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Show Destructive Competition In attempting to estimate the results of inland waterway improvements, consideration must be given to the fact that a considerable volume of traffic is now being kept off the waterways by re- ductions of railroad rates to lower levels to keep the traffic on the rails. The aggregate amount of such rate reductions and the volume of tonnage affected are not known. To a large degree, re- ductions are voluntarily granted by the railroads after negotiation with shippers and do not come to public attention unless they are made an issue before the Interstate Commerce Commission. That the effect of existing regulatory practices permitting such reductions may be serious on railroad revenues, as well as destructive to water traffic, is indicated by the statement of the assist- ant general solicitor of the Association of Ameri- can Railroads to the Subcommittee on Domestic Land and Water Transportation of the Senate Interstate and Foreign Commerce Committee, April 20, 1950, as follows: The loss of revenue from the tonnage actually diverted to the waterways because of Federal sub- sidy is serious, but it is only a part of the loss suf- fered from this cause. The railroads also suffer the loss of much revenue because of depressed rates which they must maintain in order to prevent the diversions of a large additional tonnage to the sub- sidized waterways. Erosion of the rail rate struc- ture has long been recognized as one of the most serious and evil consequences of subsidized water- way competition. The Federal Coordinator of Transportation, in his report on Public Aids to Transportation by Water, in 1939, stated: The cutting of railroad rates has played a con- siderable part in holding the water-borne traffic volume down. * * * When a waterway is opened and water carriers begin to use it, immedi- ately competing modes of transportation, particu- larly the railroads, reduce their rates, thus depriving the waterway of the traffic which it would otherwise carry. * * * The public gets the benefit of those reductions, but the waterways do not get the benefit of that traffic, and if you included all the traffic on all the reduced rates for which waterways were responsible, there would be a very different showing. Thus the shipping public is led to forego the use of the waterways and accept as a substitute subnormal or noncompensatory rail rates, which either sacrifice railroad earnings or permit the railroads to recoup their losses by charging higher rates on other traffic. It is argued that as long as regulatory procedure permits this situation to continue, a normal volume of commerce will not materialize on the waterways, and the unit costs of improvement, maintenance, and operation will be correspondingly inflated and thus tend to dis- credit the soundness of the original estimates of prospective tonnage and benefits. It is argued on the other hand that if Congress expects regulation to foster sound economic con- ditions in transportation generally, it must adjust promotional and subsidy policy to the attainment of these regulatory objectives, to the end that each of the modes of transportation may have an equal opportunity to compete for traffic on the basis of economic standards of relative cost and quality of service. This end cannot be attained, it is as- serted, so long as the general taxpayers rather than the shippers are bearing the cost of waterway improvement and maintenace. The Secretary of the Army, in a letter to the Federal Coordinator of Transportation on Sep- tember 23, 1938, commenting on this situation, said: Indirect savings to shippers under these (competi- tive) tactics are conceded in your report to aggre- gate many millions of dollars annually, but are dis- missed without credit to the waterways because of difficulty in determining their magnitude. * * * If credit is to be given to waterway transportation for direct savings in freight charges only on tonnage actually moving by water under the handicaps of abnormally depressed competitive rates, then con- sideration should be given to the tonnage continuing to travel by rail at these depressed levels as a basis for computing indirect savings. The "indirect savings" referred to by the Sec- retary of the Army are not true public benefits in an economic sense. Some means of giving due credit to the waterway improvements respon- sible for the rate reductions would seem to be appropriate. The theory on which railroad rate reductions to meet water competition have been permitted, 205 |
