different port identities. If United States Lines, for example, tries to use the Port of Baltimore as an alternate port, and Sea-Land tries to work out of Hampton Roads in addition to the cargo that United States Lines or Sea-Land can direct to their alternate ports from inland points, the local shippers at each port should be faithful to the line serving their port.

Traffic patterns. This is another dislocation problem. The tendency will go so far, I think, as to have all cargo destined to Europe and the United Kingdom loaded aboard ship at an Atlantic port in the United States even if the freight originates in California. The containerships are going to be so expensive to build and operate and have so much earning power that they are not going to send them around to the West Coast to load European cargo. The same thing, I think, will be applicable to the Far East trade. All cargo for the Far East will be loaded on the Pacific coast of the United States. Florida and the Gulf will be the gateway to South America.

Another problem is efficient use of terminals. Containerships require very expensive terminal equipment-giant cranes, et cetera. Why should an expensive crane be placed on a berth for exclusive use of a line when that line's ships are only in port 2 days a week? I think we may work out systems for better utilization of the crane by many lines. There may be all kinds of backup land behind a pier, and as long as you have some scheduling worked out, more than one line can use this expensive equipment. The kind of agreements to be worked out remains to be seen.

I think the biggest problem is how to get the containership system operating in a way that won't dislocate everything. We must achieve a balance that won't result in so much competition that rates will immediately be driven down to their lowest level, but will pass on to the shippers sufficient savings to significantly increase trade. That is the great problem and is the one that I think requires the most wisdom on the part of the carriers, their conferences, the Federal Maritime Commission, the other regulatory agencies, Congress, and the shippers. I think this container revolution has put us all in a very exciting period in transportation history. I for one am delighted to be in the middle of it. I may not sleep as well at night, but the container revolution is exciting and challenging and I am glad to try to do my part to meet the challenge. I hope you all feel the same way. In future weeks you can ask all the questions you have of the people who are the immediate experts. I am sure they will have the best answers man is able to devise.

SEMINARS ON THE CONTAINER REVOLUTION

MONDAY, OCTOBER 9, 1967

II. CONFERENCES AND THE CONTAINER REVOLUTION

(By Richard J. Gage, Chairman of the North Atlantic and United Kingdom Freight Conference)

Mr. SCHMELTZER. Before I introduce tonight's program, I would like to present Mr. Bruce Farthing, who is visiting us from England. Mr. Farthing is the principal officer of the Committee of European Shipowners.

Last week, I went through a summary of what I thought might be the savings from container operations, and set forth a great number of problems. I set forth the problems without giving you the answers. Beginning tonight, we hope to have the answers from the points of view of various segments of the shipping community.

We are starting with Richard Gage, who is going to express the point of view of the conferences, as he sees it, and what their problems will be, what their attitude is toward the container revolution, and what it holds in store for all of us.

It may be a little unfair to offer Mr. Gage as the spokesman for the conferences, principally because Mr. Gage was here as "Public Counsel-we called it, in those days-for a long time. He worked with Bob Blackwell and me, and Lee Fuller, and a lot of the other people you

know.

Mr. Gage was also with the Antitrust Division of the Department of Justice for some years.

But he has reformed in recent years, and he has been Chairman of the New York Terminal Conference, and now is Chairman of the North Atlantic United Kingdom Freight Conference.

Without further ado, I will ask Mr. Gage to step up. And, after he has finished with his comments, we can have questions-unless he wants to vary this routine.

Mr. GAGE. Thank you.

Paul Draper had an expression for the person who leaves Government to go to industry, and leaves industry to go to Government. He called them the "gamekeepers" and the "poachers." When you are in Government you are a "gamekeeper," and when you are in industry you are a "poacher."

I don't have any great talk prepared tonight. I just have a vague outline, which I will give to you first, and then we will talk ad lib on it for awhile.

I thought I would have the first heading be: "The situation in the past up until today."

In other words, what has historically happened between conferences and container operators.

And then a look at the future.

And I am going to close with quite a few unanswered questions.

What I say, obviously, cannot speak for the conferences as a whole. It can't even speak for my conference, because my conference is made up of twelve vessel operators right now, and it is difficult to get them all to agree on any point at one time. And if I were to try to speak with the viewpoints of all of these twelve member lines, then I would have to sit down-and just say "Hello."

Conferences, of course, got started a half century or so ago, and they have been a tent under which a number of steamship companies in the past could get together and serve various functions within a trade.

In the conference that I am chairman of, when I first became chairman it was quite a different organization than it is today.

Let me just take a minute to explain that, so we can lead into what the conference is today with container operators.

At that time, there were approximately the same number of operators, one or two less. They ranged from the giant shipping corporation such as United States Lines-with services throughout the world and big, fast, modern ships. The Cunard Line was in the same category, at least in our trade; it ran an excellent service every Friday night, like clockwork, unless there was a strike. Cunard and the United States Lines each had a sailing from New York to London and good, fast service getting over there. When one would build faster ships or better ships, it behooved the other one to pretty soon get itself in competition; and so they would do the same thing.

But, in the same conference, you had smaller, berth-type operatorslines which ran a good service, but not as fast, not as fancy a service. Moving down the ladder, you had lines which were essentially tramp operators; lines which filled their ships with grain to a great extent. But because there was some general cargo available, they would join the conference and make themselves under the dual-rate contract-eligible to carry some of the general cargo. But, basically, under their cost structure they were a semitramp-type operator.

We had the Irish Line, which didn't even go to the United Kingdom. Its service was limited to Ireland.

In addition, some of these lines served the principal port of our range. Some might have a South Atlantic service and call at Norfolk, but go to the United Kingdom; and some had an eastern Canadian service, but they would drop down to Boston, which would put them in the North Atlantic United Kingdom Conference.

So we had a great range of different interests. Some of them were big, and some of them family-owned corporations. And this has been, historically, the position of conferences in other trades as well. And the conferences managed to weld these various operators into one unit, and the same tariff was filed; the same rates and conditions applied to all of them. Many of the rates in the tariff were meant for just one or two of the operators, because they would be the only ones interested in carrying the cargo. There are some low-valued cargoes moving out of the southern end of our range, out of Norfolk, which are very suscep

tible to moving by tramp. And the wealthier lines, trying to meet quick schedules, just couldn't cater to cargo like that. Nevertheless, the rates would be in the tariff for everybody.

That was the situation which I met when I came to the conference; and that was the situation which prevailed for a couple of years.

And then along came Sea-Land, which changed a great many things in the North Atlantic.

Sea-Land's operation is an entirely different concept: their ships cannot carry break-bulk cargo; they are limited to 35-foot container boxes. The theory is to move these boxes quickly to Europe, and feed them out of a central spot over there. Originally, it was Rotterdam. They are now serving directly into the United Kingdom. One would think that the difference in the type of operation which Sea-Land has on the one hand, and the other conference lines had, would just make it impossible for the conference system to handle it; or at least one would think that it would radically change the conference system. But I have been very surprised at the relative smoothness with which this change has come about. We have accommodated the container operators, so far.

We have had our difficulties, and maybe I am losing my memory a little bit when I say it was smooth. Because there were some anxious moments, especially when Sea-Land was joining our conference. But, by and large, without any radical change, we have accommodated Sea-Land.

And then, following Sea-Land, you had American Export Isbrandtsen enter the service with a container service exclusively. The United States Lines has been changing its service, so that it is becoming a container operator. These lines have come in our conference, and have followed the conference tariff, with surprisingly few changes. And I believe they are as happy as one has a right to be, working in such an organization such as the conference. They don't write the tariff themselves; undoubtedly, they would write it differently if they could. But I think they can live with it quite peacefully.

The change that has taken place has been a change in our container rule, and it has been relatively small. The rates in the tariff, with almost no exception, have remained the same; the tariff structure is the same. The container rules contain various provisions relating to the containers specifically; obvious things, like detention charges on containers abroad; requirements for certain utilization of the containers; and they provide, în our conference, a 5-percent discount off the tariff freight rate when cargoes are carried in containers. That is the broad picture of it; and, by and large, it is as I said: "They move in our conference, and there has been no great revolution at all."

Atlantic Container Line recently joined the conference-again, no great problems that I can see coming.

Atlantic Container Line is going to use roll-on vessels; and so they are asking the conference to make a provision for some kind of reduction for the shipper who ships his own truck body on wheels. They want us to recognize the fact that we are not using our own containers; we are using their box, so to speak, and should pay them something for it. I rather suspect the conference will come to some kind of an agreement along those lines. It hasn't been done yet.