COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE WARREN G. MAGNUSON, Washington, Chairman JOHN O. PASTORE, Rhode Island EL BARTLETT, Alaska GALE W. MCGEE, Wyoming ANDREW F SCHOFPPFL, Kansas JOHN MARSHALL BUTLER, Maryland THRUSTON B. MORTON, Kentucky HUGH SCOTT, Pennsylvania EDWARD JARRETT, Chief Clerk JEREMIAH J. KENNEY, Jr., Assistant Chief Clerk JOHN M. MCELROY, Assistant Chief Counsel SUBCOMMITTEE ON MERCHANT MARINE AND FISHERIES WARREN G. MAGNUSON, Washington, Chairman Edwards, Hon. A. M., Secretary of Guam, Agana, Guam--- Fernós-Isern, Dr. A., Resident Commissioner of Puerto Rico, House Fitch, Edwin M., Assistant to the General Manager, the Alaska Railroad, Department of the Interior, Washington, D.C.... Fong, Hon. Hiram L., U.S. Senator from Hawaii, Senate Office Gruening, Hon. Ernest, U.S. Senator from Alaska, Senate Office Kashiwa, Hon. Shiro, attorney general of the State of Hawaii, Hono- lulu, Hawaii; accompanied by William Rogers, special deputy attorney general, Washington, D.C.. Kendall, Lane C., commercial shipping adviser to MSTS, room 1004, Building T-8, 3800 Newark Street NW., Washington, D.C.; accompanied by Capt. Charles B. Beck, USN, Director, Water Traffic Division, MSTA, and Joseph Daley, Office of the Assistant Secretary of Defense, Installations and Logistics___ Long, Hon. Oren E., U.S. Senator for Hawaii, Senate Office Building, Lykes, J. M., Jr., senior vice president, Lykes Bros. Steamship Co., McCarthy, Adm. F. M., president, A. H. Bull Steamship Co., National Muñoz-Marín, Hon. Luis, Governor of Puerto Rico, San Juan, P.R.; statement presented by Teodoro Moscoso, Economic Development Administrator, San Juan, P.R.. Oshiro, Hon. Robert, State representative, Hawaii Legislature, 293 279 54 Ross, Leo C., secretary-treasurer, Pacific Far East Line, Inc., 918 265 Staken, Hon. Thomas E., chairman, Federal Maritime Board, General 9-24 Letters and other material: Clark, Henry W., vice president, Alaska Steamship Co., 1026 17th 321 DOMESTIC OFFSHORE SHIPPING MONDAY, MARCH 6, 1961 U.S. SENATE, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, The subcommittee was called to order, pursuant to notice, at 10 a.m. in room 5110, New Senate Office Building, Hon. E. L. Bartlett presiding. Senator BARTLETT. The subcommittee will be in order. Before proceeding with the hearings, I should like, for the record, to outline briefly the nature and scope of the subcommittee's interest. The present hearing is an extension of the inquiry commenced in the last session on problems of the domestic shipping industry. Earlier hearings were directed to the problems of the coastwise and intercoastal segments of the domestic shipping industry. Attention now will be directed to the problems of the noncontiguous shipping industry and to the economic impact on the offshore areas served. Shipping to the major noncontiguous areas of the Nation operates under the same basic statutes as those which govern coastwise and intercoastal transportation, except for economic regulation, and is confronted by the same cost problems and operating conditions. Rate levels of transportation between the continental and noncontiguous areas have advanced in a continuing and accelerating round of general increases in postwar years. In some instances, new general increases have been filed before final decisions on previous rate increases. At present separate rate cases affecting the three major noncontiguous areas of Alaska, Hawaii, and Puerto Rico are in process of deter mination. A continuing conflict has developed between the crucial need for reasonable transportation rates to the noncontiguous areas necessary to their survival, and the need of carriers for increased revenue to meet mounting costs of operating, cargo handling, and vessel replacement. It has become quite apparent that, almost irrespective of the merits of decisions in specific rate cases, the piecemeal approach of present regulatory proceedings offers no long-range solution of the fundamental problems. It is the purpose of the present hearings to take, we hope, a "new look" at not only the specific problems but at the basic policies and programs of Government as they affect the present shipping services to each of these important domestic areas. It is the subcommittee's intention at this time to hear from all who are concerned and affected by present conditions seeking specific information, ideas, or proposals which might be relevant in developing appropriate legislation. I think I speak for my fellow committee members when I say these problems must be viewed as national problems-and their resolutions must, therefore, be reflections of a national policy. It is our hope that each witness will, without the restraints of tradition, speak on both the specific issues and policies that will best serve the long-range national interest. The record of these hearings will remain open for supplementary statements and material for a period of 6 weeks following the last day upon which testimony is received. I am going to ask unanimous consent, which will be promptly granted, to follow the statement which I have just made with an associated statement bearing more specifically upon the general subject, but I will not consume time now by reading it. (The statement follows:) PROGRAM FOR STUDY OF SHIPPING PROBLEMS OF THE DOMESTIC NONCONTIGUOUS AREAS I. NEED FOR THE STUDY Recent rate increases requested by American-flag ocean carriers for service to U.S. noncontiguous areas and States-principally Alaska, Hawaii, Puerto Rico, and Guam-point up a critical conflict: that between the need, by the carriers on one hand, for higher freight revenue to meet mounting operating and vessel replacement costs; and on the other hand, the requirement that these noncontiguous areas have low transportation rates in order to survive and develop their economies. At the present time the following facts are component parts of a statement of the problem; the noncontiguous areas are mainly dependent on ocean transportation for export and import movements; most of this traffic is between the U.S. mainland and these offshore areas; under the terms of the cabotage laws trade with the mainland is restricted to American vessels; and, rate regulation in such trade is under the jurisdiction of the Federal Maritime Board. Assuming that the primary national interest is best served by fostering and expanding trade between the mainland and U.S. territories and noncontiguous States, the problem becomes how to provide reasonable freight costs that will not penalize or undermine the local economies. Experience with case by case regulatory disposition of these rate matters amply justified the conclusion that no long-range resolution is to be gained on a piecemeal basis. In each proceeding, the agency has been confronted with the choice of penalizing the carrier and its future ability to serve or penalizing the industry and consumers in the area served. This adversary atmosphere, heightened by the frequency of rate controversies, has not lent itself to judgments that go beyond the narrow confines of the record. What is needed, and what the Merchant Marine Subcommittee must concern itself with, is a policy on this matter that best serves the national interest. II. PURPOSE AND SCOPE OF THE STUDY To determine (or redetermine) such a policy will require initially a definition of what the national interest is what commercial and defense goals are sought and what prestige and foreign policy objectives must be fulfilled by this trade. Conversely, a delineation must be made of the values not to be protected. Next, an examination in depth must be made of the problems facing both the areas served and the ocean carriers serving these areas. Such examination cannot be limited solely to the present high cost-low rate conflict, but beyond to anticipate, for example, the popular industrial ambitions of each noncontiguous area and the rates and service frequency needed to fulfill the goals. Finally, alternative policy solutions would be proposed and their effects considered. In each case the alternatives will be tested for their consistency or inconsistency with the definition of national policy. Failure to deal affirmatively with this problem, not at a very critical point, invites a policy of drift. |