90 cents a ton-that is 90 cents on actual space to produce the toll that we get on $1.20 a ton under the present limitations. So this bill recognizes the necessity of those three changes in order to provide a remedy for the existing situation.

Now, looking at what actually occurs under the present method of measuring ships and charging tolls, we get this result: In the first place, the maximum charge is usually $1.25 a ton under the United States rules instead of the $1.20 a ton that the Canal rules provide for on a laden ship. That is the maximum charge, of course. Now a ship in ballast usually pays 72 cents under the Canal rules as its minimum charge. In the third place, in some cases $1.20 under the Canal rules prevails as the maximum charge, and in many cases 72 cents on a laden ship or a ship on ballast is charged. In other words, in some instances the limit is $1.20 under Canal rules and other times it is 72 cents based on the actual tonnage on a laden and in ballast ship alike. The fundamental distinction between a laden ship and a ballast ship in imposing tolls is forced to be ignored under these rules, so that in many cases the maximum and minimum charges are exactly the same, applying the same toll to a fully laden ship' as to a ship that is only in ballast.

Fifth is illustrating the operation of the present rules, in some cases small vessels pay no tolls at all. That is not an important phase of the tolls question. It is just illustrative of the ridiculous rules under which the Federal Government is compelled to levy tolls: and measure vessels in the Panama Canal at the present time. The CHAIRMAN. How could you explain that?

Mr. LEA. I couldn't explain that. It is a technical matter. Mr. Sill is here and there isn't anybody better qualified to answer that than he.

The CHAIRMAN. We will call on him.

Mr. LEA. I want to say that Mr. Sill, as I regard him, is a magnificent type of efficient, disinterested, devoted employee of the Government.

Now, the average of national ships that pass through the Canal pay laden about 76.9 cents up to $1.26 per ton; in other words, a variation in the charges made against laden ships between 76.9 cents' to $1.26 a ton, or a variation of 49.2 cents per ton as between different ships using the Canal.

A rather outstanding example of the results of the operation of the present system is that of the Empress of Britain. This ship is so enormous in size that I wouldn't present it as representing the average condition, but it does represent the principle that is involved as to various ships.

When the Empress of Britain is measured by the English rules her tonnage is 22,545; when measured by the United States rules her tonnage is 15,153, and when measured by the Canal rules her tonnage is 27,503.

The CHAIRMAN. That is Suez-Panama.

Mr. LEA. No; that is the Panama Canal rules. By the Panama Canal rules the Empress of Britain has 27,503 tons, and by the Suez Canal rules 26,531 tons. When she goes to pay her tolls at Suez Canal she pays $30,741. I don't believe I have her toll here in the Panama...

The CHAIRMAN. $11,000, a little over $11,000 less.

Mr. LEA. Oh, yes; in the United States $18,941, or $11,800 less than she pays for using a British canal.

Now the Suez Canal was constructed at one-third the cost of the Panama Canal and is a sea-level canal, and they charge more for vessels than the United States pays for the Panama Canal conconstructed at three times the cost. The whole world pays those tolls in the Suez Canal and it does a larger business than the Panama Canal.

The CHAIRMAN. Do you have the figures on that?

Mr. LEA. I do not have. I have looked it up but I don't recall just now. I believe they are in the record and no doubt Mr. Smith can supply them. I could tell you if I had a few minutes to look them up.

(Following information inserted by Panama Canal:)

SUEZ CANAL TRAFFIC AND TOLLS

The Suez Canal affords a direct basis of comparison with the Panama Canal, and a valuable guide to the solution of the questions which have been raised in regard to the measurement of vessels, the proper rate of tolls, and the items of operating and maintenance costs. There are some marked differences, as well as certain marked similarities between the two canals. The following are some of the differences which should be carefully noted. The direct cost of the Suez Canal, including improvements for many years, amounted to about $125,000,000, against the direct cost of the Panama Canal during a lesser period of time of nearly $400,000,000. Against the Panama Canal deficit of over $17,000,000 to the end of 1933, after including all proper items of cost of operation and maintenance, the Suez Canal for many years paid a return of more than. 30 percent per annum on the capital stock, after paying all operating costs, including interest at from 3 percent to 5 percent on borrowings.

The rates of tolls at Suez have been subject to ready and modification to changing conditions. They have been both raised and lowered by the controlling authority, whereas the rates at the Panama Canal, though it is provided in the law and regulations that they might be changed by the controlling authority, have been reduced only, and this reduction to the breaking point, has been made not by the controlling authority, but through manipulations by shipping interests and authorities in no way connected with the Canal. The Suez Canal is owned and operated by a stock company for the benefit of the stockholders, one of the largest of whom is the British Government, whereas the United States has owned and operated the Panama Canal presumably, but not actually, in the interest of the American people at large. This difference probably explains some of the other differences.

The similarities between the two canals are that they are interoceanic waterways. The measurement rules upon which tolls are intended to be assessed at the Panama Canal and the Suez rules of measurement are substantially the same, and the rates of tolls at the time the Panama Canal tolls were originally fixed were substantially the same. The variation between the number of vessels and the amount of registered tonnage thereof passing through the two canals is not very wide. The class of expenses charged in the operating organizations of the Suez Canal does not appear to vary materially from the class of expenses charged at the Panama Canal, except as they are dependent upon the different type of canal involved. The expenses at the Suez Canal are divided among the following heads: Administration expenses, operating expenses, maintenance expenses, public charges, which latter heading is stated to include interest upon and mortization of the company's outstanding bonds and notes. From the net earnings, after deducting the above items, are taken the sums devoted to surplus, insurance, permanent additions, betterments, workmen's pensions and relief, founders' profits, and payments to the Egyptian Government.

After deducting all of the above charges, a statement for 1920 shows that a sum in excess of $28,000,000 was available for distribution as profits.

The statement of Professor Johnson, in his report on Panama Canal, Traffic and Tolls (p. 103), relative to the Suez Canal is illuminating:

"The Suez Canal has proven highly profitable to its owners. It is not probable that the revenues of the Panama Canal will yield a large return on the capital invested. The cost of the Panama Canal will be four times the cost of the Suez waterway, and it is doubtful whether the traffic of the Panama Canal will equal that of Suez. It will not be the policy of the United States Government to charge high tolls at Panama for the purpose of securing profits on the funds invested in the Canal; but, as is explained later, it will be possible for the United States, by means of moderate tolls, to secure enough revenues from the Panama Canal to meet operating and maintenance charges and to pay interest on the $375,000,000 invested in the waterway. The fact that the Suez Canal Co. in 1911 would pay a dividend of 33 percent from tolls of $1.30 per net ton indicates that the Panama Canal probably need not be run at a loss, or at the expense of the general taxpayers, if the United States applies business methods to the management of the waterway."

Following is a comparative statement, partly estimated, of transits, net tonnage of vessels, and tolls, Suez Canal and Panama Canal, for the years 1926 to 1933, the data for the Suez Canal being on the basis of calendar years, and that for the Panama Canal on the basis of the fiscal years.

The amount of tolls for Suez was obtained by converting pounds sterling into dollars at rate of $4.86. Tolls for Suez for last 3 years are estimated using net tonnage and tolls rate.

Now contrasting the charges against the foreign and American vessels, in 1933, 54 percent of the tonnage was foreign, and if we had a million dollars in reduction of the tolls in the aggregate the foreign ships would get $540,000 of it, the United States coastal ships would get $340,000, and the United States foreign $120,000.

The CHAIRMAN. That is ships engaged in foreign commerce.

Mr. LEA. Yes. So the foreign ships get more benefit out of reduced rates than American ships. I am not presenting that in the argument for increased tolls; my interest in this is not from the standpoint of increased tolls. I belong to a coast State. We are deeply interested-or I am-in seeing that these shipping companies get everything that belongs to them. A few years ago we were threatened with a very substantial raise in railroad rates in California; our farmers were producing their fruit and shipping it to the East at a loss; I know what I am talking about because I am a grower of fruit and sell a percentage of our crop in a small way to the New York market; the railroads were insisting on this great raise in the face of the fact that the farmers were not getting enough for their fruit to produce it and to pay the costs of production. We looked to the ships as a matter of great importance to our State. If there is anybody that ought to be a friend of the ships it is the producer in our State; it affords a convenience and should be a good method of transportation to the East and I think it should develop to even a larger field than it occupies today, but I am not so interested in these ships that I want them to have any unjust advantage at the expense of the United States Government. They are a benefit to our State but our State has no legitimate right or interest in their betterment in preserving a method that is unfair and I think has the effect of gouging the Government

in the tolls of the Panama Canal.

I can appreciate why the ships object to this legislation, and I wouldn't deny anybody the right to resort to every legal method they have to preserve the advantages they have. That is human nature and we are all subject to the same attitude as the rest of the people; we are no different from the shipowners.

The CHAIRMAN. On that point about the railroads, they were a unit in opposing the Interstate Commerce Commission Act. Afterward they were reconciled to it and appreciated its value and service to them also. I think after they were established they came to realize it was of service to them.

Mr. LEA. That is very true. If we do the right thing by the ships, in the end the legitimate, broad-minded shipowner will approve of it, and that right thing is to fix a toll that is businesslike and equitable as between the different users of the Canal. Now, the ship interests have had this situation. They have been opposed to a change that would cause any of these ships which are beneficiaries of the importance of toll that they are now enjoying from being compelled to pay their legitimate proportion of the cost.

That is perfectly natural. They want to continue to enjoy the advantage that a large number of ships have at the present time. In the second place, they have had a more than justifiable apprehension that if the tolls were relevied they might be increased, and hence increase the general burden of the shipping interests. Well, now, our committee was very sympathetic. We wanted to do everything we could for the shipping interests that they desired, but we were unable to get any constructive aid in working out a plan. There was constant opposition. Every concession we made brought not constructive help from the shipping interests, so we have to

try to do what is the right thing here, and the right thing by the Government and the shipping interests.

However, the committee in executive session gave considerable consideration to whether or not the burden on the shipping interests might be unjust, so we propose, in the bill over in the House, and I believe by your bill-I haven't read your bill, but I believe it is similar

The CHAIRMAN. The last bill is identical with that of the House. Mr. LEA. It calls for the appointment of a special committee to consider the whole question of toll regulation, the measurement of ships, and the tolls that should be imposed, and then, after an investigation, to report to the President on the changes and revisions and modifications that may seem desirable. The shipping interests and all interested persons are to have a full opportunity to present their case.

The CHAIRMAN. That report would be made before the act really goes into effect.

Mr. LEA. Before the President makes the order. It is to aid the President in reaching a just decision.

The CHAIRMAN. Mr. Lea, yesterday the shipping interests seemed very enthusiastic over section 2. They seemed to regard that as a stroke of statesmanship. They thought that that ought to be done, in a preliminary way, before any affirmative or substantial legislation was enacted.

Mr. LEA. I think it is a just way of regulating these tolls, all right, but I think there is no merit to the suggestion that it should be made before Congress gives the power, because that would just be a delay in proceeding without any justification. It would be a useless expense of time and effort to send out a commission to prescribe rules without any authority to enforce the rules; and then, judging by the opposition this legislation has met in the last 10 years, when we came back with a set of rules, no difference how wise and prudent they be, we would have the same opposition we have today. Then, after you get the rules back to Congress, what are we going to do with them? Enact them into law? That would be folly, because it isn't practical to prescribe rules for the measurement of these vessels that are unchangeable. The history of this legislation demonstrates that if it demonstrates anything on earth. Whenever a change is made, whoever is hurt by it will resist to the full extent of his power any change that affects him. The result is that we make rules. Some of them prove to be erroneous; mistakes are made, injustices may be made. It would be the most difficult and harassing thing, as we have had, to go through before we could correct it and make the most obviously needed changes.

The CHAIRMAN. Certain firms, which get no direct advantage or which suffer only an indirect disadvantage by their competitors enjoying these privileges seem to be rather quiescent or inactive in this campaign. The point is that they would be no better off directly if this legislation were enacted requiring everybody to conform to an equitable standard.

Mr. LEA. It is of little importance to one ship whether another ship pays its part or not. It is so uncertain or conjectural as to whether it means anything to that ship that nobody gets excited over