations were gradually restored with warbuilt ships either bought or chartered from the government. The warbuilt ships which found their way into the bulk trades, especially petroleum, were types which have in general proved competitive in the postwar transportation economy. Those which went to the break-bulk operators were basically standard dry-cargo ships, designed primarily for use in the foreign commerce of the United States and the war effort, and have turned out to be considerably less successful in recovering the prewar traffic than have the bulk carriers. As a result, the break-bulk operators now, as in 1939, are in a considerably less favorable economic situation than is the case of the bulk operators. The deadweight tonnage in the domestic dry-cargo ship fleet has declined about 56 percent as compared with the deadweight tonnage of tankers which has increased by some 32 percent. The prewar passenger ship flret has vanished from both the coastwise and intercoastal trades.

1/

As used herein, the term "coastwise trade" means trade along the Atlantic, Gulf and Pacific Coasts only. In this respect, it differs from the 1939 Survey, which included under the "coastwise" heading, trade between the continental United States and the noncontiguous American territories of Hawaii, Alaska and Puerto Rico. "Intercoastal trade" means trade moving between east and west by way of the Panama Canal.

The noncontiguous trades are not considered in this report because their competitive and operating problems have little relationship to those of the coastwise and intercoastal trades with which we are concerned.

Traffic figures indicate that the decline in dry-cargo tonnage has concurred primarily, if not wholly, in the break-bulk dry-cargo trades where rising costs, particularly in loading and discharging the ship, have largely eliminated the so-called "inherent" economic advantages of ocean transport.

In short, the crux of the coastwise-intercoastal shipping problem is in the break-bulk dry-cargo trade today as it was before the war. The reestablishment and preservation of this segment of the domestic fleet is of vital national defense importance if the immediate needs of a future grave national emergency are to be met. It is obvious that the ready availability of ships employed in domestic operations may well be a critical factor in any initial military or civil defense operation of the United States occasioned by a future atomic or thermo-nuclear war. Further, an economically sound, low-cost domestic fleet will continue to make important contributions to the economic growth and development of the United States as a whole and a balanced national transportation system in particular.

The industry's views on the situation now facing coastwise and intercoastal operators were sought at two conferences held in Washington, D. C., in early 1955, one with the dry-cargo operators and the other with the tanker operators. Subsequently, questionnaires requesting detailed information were sent to the industry participants. The replies to the questionnaires are summarized in the Appendix. Also reproduced verbatim therein are two documents submitted by the Intercoastal Steamship Freight Association and the Marine Exchange, Inc., respectively. These papers represent the composite opinions of their sponsors and authors and provide a comprehensive expression of the industry's attitude on the subjects covered.

This study has attempted to avoid repetitious treatment of many problems which have been raised from time to time and it has endeavored to treat the fundamental needs of the industry and of the country on the basis of a long-term solution.

What then are the major problems to be overcome so that the coastwiseintercoastal fleet may return to its proper place in the United States transportation complex? Briefly stated, they involve the restoration of the "inherent economy of ocean transportation" element to break-bulk dry-cargo operations.

How may this best be accomplished? At present the Maritime Administration has received a number of applications from individuals proposing a solution to this problem, within the framework of existing law, which involve the construction of new types of break-bulk ships incorporating the latest technological features designed to reduce cargo-handling costs and thereby achieving the low-cost relationship once enjoyed by the break-bulk carriers. There is every reason to believe that some or all of these proposed solutions will proceed to successful, i.e., profitable, conclusion. In any event, again as in 1939, the long-range solution appears to be along the lines of private enterprise and know-how proceeding with a vigorous replacement program of their capital equipment so as to offset the higher operating costs of their present units and thus regain a truly competitive position.