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General MEHAFFEY. That the President was authorized to fix the rates subject to the limitation set by the law.

Mr. SCRIVNER. Upon whose advice does the President depend to establish those rates?

General MEHAFFEY. Presumably initially on the advice of the Governor of the Panama Canal, through the Secretary of the Army.

Mr. SCRIVNER. As Governor of the Panama Canal, have you as yet made any recommendation to the President that those rates should be raised at least to pay the operating expense and some interest on the indebtedness?

General MEHAFFEY. No, sir. As I said a moment ago, we are having a study made of all the factors involved.

Mr. SCRIVNER. Surely; but the statement you just recently made was that since 1938 when these rates were last fixed, your costs have gone up 79 percent. If you can make a statement like that, it should not take a very long study to base a recommendation to the President that those rates be raised immediately. I hope in view of some of the comments that have already been made that that will be done and particular attention be brought to the fact that not only here in Panama are we subsidizing all this shipping, foreign and American. In fact we are doing the same thing in all of our harbors where we are called upon now to dredge deeper to accommodate deeper draft vessels which, in turn, makes it possible for the shippers to ship cheaper. We also dredge the inland waterways, all of which is charged to the taxpayers for the benefit of the shippers themselves.

I hope you will make this recommendation without further delay.

Mr. ENGEL. Governor, I can appreciate, of course, the fact you could not charge the entire capital investment up against shipping and expect to draw returns thereon; but, in view of the work on the third set of locks and possibly a sea-level canal that you and I discussed when I was in the Canal Zone in 1946

General MEHAFFEY. Yes, sir.

Mr. ENGEL. I think part of it should be. One of the reasons for the sea-level canal is for protection in times of war or of national defense.

I can also appreciate the fact it would take several years after a war to obtain a rate of shipping which would be stabilized, upon which you could base future rates for a period of time.

General MEHAFFEY. Yes.

Mr. ENGEL. What is your judgment as to whether or not we have reached a period after the war where shipping has stabilized to a point where we can fix and should fix permanent rates?

General MEHAFFEY. It seems to us that although the world can scarcely be said as yet to be in a completely stable condition, the general trend of shipping statistics has shown a regularity and generally a gradual increase that would lead one to believe the conditions have become relatively stable.

Mr. ENGEL. Of course, as the world recovers from the war and these countries in Europe recover their productive capacities, your shipping will increase.

General MEHAFFEY. Yes, sir.

Mr. ENGEL. A good deal of the world's shipping was destroyed, and Germany and Japan and other countries are not shipping at all?

General MEHAFFEY. Yes, sir.
Mr. ENGEL. And, of course, your tolls would increase accordingly?
General MEHAFFEY. Yes, sir.

Mr. ENGEL. But you think shipping has stabilized so that we could fix rates permanently now?

General MEHAFFEY. I think so; yes sir.

Mr. MAHON. As I understand it, before the rates could be raised on shipping through the Canal, the following procedure would have to be followed: You would make a recommendation to the Secretary of the Army who, in turn, would make a recommendation to the President who, in turn, would have the right to raise the rates within certain limits.

General MEHAFFEY. Yes, sir.

Mr. Mahon. If everyone were agreeable to it, how long would it take to raise those rates?

Mr. BURDICK. You have to give 6 months' notice.

General MEHAFFEY. The law says the President is authorized to prescribe and from time to time change the tolls, provided that no tolls when prescribed as above shall be changed unless 6 months' notice thereof shall have been given by the President by proclamation.

Mr. Mahon. Now, do you have any contracts with shipping companies, or would you have contracts with shipping companies, which extend into the future, which would prevent your raising their rates within a specified time, or anything of that character?

General MEHAFFEY. I think, regardless of the law, it is only fair to the shipping companies that they be given reasonable notice.

Mr. Mahon. What would you say would be reasonable notice? General MEHAFFEY. The law provides for 6 months' notice.

Mr. Mahon. You did not quite answer my question as to whether or not you have arrangements or agreements with shipping companies which are projected into the future which would prohibit your raising their rates within a specified time.

General MEHAFFEY. No, sir.

Mr. MAHON. It just seems so obvious to me that the rates should be raised that I want to explore the possibility of doing it rather rapidly.

General MEHAFFEY. Yes, sir. Mr. TIBBOTT. In other words, General, you do not make a contract with any shipping company for the passing of ships through the Canal?

General MEHAFFEY. No, sir. We consider the Panama Canal as a great international public utility. We provide the facilities, and the users come to us, and we give them service and charge them the established tariff's.

Mr. Engel. Could you make an agreement with some company? Are not the terms upon which every ship goes through there fixed by law and by treaty? General MEHAFFEY. That is correct; yes, sir.

Mr. ENGEL. So you could not make a contract with any company, because such à contract would have to deviate from the rates other ships might have?

General MEHAFFEY. That is quite correct, sir.

Mr. Mahon. If you charged all companies the same tariff, of course, there would be no discrimination between the companies.

Mr. BURDICK. We could not do it.

Mr. Mahon. I did not say it would be wise; all I am saying is that there would be no discrimination.

Mr. SCRIVNER. But they could not do that, anyway; if the law says the President is the one to prescribe the rates.

Mr. Mahon. He is the President's arm, of course, in making a change in the rates. Now, as the President cannot change the rates except within the treaty limits, my question is, Does the present treaty give enough latitude to where you would be able to raise the rates sufficiently to take care of the situation?

General MEHAFFEY. Yes, sir. There is no treaty limitation on the amount that the rates can be raised; there is merely the limitation mentioned by the chairman earlier that all ships must pay the same tolls; that is, there can be no discrimination against the ships of any nation.

Mr. ENGEL. And the same tonnage measurements must be applied to all ships alike?

General MEHAFFEY. Yes, sir.

Mr. Mahon. I do not think there is any doubt but what we should be fair and considerate of all other nations in connection with this matter and give everybody the same kind of deal.

Mr. NORRELL. Actually, the President takes no action, however, un til the proper recommendations from the lower levels get to him? That is correct, is it not?

General MEHAFFEY. As a matter of procedure, I think that is correct; yes, sir. As to the power, of course

Mr. NORRELL. He has to take the final action?
General MEHAFFEY. Yes, sir.

Mr. SCRIVNER. In other words, in partial answer to Mr. Mahon's question, with the exception of the fact that 6 months' notice must be given, theoretically and almost actually, if you made your recommendation to the Secretary of the Army tomorrow, it would not necessarily take more than a couple of hours or possibly 2 or 3 days to get that recommendation, in turn, to the President who could, if he saw fit, immediately issue that order raising the rates and then notify all concerned that “6 months from today the rates will be so much"?

General MEHAFFEY. That is correct.
Mr. SCRIVNER. So it could be done in a matter of hours or days?
General MEHAFFEY. Yes, sir.

TRANSITS BY NATIONALITY OF SHIPS

Mr. Mahon. In regard to the amount of shipping, do we customarily place in the hearings a record showing the extent of the shipping under the various flags of the various nations?

General MEHAFFEY. Not ordinarily in the record of the hearings. It is shown in the annual report of the Governor.

Mr. Mahon. Then, will you list the several nations that have the most traffic through the Canal?

General MEHAFFEY. Yes, sir.

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Does not include 847 vessels of less than 300 net tons, Panama Canal measurement.

TRANSITS BY RUSSIAN SHIPS

Mr. MAHON. Some reference was made to Russia. Do the Russian ships patronize the Canal as extensively as other major nations? In other words, to what extent does Russia patronize the Canal in terms of tonnage per year? I think it might be of interest to insert that. General MEHAFFEY. Yes, sir. (The information is as follows:) The table immediately above shows that 15 Soviet ships with a total Panama Canal net tonnage of 34,452 transited the Panama Canal in the fiscal year 1947.

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Mr. Engel. Is there any money in this budget for the third set
of locks?
General MEHAFFEY. $100,000; yes, sir.
Mr. ENGEL. For what?
General MEHAFFEY. It is for the maintenance of the remaining
equipment, records, and so forth.
Mr. Engel. But there is no money in here for new work?
General MEHAFFEY. No, sir; none whatever.

DISCUSSION OF STUDY OF SEA-LEVEL CANAL

Mr. Engel. Is there any money in here for the sea-level canal in the Panama Canal Zone?

General MEHAFFEY. None whatever; no, sir. Mr. Engel. The only funds in here are for the operation and maintenance of the present Canal? General MEHAFFEY. Yes, sir.

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Mr. CASE. Governor, you said there is no money in here for the sea-level canal or the third set of locks. Have you completed that study you were carrying on under the Senate resolution that was to be carried on by the engineers?

General MEHAFFEY. Yes, sir. The study was made under an act of Congress, Public Law 280, Seventy-ninth Congress. The study has been completed to a point where a report has been submitted to the Congress, as required by the law.

Mr. Case. Are you still operating your model?

General MEHAFFEY. Yes, sir; and we still have a considerable force engaged in getting the records in proper condition for possible future

use.

Mr. CASE. Where do you get the money for the people who are engaged on that project?

General MEHAFFEY. It was part of the appropriation for the construction of additional facilities.

Mr. Case. Do you contemplate prosecuting that project at all during the coming fiscal year?

General MEHAFFEY. No, sir. We will have to finish putting the records in such shape that we can discontinue the work at the end of the present fiscal year.

MAINTENANCE OF EQUIPMENT ON THIRD SET OF LOCKS

Mr. CASE. What about the work that was done on the third set of locks; are you doing any maintenance there?

General MEHAFFEY. Not on the actual physical work that was done.
Mr. CASE. On the equipment?
General MEHAFFEY. Yes, sir; maintenance of the equipment.
Mr. CASE. And there is money in here for that?

General MEHAFFEY. Yes, sir.' That is the $100,000 which I mentioned, which is for the maintenance of the records, equipment, and so forth, acquired for the third locks project.

ADVERSE REPORT ON COMPLETION OF THIRD SET OF LOCKS

Mr. TIBBOTT. General Mehaffey, is the third set of locks, if carried through to completion, to be placed at the same location you originally intended them to go?

General MEHAFFEY. In the report which I have submitted to the Congress, in accordance with Public Law 280 of the Seventy-ninth Congress, we have not recommended any continuation of work on the third set of locks. We do not think the completion of that project under present conditions would be a proper expenditure of funds.

Mr. CASE. Since the report has been made public, I would like to ask you a question or two.

I have the report of the Governor of the Panama Canal rendered in accordance with Public Law 280 of the Seventy-ninth Congress, first session. In the syllabus, at the beginning of the report, I find the following:

The suspended third locks project, designed to overcome the deficiencies in the capacity of the Canal by the construction of a third lane of larger locks, would be inadequate in security.

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