Mr. SHOEMAKER. It is a pretty general statement that you have made, Mrs. Sullivan, if I may say so. I have seen a great many Government studies on their own costs.

I served on the Second Hoover Commission task force on competition with business enterprise and it was with the greatest of difficulty that we could get the complete costs of any Government operation. Mrs. SULLIVAN. We found that rather true in a few things that happened right in my own area in St. Louis not too long ago, where contracts were let to do Government work, and the results were not always happy.

Mr. BYRNE. Madam Chairlady, following your statements, we have also found that in farming the work out to private industry with the help of the Government employees showing that they knew how to do the work it has been proven that the work can be done more cheaply by the Government.

Mr. MORSE. Madam Chairman, I served in the executive branch and I quite agree with the chairman that there are instances in which the Government can accomplish a service cheaper than can private enterprise, but human freedom is a very tender flower and I think our experience shows that it thrives best on the soil of economic freedom. I think that is the principle that we must consider here.

Mrs. SULLIVAN. I think we are all agreed that, because of the very nature of our country, when private enterprise can do it they should do it but in many instances they want to do it when they should not step in.

Mr. Garmatz?

Mr. GARMATZ. Following along that line, Madam Chairman, I would like to ask Mr. Shoemaker one question.

What is your opinion on Government work in shipyards? Do you think that the naval shipyards should be continued or do you think that that work should be carried on by private enterprise?

Mr. SHOEMAKER. Mr. Garmatz, we wrestled with that in the task force on which I served in the Second Hoover Commission and came up with the decision that a group conversant with all the facts should make a study on private shipyards versus Government yards.

I would be the last to say that Government yards have poor workmanship or are overly costly or anything of the sort. I tend to believe that an equally economical job can be done in private shipyards but I think there is more to naval construction and naval maintenance than just the pure question of Government competition as such, sir.

Mr. GARMATZ. Did you read the Drake report?

Mr. SHOEMAKER. I have not seen the Drake report, sir.

Mr. GARMATZ. On page 2, you make a statement, and I wondered if you would be a little more specific.

You say:

In the past it has been difficult to obtain specific information on the operation of the Panama Line.

Just whom did you see or what information did you want, when and why? Do you have any details where you were actually denied information?

Mr. SHOEMAKER. No, sir. I am going back to the time of our study. We initially worked with the General Accounting Office and found

that their breakdown, other than a study that they made for the year 1953 which was a very complete study, was pretty limited as to the segregation of the Panama Line figures.

We had fine cooperation at the time of our study with the Panama Canal Company and had good figures from them.

Subsequently, as now, the annual statements in the budget for the Panama Canal Company's Panama line are pretty limited in amounts, so that, frankly, we went to the Bureau of the Budget for these few figures that we have quoted here on page 2.

If I have left the impression that there has been any lack of cooperation or refusal to give us information, that was not my intention, sir. Mr. GARMATZ. I was just going by your statement.

Mr. SHOEMAKER. Yes, sir.

Mrs. SULLIVAN. As a railroad man, Mr. Shoemaker, do you think we should eliminate the Panama Railroad and depend upon the highway down there?

Mr. SHOEMAKER. Mrs. Sullivan, the Second Hoover Commission also studied the Panama Railroad and it was our conclusion that the railroad line was not necessary and that conclusion was backed at that time by the Department of Defense.

There was a problem going beyond economics in that at the time, namely, that the competing highway which the Army was using almost exclusively, did go beyond the boundaries of the Canal Zone into the Republic of Panama and there was some reasonable policy question in the minds of many people as to whether the United States should give up its only wholly owned and controlled transportation between the two sides of the Canal Zone other than the canal itself.

Mrs. SULLIVAN. Did they take into consideration that the highway was lying wholly within the Republic of Panama?

Mr. SHOEMAKER. At the time we made our study, the highway did go into Panama. I understand that there have been changes made or that changes are being made, and I do not know which, that might change that.

Mrs. SULLIVAN. Did your group go into the idea of building a new highway where the railroad line now exists?

Mr. SHOEMAKER. We did not. We suggested it as a possibility but we did not make any definitive study of it, Mrs. Sullivan.

Mrs. SULLIVAN. To my knowledge, I do not know how the highway could be taken over by the U.S. Government when it goes right straight through the Republic of Panama. I think, the finding of this committee several years ago and the resulting saving of the railroad did much to preserve our status there. Without the railroad as you people had proposed we could have been in real trouble getting supplies in.

Mr. BYRNE. Will the chairman yield?

Mrs. SULLIVAN. Yes.

Mr. BYRNE. At that particular time, did we not discover that the Army was deliberately bypassing the roadroad; in other words, boycotting the railroad to get rid of it?

Mrs. SULLIVAN. And the organization is going less into the red because of improved conditions. Because of all the talk of eliminating the railroad, it was going down and down.

Mr. Mailliard?

Mr. MAILLIARD. I have no questions.

Mrs. SULLIVAN. I believe our counsel has some questions.

Mr. ZINCKE. Mr. Shoemaker, your position is based upon your dislike of Government competition with private enterprise; is that correct?

Mr. SHOEMAKER. I think that is a correct statement.

I just believe in our private enterprise system, sir.

Mr. ZINCKE. Is it private American enterprise or private enterprise in general that you are interested in?

Mr. SHOEMAKER. Well, as an American citizen, I do not see any difference. Perhaps you are going back to the history of the Panama Line having been a private company at one time.

Mr. ZINCKE. I do not want you to have to debate about my question. Specifically, do you know how many lines regularly serve the Canal Zone from the east coast of the United States?

Mr. SHOEMAKER. Yes, sir. The Grace Line and the United States Line serve it from many of the east coast and gulf ports and we have a freight line, the Lykes Line, if I am not mistaken, that is serving it from the gulf coast.

Mr. ZINCKE. And also Grancolumbiana?

Mr. SHOEMAKER. That may well be, sir.

Mr. ZINCKE. Which is the national line of Colombia and Ecuador, and Coldemar Line, which is a foreign-flag line and Marina Mercante Nicaragunse, which is the Nicaraguan State Line and the Lauritzen West Coast Line.

Mr. SHOEMAKER. I do not dispute you at all. You may be quite right.

Mr. ZINCKE. That these lines are members of the Atlantic CoastGulf-Canal Zone Conference and of those I call your attention that two out of six are American-flag lines and four out of six are foreignflag lines.

Is your concern with the competition with the two American-flag lines or is it with all six?

Mr. SHOEMAKER. My concern is primarily with the competition with the American-flag lines, sir.

Mr. ZINCKE. You are aware that there is less than 95,000 tons of commercial cargo carried to and from the Canal Zone in the course of a year?

Mr. SHOEMAKER. By the Panama Line and all other lines?

Mr. ZINCKE. By the Panama Line.

Mr. SHOEMAKER. Yes, sir.

Mr. ZINCKE. And that that was done on 40 voyages which would be somewhat less than 2,500 tons of cargo per voyage.

Mr. SHOEMAKER. Yes, sir.

Mr. ZINCKE. And that in the ordinary course of events, it would not be unreasonable to assume that the 2,500 tons of cargo would be divided by at least these six conference members.

Mr. SHOEMAKER. I am sure the conference lines are all in competition with each other.

Mr. ZINCKE. And that it would be a reasonable assumption that they would all get about the same proportion of the business?

Mr. SHOEMAKER. No, sir. I do not agree that that is a reasonable assumption, sir.

Mr. ZINCKE. What assumption are you prepared to make?

Mr. SHOEMAKER. I have considerable confidence in the solicitation methods and in the service which results from American-flag service. Mr. ZINCKE. What estimate would you make as to the division of cargo under those circumstances?

Mr. SHOEMAKER. I would not make an estimate without having considerable information as to the sailings, the quality of their sailings, the ports the cargo originates from in some detail.

I do not think one should generalize on that kind of a question, sir. Mr. ZINCKE. You give as the basis of your argument that even with the preponderance of commercial traffic it showed beyond question that it is not economical operation because it has less than 40 percent of its freight capacity used and 35 percent of its passenger capacity.

Now, I call your attention to the fact that the private American companies referred to in the Drake report show on Grace Line a total southbound capacity of 1,166,600 measurement tons of which 249,100 are used. Northbound, 534,600 are used, which is not too dissimilar to the Panama Line experience; is it?

Mr. SHOEMAKER. It indicates that they have ample capacity to handle the Panama Line's traffic.

Mr. ZINCKE. But it also indicates that their operating experience is not unlike that of the Panama Line.

Mr. SHOEMAKER. That may or may not be so, sir.

Mr. ZINCKE. Well, the figures speak for themselves. You are notdisputing the figures, I take it?

Mr. SHOEMAKER. You referred to the operating experience of these other lines.

Mr. ZINCKE. I am simply testing your conclusion.

Mr. SHOEMAKER. That is all right.

Mr. ZINCKE. You have made a conclusion that United Fruit has 523,200 tons southbound of which 282,000 are unused and northbound, 173,000 of which 132,000 are unused, which would tend to indicate that private American techniques have not done too well in attracting business.

Mr. SHOEMAKER. I do not think you can draw that conclusion without analyzing the number of sailings, the determinations of those companies with the quantity of service that they have elected to provide.

Mrs. SULLIVAN. Mr. Zincke, may I interpose a question there?

Why would not, then, these other shipping lines have gotten the business that the Panama Line was getting if possibly they could do it better?

Mr. SHOEMAKER. I think the Panama Line, Mrs. Sullivan, has been giving a good service to the port of New York.

Mrs. SULLIVAN. I think that is why they have gotten the business, is that not right?

Mr. SHOEMAKER. I think they have done a good job of solicitation in competition with the Grace Line and the United Fruit Line who also serve the port of New York.

Mrs. SULLIVAN. We are going to ask for figures on how much money has been spent by the Panama Canal Company in soliciting freight and passengers.

I received that privately but I would like to get it in public because when you see some of those figures and then you realize the percentage

of the cargo that the Panama Line has, I guess, taken away from the American-flag and foreign-flag lines that carry cargo to the Canal Zone, they evidently have a better scheduling or better service or they would not have gotten as much.

Mr. SHOEMAKER. They have a regular sailing every week. Their business picked up when they added Haiti to the ports of call.

Mrs. SULLIVAN. What assurance would there be that the other lines would give us as good service?

Mr. SHOEMAKER. I think the other lines would be glad to come in and testify for themselves. Their service is good now. I cannot imagine their having any reason to depreciate their service.

They are still competing with each other and with the foreign lines, as you know.

Mrs. SULLIVAN. Also why did they not service Haiti? Now they want Haiti. What was the reason they did not service it before? Mr. SHOEMAKER. I wish I could answer that, Mrs. Sullivan. I cannot. I do not know.

Mrs. SULLIVAN. Is it a profitable thing? Is the Panama Line servicing Haiti possibly for considerations of our foreign policy? We have to get the State Department to try to help us find the answer to that.

Those are the things that I think we have to develop in finding out whether or not we should continue to operate the Panama Line; if we eliminate all commercial cargo and passengers or if we do away with the line altogether.

I hope that during this time we can develop answers to these questions.

Have we any other questions?

Mr. SHOEMAKER. I think in comment on that, Mrs. Sullivan, if I may, the Federal Maritime Board certainly is requiring various steamship companies to make specific points of call as a national policy move.

If that is the arm of the Government responsible for that, in cooperation with the State Department, then clearly they could work out with the Grace Line or such other lines as might be involved the projection of business to and from Haiti.

I do not think we have to do it by this competitive Government operation, if I may say so.

Mrs. SULLIVAN. Back in the far recesses of my memory I seem to recall, 5 or 6 or 8 years ago when they were discussing the call at Haiti, that other lines would not bother to do anything and poor little Haiti was being neglected to the point where it was one of the poorest, most destitute countries in that area of the world.

We know that some of the exports that have been coming out of Haiti since the Panama Line has made definite calls there have helped to encourage the little buildup that they have received-only through operation of the Panama Line; it was not developed by other lines because it was not profitable.

So those are things that again you do not measure always in dollars and cents. You measure them in some other manner.

I think counsel has one more question.

Mr. ZINCKE. Mr. Shoemaker, you made the statement that the Federal Maritime Board requires subsidized lines to make ports of call based solely on national policy.