Company does not earn interest on the cash on deposit with the Treasury and when the income from tolls does not provide sufficient funds to make interest payment on the investment, tolls are to be increased.

This legislation is defined as temporary and we urge its enactment. The heavy burden of costs which the canal must bear can and should be lightened.

The canal, until 1973, bore its full cost burden, although even then some critics felt revenue that could be used for further improvements was being siphoned off to cover expenses that were arguably outside the range of reasonable responsibilities for those who benefit from the use of the passage.

Then the Suez Canal was reopened, the price of oil shot up, and world trade began slumping. Nothing else could happen but that transits would decline and revenues fall.

Can we allow the canal to become so expensive as to dry up its traffic and then perhaps-like the eastern railroads of the United States have to be "bailed out" by some publicly sponsored and financed corporation? What benefit would that bring to anyone?

That does not seem a rational way, but an answer is at hand. The Canal Company simply must be relieved of some of its cost burdens. There are costs of the Canal Zone Government that, if not beyond the obligations of the users to support, certainly ought to be examined to see if these could not be dealt with in such a way as to avoid overburdening the costs of using this valuable artery.

Some $9 million of the Panama Canal Government's $23.5 million budget, paid by the Canal Company, goes to cover expenses of operating customs and immigration, postal service, police and fire protection, a judicial system and civil defense.

We do not expect our fire departments and police departments to pay their own costs. They perform essential services for the public and are supported in that vein.

We, therefore, suggest that these expenses be paid out of the General Treasury in the name of national defense.

"Self-sustaining" and "pay-as-you-go" are fine-sounding theories until the circumstances are examined.

The company, already hit by its first-ever deficit in fiscal 1973, was under the self-sustaining requirement, left little option but to raise tolls. This was done in 1974. However, conditions have changed little since certainly not for the better-and tolls have again been boosted by a change in the ship admeasurement system and Canal Company officials have left little doubt that another general increase is coming within the year.

The question now is: How can higher tolls really help when the higher tolls can be avoided by many carriers by using, not only the competing Suez Canal, but also the growing practice of moving international freight overland in landbridge and mini-bridge services?

The answer would seem to be that toll collections will not be helped and much like our experience with public transportation in the Nation's cities, costs rise, fares are increased, patronage falls off, revenues fall, fares are again hiked, and the cycle ends in financial collapse.

While we may not be verging on such a downward spiral with the canal, that possibility exists. Sea-Land Service, a big U.S.-flag user of the canal, has warned, in effect, that if tolls go up much more, it will cease using the canal. Other carriers are likely facing similar circumstances.

As an example of the effect of landbridge, the following is taken from a recent Seatrade publication study on "Soviet Shipping":

The Russian's ". . . trans-Siberian landbridge has creamed off cargoes from the shipping lines." The Russian landbridge “. has surpassed even the expectations of the Soviets, and its carriage of 70,000 containers in 1975 dwarfs the 30,000 container traffic predicted by consultants McKinsey & Co. back in 1969."

The canal still has value. The defense of the country certainly still counts the quick passage for warships between the two oceans as a definite strategic and tactical advantage.

Commerce continues heavily dependent upon the canal, both our own and that of other nations. It would seem that the canal then retains commercial value as a useful, and hopefully competitive, means of moving this country's trade, and that of much of the world. Carriers have never objected to paying tolls to help support the canal. They do not now. Now, however, they are being forced to pay, in effect, through tolls, the original $380 million investment plus the value of the treaty rights and titles, now valued at close to $332 million.

The St. Lawrence Seaway was saved from a somewhat similar dilemma by being excused from having to pay interest to the Treasury on the U.S. Government's share of the development of that waterway-a joint United States-Canadian undertaking with far less commercial and strategic value.

Without bogging down in the details of falling transits and revenues, which the appropriate authorities will supply, or the legal requirements, it seems quite clear that a fundamental rethinking of handling this kind of publicly provided project with broad benefits is in order.

Gentlemen, this concludes our formal statement. We wish to add just certain informal thoughts if we may.

First we are here to offer our views on the financing of the canal enterprise and on H.R. 12641, our views and causes as seen by the NMU and possible solutions.

We submit our remarks have covered pretty well the outline of that intent.

NMU is made up of some 25,000 American seamen. We have some 6,000 to 7,000 canal workers, majority of whom are non-U.S. citizens. In fact, I think it is indisputable that we are the largest union in the Canal Zone.

We have been concerned about the operation of the canal for many years. We certainly have appreciation for the effort of Governor Parfitt during these difficult times.

NMU has had a presence in the Republic, in the Panama Canal Zone for 15 years. And I have made during that time at least annual visits, quite often more, over this period of time, I have often found that the various heads of the departments of the Canal Company have either been coming from or going to meetings in which projections of the operation of the canal for either a 5-year term or a

10-year term were being undertaken. And I have often asked them which one of these projections of anticipated capital pertained to the present situation.

And we have been told that in none of their most recent projections have they envisioned the situation that they are faced with today.

We find that this is extremely amazing, certainly everybody on this committee, everybody acquainted with the maritime industry, knows what has been happening to this industry for the past 10 or 15 years, for every new vessel has been replacing some five to seven older vessels. And echoing the words of Bob Blackwell in the case of tankers and supertankers, it could be as high as 20 or 21, T-2 equivalents. And yet we find that the Panama Canal Company has not envisioned this kind of reduction in force since then.

It was Nicholas Johnson, about ten years ago, who predicted there would be 500 American flag vessels-apparently no one paid any attention to him.

We can not speak for the longshoremen here, but we know of the concern of the American longshoremen on all coasts because they are being dramatically and drastically hit by the landbridge and minibridge concept.

We tried to make it quite clear in our visit to the canal recently, that we could not allow anything to happen, we could not take any position that would aid the steamship industry of utilizing greater utilization of the minibridge and landbridge concept to the detriment of the jobs of American longshoremen. So that it is not only the Canal Zone worker, it is not only the American seamen, but it is the American longshoremen as well who could be drastically affected by any curtailment in the use of the canal.

We certainly agree with the remarks of Mrs. Sullivan earlier that the deficit should not be made up on the gains made by the workers over the past number of years. We have heard it said that the Panama Canal should be a showcase. Well, this is certainly the phrase that Rene Lioeanjie and myself have used throughout Latin America wherever we have traveled talking to trade unions and this is what we have talked to our membership in Panama about.

And the security angle, it is the NMU that has pushed for the Panamanian worker to aspire to better jobs in the canal. And just at the time when we are showing some results that they are aspiring to the better jobs, they are raising the grade from 4 to 6 up to 10.

Our statistics show that there are less than 200 jobs, 100 in some jobs available to these people from grades 7 on up to grade 13. So that this one thing has effectively eliminated their aspiration to better jobs and working conditions in the Canal Zone and we say that that must not happen.

Thank you very much. And whatever questions that the committee has we would certainly try to answer.

Mr. METCALFE. Thank you very much, Mr. Wall, for your very profound prepared statement, as well as the statements that you have given us after the conclusion of your prepared statement.

You are to be complimented on the contents of this statement.
I would hope that you would submit that statement to the Board

of Directors of the Panama Canal Company, the Canal Zone Civilian Personnel Policy Coordinating Board, and to the Department of Defense negotiating team, as well as to the Secretary of the Army.

I would not ask but one question, since your presentation was so lucid and clear, and that is with reference to the analogy that you made, the price of the can of corned beef, is that an isolated pricing or is that typical of most of the items that are purchased?

Mr. WALL. I am advised that it is not only typical, but that the corned beef that is available in the other surrounding countries is Argentine beef canned in Argentina, whereas the price we used is a price

Mr. METCALFE. I did not mean that

Mr. WALL. No.

Mr. METCALFE. But for other items other than corned beef? Mr. WALL. Yes, this is a total across-the-board, just used as a representative example.

Mr. Metcalfe. Thank you very much.

I now recognize the chairperson, Mrs. Sullivan.

Mrs. SULLIVAN. I am delighted to have all of you here this afternoon and it is for many long years that I have worked with Mr. Lioeanjie, and I have always had trouble pronouncing his name, and Mr. Gaskin. And I think they can tell you, Mr. Wall because they were down there when our group would go down, and you were not always down at the same time, that our whole effort was always to treat the Panamanian as well as the U.S. Canal Zone worker with the same consideration.

And I think we all suffered through that 1967 treaty when we had to get it on the streets of Panama at 50 cents a copy, when we could not get it here from our State Department.

And I do not know what is going to happen to the next one. But I do know of the great loyalty of the Panamanian worker as well as the great loyalty of the American worker, and I know that they have great pride for their jobs with the Panama Canal.

And as I said earlier today, we can look with real pride at what has been accomplished since the canal was opened in 1914-the great strides that have been made. It is difficult to think that they would attempt this, whoever had the bright idea of trying to gather a little of the needed money to get out of the red from the backs of the working people who, through no fault of their own, found the revenue was down.

I hope that what the President's aides promised me on the 17th of March; namely, that the administration will sit down quickly and talk over and negotiate some kind of withdrawal of these proposals, because they said, remember, they are only proposals, would prevail. But you cannot just live on primises on this matter and I think it all has to be done and has to be done quickly.

There are other ways that we are trying to find to solve the financial problem, but it should not be taken out of the workers themselves unless they are going to take something from everyone from the top to the bottom, and I do not think that would ever be done. But I am glad that you have come with your testimony today. You did not have to show your interest, but you have expressed it beautifully.

Tomorrow we are going to hear from a few other labor representatives, but we cannot have full testimony from each because there just is not that much time. We know what their problems are, but what we are trying to do now is to try to find some kind of good solutions as to what we can do. As I said this afternoon, we have got to find some way to build up the economy of the world and get our U.S. trade back into real activity, so that we have the cargo passing back and fourth and transiting the canal.

And I just want to thank you for taking the time to come up here, and for presenting this testimony. And I implore you, go back to all of those people that sort of lost their temper and their head a few weeks ago and say this is not going to help because it seems a little. different when you realize that those ships are standing out there idle and that it costs on the average, I understand, of $8,000 a day to operate a ship, all that canal slowdown is doing is just making the debt that much greater.

I tried to express this point in the contacts that I made where we were concerned, that we were working on the problem, and that your Governor was working on it. He is doing, and as I said before, he has done a beautiful job in trying to work this thing out.

We can trust him. He is not going to tell you something and turn around and do something else, and I think if you have this confidence in the leaders in the Canal Zone and in Congress, and of those on this committee, then you can be assured we will do everything that is humanly possible, but we cannot withdraw that proposal. We can do everything we can to push those who have proposed it to remove it. So thank you for coming.

Mr. WALL. If I might just re-echo your sentiments in behalf of Governor Parfitt. We have said that we are the largest union in Panama. And while we realize the frustrations that provoke the other organizations or the other individuals, we did not participate in any sick-out or slowdown.

Mrs. SULLIVAN. I know that.

Mr. WALL. We also represent in addition to the men working for the Panama Canal Company, those aboard the S.S. Cristobal. And in all government agencies, the union has taken the pledge that they will not strike the U.S. Government. And we do not think you can strike one piece of it and still maintain that same position.

And we understand the people are lookng at the crystal ball. We thought that the purpose of this discussion being generated was to save money and it is our understanding that the Cristobal is a very efficient vessel and they may even be going to retrofit the vessel, to modernize the ship so the crew reductions might be made, and they will have the full cooperation of the National Maritime Union as well as the other officer unions that are aboard those ships, so thank you very much for your time.

Mr. METCALFE. The Chair recognizes the gentleman from Kentucky. Mr. SNYDER. Thank you, Mr. Chairman.

I am glad to see you folks again. I appreciate your statement. I have a couple of questions, on page 2 where you make comparison in prices.

Mr. Wall, you ad-libbed the ability of both U.S. and non-U.S. citizens to buy in the zone, purchase in the zone, being changed in 1957.

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