Mr. CAPOZZOLI. I agree with the statement you have made, but my purpose was merely to indicate the practical difficulty that you were confronted with.

Mr. ROTH. We are aware of that.

Mr. MCCANN. I believe you have another brief that is to be submitted through Mr. Van Metre, professor of transportation at Columbia University.

Mr. ROTH. We thought that it would be important in considering this matter that careful thought be given to the public interest from the standpoint of our over-all national policy, particularly as it applies to the international overseas trade. We have asked Mr. Van Metre, professor of transportation at Columbia University, to make such study and survey, which he has done.

We would suggest, if it is agreeable to your committee, that we be permitted to file that. It covers somewhat some of the materials in this legal brief. The survey approaches the problem from a different angle, and we are particularly anxious to have him appear as a witness and develop the national interest from the standpoint of the broad national transportation policy.

The CHAIRMAN. It will be admitted.

(This brief was marked exhibit No. 4 and is reproduced in the Appendix.)

Mr. ROTH. Reference has been made here to the equitable position which the steamship companies occupy in this, and frankly I do not think that is the determining consideration for this committee, or the American public. I think it is something they might take note of. I should like to point out that the shipping industry has, as Mr. O'Brien has said, been devoted exclusively for the whole duration of the war, and a large part of it devoted to the purposes of transportation in connection with our allies' cause even before the war, and as a result of that we find ourselves in the position where we have not been able, of course, to keep our trade contacts. In the meantime, other forms of transportation have gone on. If that situation continues, as I have already stated, we will be at a great disadvantage, not only with foreign competition but with air lines of this country, if they are guaranteed either temporary or permanent certificates.

We risked considerable capital in building up trade routes where none existed before. We have developed new territories with our steamship services. We have done a great deal in the way of promoting trade, both tourist and business trade. The steamship companies have financed hotels and other tourist facilities. We have spent huge sums in promotional activities and in advertising the merits of tourist attractions both at home and abroad.

We do not object to air competition or to sharing the benefits of merchant marine pioneering. Rather, we welcome it, for ocean shipping believes in progress and the advancement of scientific aids to transportation. The steamship companies do object to being told that they may not meet this new competition on an equal footing; that they must enter the international commerce ring with their hands firmly tied behind their backs.

Here is another point. Ocean shipping is the only form of transportation that has been wholly devoted to war purposes. At present we have no regular passenger service at all anywhere under the American flag. We just think that in common fairness in view of the contribution by the steamship companies to the development of overseas

commerce that we have certain grandfather rights in the practical situation that exists. While, as I have said before, we think that the public interest, and particularly the interest of our national security must be the paramount consideration, nevertheless our Constitution is the thing that should be taken into account. It has been taken into account in other forms of transportation-motor carrier, railroad, and other types and the same principle, we think, would apply in our case. We therefore urge that in the public interest the right of the steamship companies in this air transport field should be reaffirmed and everything should be done that possibly can be done to protect us against the foreign situation that is sure to develop.

The CHAIRMAN. Do you have any form of legislation that you could offer?

Mr. ROTH. I have not because, frankly, Mr. Chairman, I have already indicated that the most important thing is to get into this field as quickly as we can, and we may not be able to wait for legislation. If legislation itself is essential, then we shall be very glad to collaborate in suggestions from a practical standpoint. At this moment, however, we do not have available any suggested form of legislation.

Mr. MCCANN. In other words, Mr. Roth, if the war should terminate tomorrow, or within the near future and our ships should be tied up for a year and a half or 2 years, and certificates should be granted to the air lines over the routes of the steamship companies, or if foreign shipping is in a position to come in and take your passenger business, the damage to the domestic steamship companies might be very great indeed if some action is not taken now.

Mr. ROTH. That is right. I think that the figures which will be presented here will show that.

The CHAIRMAN. I am ready for action.

Mr. O'BRIEN. I am ready too.

The CHAIRMAN. I think the committee is.

Mr. MCCANN. I think the attitude of the shipping interests is that the Civil Aeronautics Board has recently modified the expression of its opinion of January 1943, and that they may modify their views even further.

Mr. HERTER. These applications that went in from the different shipping companies, hearings were supposed to begin on them in May. Mr. ROTH. They are going on now.

Mr. HERTER. As I recall, May 15 was the date originally set. The first ones are just coming on now. Have you any indication from the C. A. B. as to how those hearings are scheduled and how immediate the problem is?

sure.

Mr. ROTH. We can file a statement of the scheduling. I am not The first group is the Pacific group, and then we move to the Caribbean. The 18th will be the beginning of the hearings on the Carribbean route.. They are in process now.

Mr. O'BRIEN. Mr. Roth, Mr. Pogue has been quoted a good deal here with regard to the modifications of the C. A. B.'s views. During the hearings held in January I asked Mr. Pogue this question:

Mr. O'BRIEN. You mentioned that somewhere they were making preparations at the present time, eager preparations. I was quite intrigued with your interpretation placed on section 408 (b) of the C. A. B., which is the controlling section, if I am not mistaken.

Mr. POGUE. That is correct.

Mr. O'BRIEN. Everything is done in the line of public interest. might be a little old-fashioned statement as far as I am concerned. rifically interested in the American public interest.

Mr. POGUE. So am I.

Now, this
I am ter-

Mr. O'BRIEN. Do you think it would seriously jeopardize the American public interest in the event that we do not have the cooperation of these two means of transportation after the war?

Mr. POGUE. I hope that we have that collaboration.

Do you think that he can further modify that statement, or the Board?

Mr. ROTH. I am like Admiral Land; I cannot foretell what it will do, but in answer to the Chairman's question as to what might be done, I think it would be extremely helpful in this general situation if this committee, which has at heart the welfare of the American merchant marine, were to reaffirm its position, if that is its position-after consideration of all the evidence of the importance of the right to participate at an early date in view of testimony which will be developed at this hearing.

Mr. O'BRIEN. Mr. Roth, in view of the fact of the situation as it confronts us now, it is imperative that something be done if you are going to perpetuate this industry.

Mr. ROTH. Obviously the thing we would most like would be clarifying legislation so that there would be no doubt about this. If it is not possible to get that within time, we still face an emergency in which we would do our best to convince the C. A. B. that the public interest does require recognition of this right.

Mr. BUCK. Mr. Roth said that on some trade routes passenger business was carried at a loss. I gathered that the desirability of passenger business in such instances hinges on the fact that it engenders freight business.

Mr. ROTH. That is right.

Mr. Buck. Could I have an explanation just how the carrying of passengers increases the freight business?

I

Mr. ROTH. May I say, I said that has been true in the past. If you ask me to give you an exact instance at the moment I would have to get that information. The fact is that people do business with people who take care of their requirements. It develops good will. If I may use a simple illustration, in the country where I grew up there was only one telegraph company. That was the Western Union Co. To me no other company has ever existed. formed my contacts with them. They took care of me and I have always thought of that company as the only one. Somewhat by the same token is a firm taking care of passenger traffic and serving the traffic expeditiously. It builds up good will and to a large extent influences the carriage of cargo, other conditions being the same. is a question of goodwill largely and the ability to furnish the trade an over-all service. You deal with one concern and those are your friends. If you carry their passenger business they will give you their cargo business."

It

Mr. MCCANN. Are there any further questions of Mr. Roth? Mr. CAPOZZOLI. In view of the importance of this subject, speaking for myself, I would suggest that we have a hearing this afternoon. The CHAIRMAN. We will recess until 1:30 o'clock.

(Whereupon, at 12 noon, the committee recessed to reconvene at 1:30 p. m.)

AFTER RECESS

The committee reassembled, pursuant to taking a recess, at 1:30 p. m., Hon. Schuyler Otis Bland (chairman) presiding.

The CHAIRMAN. The committee will come to order.

Mr. MCCANN. Mr. Baggett, will you please state your full name.

STATEMENT OF SAM G. BAGGETT, GENERAL ATTORNEY, UNITED
FRUIT CO.

Mr. BAGGETT. My name is Sam G. Baggett.
Mr. MCCANN. And your official position?

Mr. BAGGETT. General sttorney, United Fruit Co.

The CHAIRMAN. For the record, may I say at this point that Mr. O'Brien, who was present this morning, is leaving to serve on a special subcommittee of this committee and will probably be gone some time, and that is the reason for his absence this afternoon. He asked me to make a statement to that effect.

Mr. MCCANN. Mr. Baggett, did you prepare the brief which has been introduced in evidence on the right of steamship .carriers to participate in transoceanic air service?

Mr. BAGGETT. Yes; I prepared it. I submitted a draft of it to counsel for some of our other companies and received suggestions from them, particularly from Mr. J. Raymond Hoover, of the District of Columbia bar.

Mr. MCCANN. Will you explain the issues of law and the matters covered in this brief so that the Committee will understand its contents?

Mr. BAGGETT. Mr. Chairman, I wish first to emphasize something which was brought out incidentally this morning, and that is that the Board, by dicta and other statements made by members, has created the impression that Congress has excluded steamship carriers from participation in air service, except under the most limited circum

stances.

That, in my opinion, is not true. The exception has been the work of the Board.

But it places the steamship carriers in an unusual and unfair position of possibly seeking corrective legislation in order to get the treatment they are entitled to under existing law.

The point I wish to make is that granting steamship companies the right to enter the air transportation field would not involve any change in congressional policy.

So far as I know, the first time it was ever suggested that Congress intended to exclude steamships was in the second decision in the American Export case. In the first decision they could find nothing contrary to the public interest in the ownership of the Export Airlines by the steamship company. And when the case came back to the Board, after being reversed on another point, they indulged in dicta which indicated that it was, in their opinion, the policy of Congress to rigidly limit steamship carriers in the air transportation field.

In the American Export case the Board asserted:

There exists and has existed for many years a prevailing congressional intent that the various forms of transportation should be mutually independent.

And again they say:

A construction of the Civil Aeronautics Act which rigidly limits the participation of the older forms of transportation in the air-transportation field is not only sustained by the language of the act itself but is also in harmony with well-established congressional policy.

Now, everyone knows that the railroads with the approval of the Commission have covered the entire country with a network of bus and truck lines, that the railroads have been permitted to continue extensive steamship operations, and that even the Government-owned Panama Railroad Company owns and operates the steamships of the Panama Line. Itis, therefore, apparent that either the Board is wrong or that the policy of Congress has been openly flouted with the approval of the Maritime Commission and the connivance of Government officials.

A diligent search of transportation legislation fails to disclose any congressional enactment or declaration of policy supporting the broad assertions of the Board. On the contrary, it appears that Congress has adopted the policy of coordination or the utilization of every transportation facility to the best advantage, that one of the principal purposes of the Motor Carrier Act was to enable the railroads to make better utilization of motor vehicle service, or motor vehicle transportation, and that in enacting the Civil Aeronautics Act Congress expected that steamship carriers would be permitted to enter the air transportation field on a basis of equality with other applicants.

The meager authorities cited by the Board in support of its statements are taken principally from acts and statements of a past generation when only railroads were under Federal regulation and when modern means of transportation had not been developed. Even when these authorities are analyzed, that is, the authorities they cite, they do not support the broad conclusions reached by the Board. The Board refers first to the Panama Canal Act of 1912 and the congressional discussions regarding that act. It is not necessary to analyze that act in detail, as it is well known that it was passed to cover a specific domestic situation. As stated by the Interstate Commerce Commission, the purpose of the act was not to forbid railroad ownership, operation, or control of steamship lines, but to forbid the use of such ownership or control in such a manner as to restrict movement of interstate commerce in the interest of that railroad's competing rail lines.

The act imposed no restrictions on the operation of steamships by railroads where the two facilities do not compete for traffic, and even where they do compete, except as to ships moving through the Canal, the Commission is authorized to permit the continuance of such ownership and operation if in the opinion of the Commission such ownership and operation is in the public interest and will not restrain or exclude competition.

By the Transportation Act of 1940 the Commission was authorized to approve the acquisition of steamship lines by railroads. Even this most recent act of Congress certainly negatives any intention by Congress that the various forms of transportation should be mutually independent or separate.