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Mr. THOMPSON. Of course, that is limited. I mean any differential there is prohibited by treaty, as I understand it.

Mr. BURDICK. Yes. We will have to give the foreign vessels the same rate that we give the Americans. That is the reason it has always been our view that we ought to find some other way of giving financial aid to American ships instead of giving more than half of it to foreign ships.

Mr. THOMPSON. Well, Mr. Burdick, I realize we have sort of put you on the spot this morning; I haven't intended to at all. I didn't ask you to make a prepared statement, but you certainly answered our questions very helpfully, and I appreciate it.

Mr. BURDICK. Well, thank you, Mr. Chairman. I am perfectly willing to do anything I can to bring information to the committee.

Mr. THOMPSON. Well, you have always been very helpful.

We have Commissioner Mellen here from the Maritime Commission. We would like very much to have your views, Mr. Commissioner.



Mr. MELLEN. I regret that I was unable to attend the last hearing you had on this issue. As I explained to you at the time, with all the other matters before us and with numerous other bills and the preparation of reports on them to your whole committee, I haven't had much time to read much of the prior testimony, but I have glanced over it from time to time in the last week and have gathered the impression that Mr. Bailey, president of the National Federation of American Shipping, had touched upon a rather wide range and much historical background. In order to avoid repetition, I wouldn't seek at this time to add what may be duplicate statements.

I would like to point this out, though, Mr. Chairman, that the issue in the main as it affects the economy of the United States with respect to transportation in the United States and matters related thereto is something apart from the mere desire to obtain a reduction in the Panama Canal tolls, as that reduction might relate to all ocean commerce regardless of flag. It is understandable that business interests, whether they be American business interests or British business interests or business interests of any foreign country, in the conduct of their ships in commercial activities, of course, are desirous of having anything done that can contribute to a reduction their over-all costs of operations.

I particularly would like to focus the attention of yourself and the committee on the issue with respect to intercoastal operations. I would like to point out and emphasize that a cost resulting from an application of a toll at the Panama Canal increases the cost in our intercoastal operations--shall I say, add to numerous increases in cost in intercoastal operations. I am conscious of the fact that long historical background, running into treaties and international law, tied in with the precedents that have been established in and about the Suez Canal, have an important bearing when you are required to consider the factors and the aspects in the area of international trade, international commerce, and international shipping. But let me point out, with respect to that which we know and frequently refer to here as the domestic shipping area services, that foreign-flag 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 hereafterin 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 cbarges 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 Xr. 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 ìreaty 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:)





(CLAYTON-BULWER TREATY) 1 (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.)

(ARTICLES) [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.).

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