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ships are excluded therefrom, and therefore I contend that the application of a toll at the Panama Canal on an American ship, a ship flying the United States flag, moving from one port in the Atlantic or the Gulf to another port in the Pacific, particularly with reference to the continental United States-I fail to see how it was ever contemplated by any treaty that we should be prohibited from granting relief to shipping operations exclusively serving the domestic economy. I am well aware that someone who seeks to oppose such a view may contend, well, Great Britain might want to go through the Suez Canal to some other possession, but, I point out to you, that is not intercoastal trade, and I again emphasize, additionally emphasize, that it has no parallel or similarity to our domestic services, because in any such operation, so far as I know, foreign-flag vessels are vessels foreign to the British flag in that case, or in going from France to Madagascar through the Suez Canal, ships of flags foreign to either France or Great Britain, as far as I know, are not excluded from carrying on that kind of shipping activity. But we do know that in our laws, we prohibit a foreign-flag vessel from carrying on in intercoastal operations, lifting cargo at one American port, going through the Panama Canal and depositing it at another American port. For that reason, I feel that that domestic service area is a thing apart from anything originally contemplated in these treaties that are frequently referred to in a recitation of the historical background stemming prior to, during and subsequent to the Suez Canal activities. It is possible that under the phraseology of those treaties, technically, under international law, opposition could be registered, but I hold that any such opposition is wholly illogical because it seeks to create a condition that would permit foreign alinements or the alinements of ships under foreign flag to seek to prevent that which I offer to you, when that which I offer to you, if permitted, would in no wise affect any adverse influence on any foreign-flag ship or any foreign nation because they are already prohibited from activity in that area.

Now that, in essence, is what I wish to comment on, Mr. Chairman. I feel we ought not to go so far as to apply that which I recommend here or which I make observations on with respect to those shipping companies who do now or who may contemplate hereafter in an activity in international trade wherein they seek to effectuate what they term to be alinements in their over-all operations, say, sailing from New York, going through the Panama Canal and into San Francisco, and thereafter sailing the surface of the seven seas. I don't make any such advocacy but for persons exclusively engaged in intercoastal trade, in intercoastal service, providing an additional transportation medium for the domestic shippers, with respect to whether it be otherwise by rail or by truck or by inland waterway, if such were possible, and it is for that reason I believe if the matter is pursued, we can successfully or should successfully obtain at least a substantial reduction in the tolls made applicable to intercoastal shipping if not the entire removal of them.

I have nothing further to say, Mr. Chairman, because I think Mr. Bailey seems to have covered in his statement pretty well the other aspects.

I would like to emphasize, however, getting back to the relationship of the commercial activity as against the aspects of national defense

or the military establishment aspects, that to any extent an elimination of the tolls applicable to intercoastal shipping reduces the over-all revenue, as that over-all revenue may relate to the operations of the Panama Canal and that area and that that difference be added and transferred as a charge against the Military Establishment and the national-defense aspects.

As I understand it, the general theme of some of the proponents of this is to reduce all commercial charges without respect to foreign flag what flag?-in order to carry on a greater burden with respect to the Military Establishment. That area of intellectual agreement I will leave to others, but I do say to you that, to my mind, I can find no justification for not exonerating from these charges ships exclusively engaged in a full intercoastal operation.

I have nothing further to say at this time, Mr. Chairman.

Mr. FUGATE. Mr. Mellen, excepting the present treaty arrangement under which we are now operating, have you any observations on how we might give preferential treatment to intercoastal trade? Mr. MELLEN. Privileged treatment?

Mr. FUGATE. Yes.

Mr. MELLEN. I wouldn't costrue it as privileged treatment. I think it has been discriminated against now. I am trying to rectify discrimination.

Mr. FUGATE. Fair treatment.

Mr. MELLEN. That is what I am advocating. It is being unfairly treated now. It has been given treatment as if it were engaged in

international trade.

Mr. FUGATE. I am concerned with the proposition as it now obtains under the present treaty arrangement.

Mr. MELLEN. Yes, sir.

Mr. FUGATE. Whether or not we can get the proposition resolved, as you state, is a matter, of course, for the future, but we are confronted with trying to establish a sound policy now. Do you have an observation as to how that fair treatment might be given to intercoastal shipping?

Mr. MELLEN. I think I have expressed it here, Mr. Fugate.
Mr. THOMPSON. To eliminate the tolls?

Mr. MELLEN. I advocate the elimination of the tolls.

Mr. FUGATE. Well, that, of course, would require the rewriting of the treaty, would it not?

Mr. MELLEN. I am not sure that it would. It might and it might not.

Mr. THOMPSON. The State Department has taken that position. Mr. MELLEN. I have discussed it frankly with some of the officials of the State Department on Saturday, and I don't know whether the State Department, with respect to your question, has gone into the particularization as concerns exclusive treatment of the intercoastal trade. I think if they take a contrary view, they are mistaken. Mr. THOMSPON. They have consistently taken it, though. Mr. FUGATE. I am taking the view that they are right.

Mr. MELLEN. It might be consistent with prior observations of theirs, but I think it is most inconsistent with the facts.

Mr. THOMPSON. We have tried to talk them out of things before, Mr. Commissioner.

Mr. MELLEN. I fail to see, Mr. Chairman, how any international treaty plays any part in our domestic economy, in our domestic area. I am well aware that they always seem to seek to inject foreign aspects into all our domestic and national economy.

Mr. THOMPSON. The State Department?

Mr. MELLEN. Yes. They too frequently seem to represent foreign interests in the United States rather than to represent American citizens abroad.

Mr. FUGATE. Well, that is well said, Mr. Mellen [laughter], but we are still confronted with the problem.

Mr. THOMPSON. I am very glad to have the views of the Maritime Commission, Mr. Commissioner.

Have you any other questions?

Mr. FUGATE. Yes.

Mr. THOMPSON. You haven't shed much light on our deliberations this morning.

Mr. MELLEN. No, but at least we can keep on adding emphasis to it, and I don't think it will be very difficult to bring about a modification of the treaties, and, after all, how long are we going to permit ourselves to be run by alliances of foreign nations?

Mr. THOMPSON. Well, I sympathize with your position, but I don't believe it is going to come within the purview of this committee. Mr. MELLEN. You mean it might be referred to the Committee on Foreign Affairs, I suppose?

Mr. THOMPSON. Probably so.

Mr. MELLEN. Then we can get on some other bill, can't we?
Mr. THOMPSON. That is right [laughter].

Are there any other questions?


We now have Mr. Frazer Bailey.


Mr. BAILEY. I am sorry I have no prepared statement, Mr. Chairman.

I would like to say at the beginring that I was very much interested in the remarks of Mr. Mellen, for whom I always have the greatest respect as to his views on all subjects.

Perhaps we have been a little modest in our propositior. The matter of tolls on intercoastal shipping was eliminated in the Panama Canal Act of 1912, and the Congress ruled against us on that matter and restored them in 1914. That is just a factual background.

With respect to Mr. Burdick's statement, just for the record, may I say that the report of the Governor for the fiscal year 1948 shows a number of years in which the Panama Canal operated at a profit, after interest. The highest amount was $3,376,000 in 1928. It was $2,900,000 in 1929, and $3,300,000 in 1930. I am sure he simply overlooked those items in the figures.

Mr. THOMPSON. We sprung him as a witness unbeknownst to himself, Mr. Bailey.

Mr. BAILEY. I am not criticizing Mr. Burdick at all. It is a mass of figures and very easy to overlook.

Mr. FUGATE. That was after interest charges had been added?

Mr. BAILEY. Yes, sir. It ran as high as $3,300,000 for 2 years after interest charges, but in the majority of instances, as has been reported, the Canal operated at a deficit after interest, and it has an accumulated deficit, as shown in the Governor's report, and I think we might refer to it in the record, Mr. Chairman, with your permission. It is the annual report of the Governor of the Panama Canal for the fiscal year 1948, table No. 24 on page 142 thereof.

May I just mention one other thing and that is with reference to the percentage of American ships using the Panama Canal in years past. The statement of Mr. Burdick was quite correct. However, if you will look at page 12 of the Governor's report, you will find that in 1947, 54.1 percent was United States and 53.3 in 1948. I believe that relates to cargo. I am assuming that the ships and the cargo would be relative.

Now, Mr. Chairman, we appreciate very much the opportunity of supplementing our statement of May 23 on this subject. We will require very little additional time before your committee to submit such additional data, and we are very grateful for the patience and attention which you have afforded us.

We believe the committee would like to have in the record, and we are submitting for that purpose, a copy of the international treaties which relate to the building and operation of the Panama Canal. These may be specified as (1) the Clayton-Bulwer Treaty of 1850, (2) the Hay-Pauncefote Treaty of 1901, (3) the Hay-Bunau-Varilla Treaty of 1903 and 1904, and (4) the Treaty Between the United States of America and the Republic of Panama of 1936. (The document referred to follows:)



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(Signed at Washington, April 19, 1950; ratification advised by the Senate, May 22, 1850; ratified by the President, May 23, 1850; ratified by Great Britain, June 11, 1850; ratifications exchanged at Washington, July 4, 1850; proclaimed at Washington, July 5, 1850.)


[I. Declaration as to control of canal, occupation of territory, and commercial advantages.

II. Neutrality of canal in case of war.

III. Protection of construction.

IV. Mutual influence to facilitate construction.

V. Guarantee of neutrality.

VI. Cooperation of other States.

VII. Mutual encouragement to speedy construction.

VIII. Protection to other communications.

IX. Ratification.]

The UNITED STATES OF AMERICA and HER BRITANNIC MAJESTY, being desirous of consolidating the relations of amity which so happily subsist between them, by setting forth and fixing in a Convention their views and intentions with reference to any means of communication by Ship Canal, which may be constructed between

1 Manuscript, United States Department of State, Archives, Treaty Series, No. 122. Also H. Miller op. cit., V, 671-75 (US); S. Doc. No. 474 (63d Cong., 2d Sess.), pp. 272-76; W. M. Malloy, Treaties, Conventions, International Acts, Protocols, and Agreements , 1, 659-63 (US); Hertslet, Commercial Treaties,

VIII, 969-73 (Gr. Brit.).

** * *

the Atlantic and Pacific Oceans, by the way of the River San Juan de Nicaragua and either or both the Lakes of Nicaragua or Managua, to any port or place on the Pacific Ocean the PRESIDENT OF THE UNITED STATES, has conferred full powers on JOHN M. CLAYTON, Secretary of State of the United States; and HER BRITANNIC MAJESTY on the Right Honourable SIR HENRY LYTTON BULWER, a Member of Her Majesty's Most Honourable Privy Council, Knight Commander of the Most Honourable Order of the Bath, and Envoy Extraordinary and Minister Plenipotentiary of Her Britannic Majesty to the United States, for the aforesaid purpose; and the said Plenipotentiaries, having exchanged their full powers; which were found to be in proper form, have agreed to the following articles.


The Governments of the United States and Great Britain hereby declare, that neither the one nor the other will ever obtain or maintain for itself any exclusive control over the said Ship Canal; agreeing, that neither will ever erect or maintain any fortifications commanding the same, or in the vicinity thereof, or occupy, or fortify, or colonize, or assume, or exercise any dominion over Nicaragua, Costa Rica, the Mosquito Coast, or any part of Central America; nor will either make use of any protection which either affords or may afford, or any alliance which either has or may have, to or with any State or People for the purpose of erecting or maintaining any such fortifications, or of occupying, fortifying, or colonizing Nicaragua, Costa Rica, the Mosquito Coast, or any part of Central America, or of assuming or exercising dominion over the same; nor will the United States or Great Britain take advantage of any intimacy, or use any alliance, connection, or influence that either may possess with any State or Government through whose territory the said Canal may pass, for the purpose of acquiring or holding, directly or indirectly, for the citizens or subjects of the one, any rights or advantages in regard to commerce or navigation through the said Canal, which shall not be offered on the same terms to the citizens or subjects of the other.


Vessels of the United States or Great Britain, traversing the said Canal shall, in case of war between the contracting parties, be exempted from blockade, detention or capture, by either of the belligerents; and this provision shall extend to such a distance from the two ends of the said Canal, as may hereafter be found expedient to establish.


In order to secure the construction of the said Canal, the contracting parties engage that, if any such canal shall be undertaken upon fair and equitable terms by any parties having authority of the local Government or Governments, through whose territory the same may pass, then the persons employed in making the said Canal and their property used, or to be used, for that object, shall be protected, from the commencement of the said Canal to its completion, by the Governments of the United States and Great Britain, from unjust detention, confiscation, seizure or any violence whatsoever.


The contracting parties will use whatever influence they respectively exercise, with any State, States, or Government possessing, or claiming to possess, any jurisdiction or right over the territory which the said Canal shall traverse, or which shall be near the waters applicable thereto; in order to induce such States, or Governments, to facilitate the construction of the said Canal by every means in their Power; and furthermore, the United States and Great Britain agree to use their good offices, wherever or however it may be most expedient, in order to procure the establishment of two free Ports-one at each end of the said Canal.


The contracting parties further engage that, when the said Canal shall have been completed, they will protect it from interruption, seizure, or unjust confiscation, and that they will guarantee the neutrality thereof, so that the said Canal may forever be open and free, and the capital invested therein, secure. Nevertheless, the Governments of the United States and Great Britain, in according their protection to the construction of the said Canal, and guaranteeing its neutrality

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