ing effective, but orders the carrier not to change any rates in the meanwhile. Mr. SIDDONS. That is correct. Mr. BELL. That is correct? Mr. SIDDONS. Yes. Mr. MARTIN. Now, under the existing law, you want to apply for the change involving the long-and-short-haul clause and it may be pending for a year or two, or several years before it is finally disposed of. In the meanwhile the existing rate remains in effect. That is the situation, is it not? Mr. SIDDONS. Yes, sir; except that we cannot file a petition; the carriers must do that, not the shippers. Mr. MARTIN. Now, if the Pettengill bill would just put that shoe on the other foot and have the shippers petition, would you have to wait for years to get the rate suspended, and the rate meanwhile be in operation? Mr. SIDDONS. Well, we have other provisions for that, Mr. Martin. We would attack the rate under the other section of the act after it becomes effective, and if we can prove it violates it then the rate is changed. Mr. MARTIN. You are quite familiar, of course, with the business and industrial conditions generally out in that area, in the intermountain area? Mr. SIDDONS. I would not say familiar; I have heard a lot about it. Mr. MARTIN. Do you know of any reason why the change would be injurious or detrimental to other and smaller industries than sugar? Mr. SIDDONS. No, sir; I do not. Mr. MARTIN. And, the steel business? Mr. SIDDONS. No, sir; I do not. May I make a statement on that, and in support of that? Mr. MARTIN. Yes. Mr. SIDDONS. I anticipate that you will get some of those objections. Take for example the Colorado beet-sugar industry, which is inland. Under these 1933 sugar cases, the Commission granted permission to publish lower overland rates from the California coast. That application of the transcontinental carriers was hardly in the hands of the Commission until the trunk-line carriers serving Colorado had a similar petition before the Commission. It is to the interest of every carrier to keep the freight of its industries freely moving, and in my experience in transportation I have never run across a railroad yet that was not more than anxious to meet any competitive situation like that. Now, let us refer to that. It was discussed here this morning, and you asked the gentleman from Utah, suppose for example the carriers do publish a fourth-section rate to San Francisco of 75 cents, from Chicago, and the rate from Chicago to Salt Lake City would be a dollar, or let us say a dollar and a half, as the case may be. Based on my experience, just as soon as that low rate to San Francisco got to moving sufficient volume of traffic to San Francisco that it was trucked back to Salt Lake City, to such an extent as to affect some of the carriers who were serving Salt Lake City, the first thing they will do under this Pettengill bill is to publish the fourth-section relief rates from Chicago to Salt Lake City and thereby Salt Lake City will get just the same benefit as anyone else. Mr. MARTIN. Since you mention Utah, and Salt Lake City in particular, I got a telegram at noon from a hardware company in Salt Lake City. It says: If you desire to protect the future welfare of the people of practically onefifth of the area of the United States against unjust rates, we earnestly urge your vigorous and prompt opposition to the Pettengill bill. Mr. SIDDONS. Well, my explanation there is, I think if he would just consider it, it seems that all of this opposition in the intermountain territory is from jobbers, and according to my way of thinking, the producers are the ones who are entitled to consideration. Mr. REECE. I was just about to Mr. SIDDONS (interposing). And I do not know a producer in that area that has any objection to it. Mr. MARTIN. Just before Mr. Reece cuts in there there are some things we know without knowing anything about interstate commerce law or rates, and that is, of course, that our country is a producing country. Mr. SIDDONS. Yes, sir. Mr. MARTIN. We do not begin to consume a small part of any of our principal products. We produce coal and produce steel and produce sugar and cattle and many agricultural products, produce cement, produce marble— we have got one marble mountain out there, out of which the Tomb of the Unknown Soldier was carved, the finest block of marble in Washington, if not in the United States, and there is enough of that kind of marble in that mountain to build all of the marble buildings that will ever be built in the world. We have got more cement out there than will be necessary to build all of the highways and bridges that will ever be built in the world, and I just mention those as a few of the things we can see. We are a producing and not a consuming State. Mr. SIDDONS. And, just to show the extent to which the Colorado lines are helping that marble quarry, I believe the rate has been reduced to 80 cents from that quarry to the East coast, and if we had fourth-section relief they doubtless would do better than that to help the Colorado industry out. Mr. MARTIN. Go ahead, Mr. Reece. Mr. REECE. Before the chairman read his telegram I had in mind to make a suggestion, using a hardware store as an example, and had in mind making it a hardware store in Salt Lake City. Is that what that was? Mr. MARTIN. Yes, sir. You understand, I do not read the names of these people into the record. That would not be ethical, I presume. I just give the substance of the telegrams or the letters. The names do not make any difference. Mr. REECE. If the interest of the beet growers in Idaho, and the interests of the steel and mining men in Idaho, and the interests of the other large industries and large growers, whether they be beet growers or growers of other products, are best served and are in a measure dependent upon the repeal of the long-and-short-haul clause so as to enable them to command markets for their output, does not the interest of the hardware dealer, or would not the interest of the hardware dealer, be likewise served? As this gentleman over here suggested, they have more than one hardware store in Salt Lake City; but if the beet growers go out of business and the steel and mining men go out of business, and a few other large groups of people go out of business, one hardware store would amply serve Salt Lake City, I should say. Mr. SIDDONS. That is the way we look at it, Mr. Reece. Mr. REECE. And that suggestion was in my mind before the telegram was read, anticipating that the opposition to the Pettengill bill might arise from sources like that, and I do not believe that so far there has been any explanation made that would give a basis for their apprehensions. Mr. SIDDONS. I cannot see any, Mr. Reece. As I explained to you a moment ago, if that hardware jobber in Salt Lake City has got a business that was being competed against through other fourthsection rates, or through water-rail rates from the coast, the carriers are going to be granted, with this Pettengill bill, leeway to make fourth-section rates from the point to help them out. Mr. REECE. But, leaving all consideration of rates, so far as his own stock is concerned, out of consideration, as a retailer he is interested in the general welfare and prosperity of the people in his community. A retailer cannot succeed unless the community in which he is located succeeds. Otherwise his customers have no buying power, and in large measure may have no use for his supplies. Mr. SIDDONS. His customers are depending on the prosperity of these producers selling their surplus products in distant markets, else they have no money to buy from him. Mr. REECE. I do not see, so far as his stock goes, which he handles in his store, that the Pettengill bill would affect it one way or the other, at least very materially; but as I indicated earlier, it would seem to me the natural tendency would be to give him lower rates. I am somewhat anxious to get through with the proponents of the bill and hear what the opponents base their contentions upon with respect to some of these phases of it. Mr. BELL. Mr. Chairman, speaking of hardware, if you will permit, I can give you a very good illustration. I tried the last transcontinental fourth-section case presented to the Commission. It was a port-to-port case and involved to Sunset, Gulf, rail, and water rates of the Southern Pacific transportation system. I do not believe this feature has been commented upon in the record. Of course, it depends upon what the existing rate is, and what the cost of transportation would be, for example, from the Pacific coast ports to the interior points, but in that case there were a number of instances where the lower rate to the Pacific coast resulted in a reduction of the rate directly to the intermediate points, and it so happened that hardware merchant at Phoenix, Ariz., appeared in opposition to our application. It so happened that our application reduced his rate on shelf hardware from Phoenix, Ariz., to New York, 75 cents a hundred pounds. He agreed that if his outbound distributing rate was reduced 75 cents a hundred pounds, that would enable him to compete, say with Los Angeles and far western points, but he still opposed our application, although I pointed out to him what was the fact, that we were going to reduce his inbound rates 75 cents a hundred pounds, and that it was perfectly obvious that the reduction on his inbound freight would be equivalent to the reduced distributing costs; not only that, but in that same case we proposed a reduction in the rates on cotton eastbound resulting from the rates we were proposing to the terminal. It developed that that would greatly benefit compresses in the Sait River territory in Arizona. Opposition came to that from a concern at Los Angeles Harbor, having a monopoly upon the concentration and purchasing of cotton in the State of Arizona. It would enlarge the competition in purchasing, benefiting the grower in the State of Arizona, and his rate would have been reduced eastbound. As it was, he was compelled to ship all of his stuff through Los Angeles and the Panama Canal. Mr. LYON. And that case was decided against the Southern Pacific after months of consideration. Mr. BELL. After years of consideration. Mr. MARTIN. You have concluded, Mr. Siddons? Mr. SIDDONS. Yes, sir. Mr. MARTIN. Thank you very much, Mr. Siddons. STATEMENT OF H. N. PROEBSTEL, SEATTLE, WASH., APPEARING Mr. MARTIN. The next witness is Mr. H. N. Proebstel, representing West Coast Lumbermen's Association. Mr. PROEBSTEL. Mr. Chairman and gentlemen of the committee, my name is H. N. Proebstel. I reside in Seattle, Wash. I appear on behalf of the West Coast Lumbermen's Association, Willamette Valley Lumbermen's Association, and the Red Cedar Shingle Bureau, which are organizations of sawmills and shingle manufacturers west of the Cascade Mountains in the States of Oregon and Washington. These organizations are in favor of the passage of this bill. I would like to add that I have been employed by the West Coast Lumbermen's Association for the last 15 years as traffic manager. I would like to state also some facts in connection with the west coast lumber industry so that the committee will have an idea of its size and importance to the community. The production of Douglas fir and allied softwood species of lumber in 1926 was over 10,000,000,000 feet, board measurement; in 1934 the production was 4,275,000,000, the difference in production being mainly due to the existing business depression. As to the value of the product, in 1926 our lumber at the mills sold for $216,000,000; in 1934 it had shrunk to $74,000,000. Our region contains the largest remaining standing softwood timber in the United States, around 650,000,000,000 feet, board measurement, or over one-half of which is privately owned. Our industry normally employs over 100,000 men and pays the highest wage scale of any lumber-producing section in the country. Directly and indirectly, about 60 percent of the region's population is dependent on the lumber industry. Oregon's and Washington's population, 1930 census, was about 212 millions. Lumber sales have been affected by the stagnation in the recent years in the so-called "durable-goods industries." It has resulted in a minimum of consumption of materials which are used in the field of the so-called "capital accounts"; maintenance in all the classes of consumption due to necessity of rigid economy has been held down to bare necessities. Railroads are large users of capital goods. For example, they take 25 percent of our lumber in normal times. In normal times they take 18 percent of the steel, and improvement in their earnings may be expected to follow better opportunities to compete with water and truck agencies of transportation would lead to a big improvement in general business conditions. These producers manufacture more lumber-meaning the west coast lumber producers-and shingles than can be consumed in the territory of production. The large important markets are fifteen hundred or more miles distant from this producing region. The industries I represent use both rail and water transportation. Their attitude toward the transportation problem is for fair treatment and equality of opportunity for all forms of transportation used; that is, rail, water, and, to some extent, trucks. In a word, we approve of the policy of Congress as announced in section 500 of the Transportation Act of 1920, "to foster and preserve in full vigor both forms of transportation." Mr. MARTIN. Now it is three. Mr. PROEBSTEL. Now it is three. Mr. MARTIN. And trucks. Mr. PROEBSTEL. The trucks should have a square deal, too. With the passage of the Transportation Act of 1920 and particularly the amendment of section 4, the long-and-short-haul section, Congress set up such a strict and unworkable administrative mandate that the Commission has been unable to carry out the will of Congress to preserve in full vigor both water and rail carriers. The results, as have been made clear to this committee by the witnesses who have preceded me, boil down to the simple statement that the transcontinental railroads which serve our territory have been unable to compete with the intercoastal steamship lines for scarcely any of the long-haul traffic from or to Atlantic or Gulf coast ports. Indeed, as has been shown, the takings of the intercoastal steamship lines have reached far inland. As to the eastbound movement a substantial tonnage which the railroads formerly claimed as theirs, has been gradually diverted away from the rails to the Panama Canal route. While not bearing directly on the subject, it is a matter of common knowledge that the railroads, at least the western carriers, or many of them, have lost in passenger traffic volume down to the point where the rendition of passenger service has involved losses in the service and thus thrown the burden of making up the losses onto the freight traffic. A matter much discussed and commonly known is the great inroads on rail carriers' revenues through the diversion of traffic to trucks. These matters are mentioned, even though they may appear to be repetition of testimony already given, because we wish to |