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still be permitted to exercise their ability to meet competition. The consumer or user of transportation service is entitled to the benefits of competition. Competition need not be of what has been called the "cutthroat" variety, but may, should, and probably will be that type which develops new and better ways of doing things more efficiently and more economically.

We do not find in this bill a proposal to abolish the Interstate Commerce Commission or the vital parts of the Interstate Commerce Act which we have referred to. All of the authority of the Interstate Commerce Commission would still be accorded that body, but they would not be restricted in the pursuit of their duties by a mandate from Congress not to permit the rail carriers to compete, by lowering rates, with water or highway carriers where such competition exists, unless they also lower rates to points where there is no competition. This committee and Congress is going to be flooded. with protests from individuals in the inland country who know nothing of the issues involved, except such information as has been or will be given them by those who have for years pursued this fallacious idea and who have not been able to see the results of their error after 15 years of operation under the present law. These protests will come not as a result of confirmed judgment, but because of confidence in the able but prejudiced leadership which has so long adhered to the idea that it was possible to legislate away the advantage of sea-coast transportation facilities. Such editorial statements as the one I have quoted and even worse statements by those who should know better are influencing public opinion throughout the inland and intermountain territory. The ocean freight lines have not overlooked the possibility of this legislation being enacted and are using such influence as they have to persuade opposition.

We are interested because we have a long way to bring our freight. We have a lot of freight to bring to market. We want a rate at which we can move it and continue in business. We have been practically put out of business in the past 15 years, because of the excessive cost and keen competition from new districts coming in. Our carriers are aware of our condition and I believe that they want to help us. I think that they will if the opportunity is given. Mr. MARTIN. Do you feel that the change is chargeable in substantial part to the change in section 4 in 1920?

Mr. PLETTE. I know that they have lost a great deal of their tonnage and that unquestionably-not perhaps so much the change of 1920-probably more the change of 1910 in the long-and-short-haul clause, when it was inserted; but the effect of that was not felt due to war conditions until, as it has been testified before, and I did not care to repeat it, along in 1923 and 1924.

Mr. MARTIN. Any questions, Mr. Reece?

Mr. REECE. In what way would the rates, transportation rates at Spokane be increased by the repeal of the long-and-short-haul clause? Mr. PLETTE. Well, I do not think they would be. I cannot conceive any way they would be.

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Mr. REECE. It would in no wise interfere with Spokane's enjoyment. of any benefits which it now derives from water transportation, would it?

Mr. PLETTE. No.

Mr. REECE. If there should be any tendency, and there is no indication that there would be, for railroad rates to be increased in Spokane, then the Interstate Commerce Commission would have power to peremptorily suspend the rates.

Mr. PLETTE. That is right.

Mr. REECE. And set a hearing.

Mr. PLETTE. That is right.

Mr. REECE. As was indicated by the previous witness.

Mr. PLETTE. That is right.

Mr. REECE. It is true that, as the editorial which you read said, the canned goods at Spokane might cost more than they do on the coast; but, if so, I presume they cost more now than they do on the

coast.

Mr. PLETTE. They do.

Mr. REECE. That is all, Mr. Chairman.

Mr. MARTIN. How far is it from Spokane to Yakima?
Mr. PLETTE. By rail about 200 miles.

Mr. MARTIN. And it lies west of Spokane largely?

Mr. PLETTE. Yes; it is between Spokane and Seattle.
Mr. MARTIN. How far is it from Yakima to Seattle?

Mr. PLETTE. One hundred and sixty miles.

Mr. MARTIN. Pretty well in the central part of the State?

Mr. PLETTE. Yes.

Mr. MARTIN. Are conditions materially different in Spokane and Yakima?

Mr. PLETTE. Well, Yakima is a producing area, a heavy producing area. The two sections are both located in the central part of the State and are very heavy producing areas. The Wenatchee territory, which Mr. Baker represents, and the Yakima territory, which I represent, are both heavy producers of fruit.

Mr. MARTIN. I believe that is all, Mr. Plette; and thank you very much for your statement.

Mr. PLETTE. Thank you.

STATEMENT OF BERT L. BAKER, SECRETARY-MANAGER OF THE WENATCHEE VALLEY TRAFFIC ASSOCIATION

Mr. MARTIN. The next witness will be Mr. Baker, representing the Wenatchee (Wash.) area.

Mr. BAKER. My name is Bert L. Baker. For the past 14 years I have been secretary-manager of the Wenatchee Valley Traffic Association, a nonprofit organization incorporated under the laws of the State of Washington. The association has for its function the handling of transportation problems, legislative matters, and other questions that are in common with the fruit industry of the Wenatchee Okanogan district. This district is located east of the Cascade Mountains in the counties of Chelan, Okanogan, Douglas, and Grant in the State of Washington, and produces and ships annually between 20 and 20,000 carloads of deciduous fruits.

Several years ago our association became interested in the proposal to modify or liberalize the fourth section of the Interstate Commerce Act. As I interpret the intent of this proposal, it would give the Interstate Commerce Commission more latitude in granting

authority to the rail carriers, and I believe the railroads are entitled to this consideration.

Mr. MARTIN. How old is your association?

Mr. BAKER. It was incorporated in 1918.

Mr. MARTIN. What was the attitude of the association as to the long-and-short-haul clause prior to the time you mention here, several years ago?

Mr. BAKER. I am not familiar with it. I was not there.

Mr. MARTIN. You do not know whether they opposed or were just not interested?

Mr. BAKER. I think the opinion was divided, as I remember. I was not there at that time.

Mr. MARTIN. Is it divided now?

Mr. BAKER. To some extent, but the sentiment is changing toward this bill.

Mr. MARTIN. Proceed.

Mr. BAKER. It is a recognized fact the rail carriers must have volume, in order to meet their fixed operating expenses and the greater the volume, naturally results in greater gross revenue. The rail carriers want and need westbound return revenue tonnage just as much as our fruit growers need higher returns from the sale of their fruits. I mention westbound tonnage for the reason that the rail carriers are required to furnish refrigerator cars for transporting our fruits to market and practically all these refrigerator cars are moved westbound empty. My thought is this: That if the carriers could be given the right to establish lower rates on certain commodities to western seaboard terminals, with, of course, the approval of the Interstate Commerce Commission, they would be in position to secure some of the traffic that is now moving by water. Here is a typical example. In October 1934 the steamer Wildwood arrived at Seattle with 7,000 tons of Mississippi Valley grown corn to be used as poultry and stock feed in the Pacific Northwest and particularly the territory surrounding Seattle. Had the rail carriers been permitted to establish a rate to compete with water carriers, this corn could have been loaded in refrigerator cars that normally move empty westbound. It would have taken 260 to 280 refrigerator cars to move this 7,000 tons, or about five trainloads, thus giving the railroads this revenue. This class of traffic will always move by water until the rail carriers are able to publish rates that will aid them in securing some of this business. No rates should be published without the approval of the I. C. C.

Whether or not the fourth section of the act is modified or repealed, an intermediate point will continue to pay a higher rate than a point located on the coast served by oceangoing vessels, for the reason that water rates are less. By allowing the rail carriers to enter the field and compete with water carriers they could regain some of the tonnage they have lost. It would not be reasonable to believe that rates to interior or intermediate points would be increased because of this modification. As a matter of fact, I do believe it would affect the rate situation at intermediate points by reducing the rates.

The development of motor-truck transportation has brought about a new era which will prevent any rate increases and has developed in the minds of the shipping public a sense of security along this line. For instance, Wenatchee is located 165 miles east of Seattle.

Commodities can now be moved by water from eastern points to Seattle at a lower rate than by rail and then moved to Wenatchee by truck. The combination of these two rates is less than the all-rail rate to Wenatchee. It is then natural to assume that if the act is amended as proposed, the rail carriers will reduce their rates to meet this competition. Under present existing conditions seaboard terminals served by oceangoing vessels have an advantage over interior or intermediate points, and this may always exist, regardless of how great a profit the rail carriers may show.

The regulation of trucks in the State of Washington is covered by law, whether it be certified contract or private carrier. Insofar as we are concerned in the Wenatchee territory, any commodities moving by truck are practically all confined to intrastate movement, and the point I want to make is the following illustration: Supposing the water carriers have a rate of 75 cents per hundred on a certain commodity from an eastern point of origin to Seattle and the all-rail rate is $1.25 per hundred. Under present conditions the $1.25 rate would also apply to Wenatchee. Now, then, if the commodity can be trucked to Wenatchee, a distance of 165 miles, for 30 cents per hundred, this commodity could be delivered in Wenatchee by water and truck at a rate of $1.05 per hundred, or a saving of 20 cents per hundred. By allowing the rail carriers to meet the water competition to Seattle, they would be obliged to meet the water-andtruck competition to Wenatchee and should then put the rail carriers in a position to secure some additional traffic. I appreciate the fact that water transportation is cheaper than rail transportation, but I would not expect the Interstate Commerce Commission to grant authority to the rail carriers to establish rates on the same level of rates established by water carriers. There should be a differential in order to take care of the extra expense of the shipper or receiver in delivering and removing the commodity to and from the dock. Most carload shippers and receivers are served by tracks, thus eliminating this extra cost when such commodities are moved all-rail.

Our fruit industry is practically dependent upon the rail carriers in the marketing of our fruits. Normally we export between 20 and 25 percent of our production, which moves to foreign markets through the port of Seattle, thence through the Panama Canal. The balance of the fruit crops must be sold on the domestic market, and the freight rate is a large item of cost in the delivered price. Therefore, we favor the proposal to give the carriers further opportunity to build up their revenue in order that we might reasonably expect relief by reducing the eastbound freight rate on our fruits.

I do not contend that this proposed amendment of the fourth section of the Interstate Commerce Act would overnight create such a volume of revenue tonnage that it would be necessary for the carriers to put on extra trains, thereby increasing employment; but I do contend that it would in due time bring about such a condition, and in the meantime, no doubt, would increase the rail carrier's gross revenue.

The fruit shippers are primarily interested in cheap transportation, and we believe that to secure it the railroads must have volume. This proposal would be one factor to aid them in securing a greater volume. If the railroads of the United States are to live, one of two things must be done: First, release the railroads from the shackles

of some of the present regulations with which they are now chained; or, second, shackle all other forms of transportation with the same chains.

Mr. MARTIN. What is the distance from Yakima to Wenatchee? Mr. BAKER. To Wenatchee?

Mr. MARTIN. From Yakima to Wenatchee.

Mr. BAKER. About 120 miles.

Mr. MARTIN. Are the conditions in the two areas quite largely the same?

Mr. BAKER. Practically the same.

Mr. MARTIN. And both of them are fruit-producing areas?

Mr. BAKER. Fruit-producing areas; yes, sir.

Mr. MARTIN. You are quite a bit closer to the coast and to Seattle? Mr. BAKER. We are about 165 miles from Seattle.

Mr. MARTIN. Any questions, Mr. O'Brien?

Mr. O'BRIEN. No questions.

Mr. MARTIN. Thank you very much for your statement.
Mr. BAKER. Thank you.

STATEMENT OF L. C. NEWLANDS, VICE PRESIDENT AND GENERAL
MANAGER OF THE OREGON PORTLAND CEMENT CO., PORTLAND,
OREG.

Mr. MARTIN. The next witness is Mr. L. C. Newlands, vice president and general manager of the Oregon Portland Cement Co., Portland, Oreg.

Mr. NEWLANDS. My name is L. C. Newlands. I am vice president and general manager of the Oregon Portland Cement Co., Portland, Oreg., who own and operate two cement plants in the State of Oregon.

I am a past president of the Portland Chamber of Commerce and a director of the Chamber of Commerce of the United States, and present director of the Portland Chamber, but I am not authorized to speak for any of these bodies but appear before you as a shipper of cement on lines of the Union Pacific and Southern Pacific in Oregon.

One of our plants is located at Oswego, on the Southern Pacific Railroad, 8 miles south of Portland, and the other at Lime, in eastern Oregon on the Union Pacific, about 6 miles from the Idaho State line.

Prior to the location of our plant at Lime, Oreg., it was necessary that we be placed in position to sell our product in the Portland market, where by reason of water transportation on cement readily obtainable from cement plants in California, through California ports to the port of Portland by lumber schooners returning empty north-bound to the Pacific Northwest, after having discharged lumber in California ports, conditions surrounding the sale of cement in western Oregon were highly competitive.

The Union Pacific submitted application to the Oregon Railroad Commission and secured permission to publish fourth-section rate on cement from Lime, Oreg., to Portland, carloads, 15 cents per hundred pounds, minimum marked capacity of car but not less than 80,000 pounds, which has been in effect during the period of our operations. and has enabled us to sell cement at Portland from Lime, Oreg., plant

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