nance men. There are checkers and clerks. There may be 60 or 70 of them who are permanent people.

Mr. JOHNSON. How many would you estimate would be employed in the operation of the MSTS?

Mr. CONNOLLY. Well, the MSTS, if they took over all of the work of the Panama Line, none of these people would be employed because MSTS loads 10 miles away in Brooklyn at the Army base and they have their own force there of our men, of longshoremen, but these people could not go there because the seniority would stop them. Those people out there have local seniority.

Mr. JOHNSON. Would that not add to the employment at the other loading base?

Mr. CONNOLLY. I do not know how much it would add. It would be more what we call a topping off job. A ship is going down maybe below Panama and they would top off the Panama cargo.

It may not employ more men. It may give the men who are working there a little more money. If they are making $100 or $150 now they make $200, but we are interested in keeping these old employees who have been with the Panama Line for years and their fathers before them.

Mr. JOHNSON. Are the employees of the Panama Line members of the union?

Mr. CONNOLLY. Yes, sir.

Mr. JOHNSON. What union?

Mr. CONNOLLY. The International Longshoremen's Association. Mr. JOHNSON. That is your organization?

Mr. CONNOLLY. That is correct.

Mr. JOHNSON. That is all.

Mrs. SULLIVAN. Mr. Mailliard?

Mr. MAILLIARD. I have no questions.

Mrs. SULLIVAN. Mr. Gross?

Mr. GROSS. I have no questions.

Mrs. SULLIVAN. Mr. Morse?

Mr. MORSE. I have no questions.

Mrs. SULLIVAN. Mr. Byrne?

Mr. BYRNE. In answer to Mr. Johnson's question, you said they belong to a union. How many employees would be involved there as crewmembers?

Mr. CONNOLLY. I am not talking of the crew.

Mr. BYRNE. Are they civil service employees?

Mr. CONNOLLY. No, sir. They are members of the Maritime Union.

Mrs. SULLIVAN. Mr. Counsel?

Mr. ZINCKE. Mr. Connolly, generally speaking, there is a surplus of labor in the New York area, is there not?

Mr. CONNOLLY. That is correct.

Mr. ZINCKE. And in your union?

Mr. CONNOLLY. That is correct.

Mr. ZINCKE. So that if this pier was eliminated as a means of employment, it would throw these 300 men into the surplus?

Mr. CONNOLLY. That is correct.

Mr. ZINCKE. And the division of this 2,500 tons average cargo per month among the other lines would not absorb an appreciable number of 300 people from the surplus?

Mr. CONNOLLY. I can see them absorbing very, very few.

Mr. ZINCKE. Thank you, sir. That is all I have.

Mrs. SULLIVAN. Thank you, Mr. Connolly. We appreciate your coming up.

Mr. CONNOLLY. Thank you.

Shipyard operators.

Repair contractors.

Governments, Federal:

1. Loss of income tax paid by Panama Line employees.

2. Loss of corporation and other taxes paid by management groups as a result of decreased volume.

3. Expenditures of additional operation subsidies to other American-flag operators.

4. Loss of a certain percentage of Panama Line business to foreign carriers. Governments, New York State:

1. Payment of approximately $50,000 per week in unemployment benefits. 2. Loss of income-tax revenues.

3. Loss in revenues resulting from spending limitations.

Governments, New York City:

1. Loss of pier rentals.

2. Loss of tax revenues.

3. Ultimate payment of relief to over 1,000 families.

PATRICK CONNOLLY,

Vice President, International Longshoremen's Association.

Mrs. SULLIVAN. Mr. Lovelady, we have some time. I wonder if you would like to give some of your testimony? If we do not finish with you, we can take it up tomorrow.

STATEMENT OF RUFUS M. LOVELADY, PRESIDENT, LODGE NO. 14, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, ACCOMPANIED BY JOHN A. McCART, DIRECTOR OF LEGISLATION, AMERICAN FEDERATION OF GOVernment EMPLOYEES, AFLCIO

Mrs. SULLIVAN. Mr. Lovelady, will you identify yourself for the stenographer?

Mr. LOVELADY. I am Rufus Lovelady, president of Lodge No. 14 of the American Federation of Government Employees, located at Balboa, C.Z. Appearing with me is our national legislative director of the American Federation of Government Employees, Mr. John McCart, who has offices here in Washington.

Madam Chairman and members of the subcommittee, I shall not, in my statement, attempt to quote any statistics regarding operations of the Panama Steamship Line, such as tons of cargo or passengers carried, or the profit or loss of the line. That, I think, is a matter properly within the scope of the stockholder, the board of directors, the President of the Panama Canal Company, and other management officials of the Company. I shall, therefore, limit my remarks to a narrative statement setting forth the position of those I have the privilege of representing in the matter of continuing or discontinuing operations of the Panama Canal.

The Panama Steamship Line is of vital concern to some 3,500 U.S. citizens employed by the Panama Canal Company and the Canal Zone Government. These employees consider the line one of our most important remaining fringe benefits. Their concern is attested to by the more than 3,500 signatures of them and their adult dependents to a spontaneous petition circulated among them shortly after the Eisenhower order of December 21, 1960, directing that the Panama Line cease its commercial operations, effective February 10, 1961. Those petitions are here.

The petition reads as follows:

We, the undersigned, citizens of the United States and residing on the Panama Canal Zone, respectfully, but vigorously, protest any action by anyone that would curtail the service of the Panama Steamship Line between the ports of New York, Port au Prince, Haiti, and Cristobal, C.Z. Most of all, we object to curtailing such service to us and our families if it is done to favor a steamship line which is already heavily subsidized by us and other taxpayers of our country, such as is well known in the case of Grace Line.

Still of more importance to us is the strategic importance of the Panama Line in the defense of the Caribbean area and the United States of America, particularly with regard to the availability of dependable transportation facilities for necessary supplies and personnel to meet emergency situations.

We urge that unilateral decision and action not be taken in this extremely important matter. Instead, we propose that if any change in the present status of the Panama Line is being considered, the question be referred to the appropriate committee of the Congress for investigation and recommendation.

Since time was of essence, the petition had less than a week of circulation among those concerned. I am confident that if allowed more time two or three times as many signatures would have appeared on the petition. We think, however, the number who signed in so short a time can be regarded as conclusive evidence of how important the service is to the average employee of the Panama Canal.

As taxpayers we are just as much concerned with how our tax dollars are spent as is anyone in this country. We wonder, therefore,

why an inordinate amount of our tax dollars should be spent to subsidize construction and operation of private steamship lines. This question assumes greater importance with us since we know that the Panama Line operates without cost to the U.S. Treasury and the taxpayers. Because of the added cost which we will be required to bear if the business of the Panama Line is surrendered to one or more private steamship lines, we think we are right in objecting to implementation of the Eisenhower order.

We believe that our position in connection with the operation of the Panama Line has, at least, some support of the Congress. For example, in House Report 377, 86th Congress, in connection with Panama Canal appropriations for fiscal year 1960, the committee said:

PANAMA LINE

The committee was impressed with testimony concerning the necessity for assuring complete control of the line of supply to the Canal Zone, particularly in the light of unsettled political conditions in countries located in the Caribbeanarea, and the requirements for carrying on large-scale construction activities involved in the solution of the problem of providing adequate facilities to meet the demands of traffic.

The canal is over 2,000 miles from the U.S. sources of supply, and it seems obvious that essential support for the operations of the U.S. Government in the Canal Zone makes necessary the Company's continued control of its ocean transport as provided in its charter. The operation of its own ships between the United States and the Canal Zone results in no cost whatever to the taxpayer, since the ships were built and are operated without any subsidy.

I added the emphasis.

We take this to be prima facie evidence that one of the most important committees of the Congress believes the Panama Line is rendering a valuable service to the Government of the United States at the least possible cost to the taxpayers. Moreover, we infer from the report that this important committee approves the operation of the Panama Line.

The Miami Herald of October 30, 1960, contained an article by Columnist Drew Pearson, from which I quote as follows:

The famous Panama Steamship Line, operated by the War Department and the U.S. Army for more than half a century is going to be discontinued shortly after the election.

President Eisenhower has given secret orders to end Government operation of one of the most famous shipping lines in the Western Hemisphere, started by President Theodore Roosevelt at the time he was building the Panama Canal. The decision has been taken despite the vigorous objection of the U.S. Army, and a top secret memo submitted to the White House by Secretary of the Army Wilbur Brucker. Nevertheless, the President has stood pat and the main route of the famous steamship line will be taken over by Grace Steamship Line.

Normally, the President, who has spent 40 years in the Army, and was reared on the importance of Panama and the communications system built around it, would have sided with his Secretary of the Army.

Mr. Pearson then went on to tell why the President would issue the order to put the Panama Line out of business. His story spurred us into immediate action in an effort to head off the issuance of such an order if possible. We resorted to letters to Members of Congress and others that we thought might help us plus the petition mentioned earlier in this statement. In addition, I prepared a brief on the question, the text of which was inserted in the Appendix of the Record on February 6, 1961, by the distinguished lady who is chairman of this subcommittee.

One of the things I said in the brief, and I quote from it in pertinent part here, is that the Panama Line's primary mission is to keep the Government agencies on the strategic Canal Zone supplied with personnel and materials essential to the continuity of canal operations. This has been the paramount mission of the line since it was inaugurated in 1904 when the construction of the canal was begun. The line's two ships, the SS Ancon and SS Cristobal were built in 1939 without subsidy. They have never, nor do they now require a subsidy to operate. I understand they have a life expectancy of 35 years, which means another 13 or 14 years of useful life. Although the line charges regular conference rates, the Budget Bureau study shows the 22-year-old vessels operate at 80 percent of the cost of other American-flag carriers in the area. This is undoubtedly a source of embarrassment to the subsidized carriers whose vessels have an authorized 20-year life designed to help spur domestic ship construction.

In my brief, I asked the question: What is the real motive behind Grace's all-out efforts to eliminate the Panama Line? Why did it, according to my information, offer to buy the Panama Line's two ships? One answer, we think, is that the Panama Line is a stabilizing influence against those who would raise conference rates on the Caribbean run. Another, and more obvious answer, is that Grace would expect to fall heir to the captive cargo shipped by the Panama Canal Company-Canal Zone Government since such cargo must, by law, sail on American bottoms.

It is natural that we are concerned with the fringe benefits of the Panama Line. But more important to us as citizens of the United States is the security of our country. In this connection, may I quote pertinent parts of a letter of March 16, 1959, from former Governor W. E. Potter to the Honorable Herbert C. Bonner, as follows:

The Panama Canal is a vital adjunct to the security of the United States. Its operation and maintenance demand the ability to react immediately to emergencies and to supply needs of the canal itself and the population that permits it to do its job. Potential supply problems arising out of emergencies are such that the head of the canal organization cannot insure dependable operation of the canal without maximum control of procurement and supply transportation facilities. This control is inherent in the Panama Line operation, and it would not exist if the canal had to rely on any other present or proposed service by a private line. We control the Panama Line schedules; we cannot control others, and we cannot expect assured, dependable service from a private line with its own primary interest dictating its scheduling, priorities, and so forth. We know that Panama Canal cargo will always be first priority cargo on the Panama Line; it would never be first priority cargo on any other steamship line, despite any assurances to the contrary.

Mrs. SULLIVAN. May I stop you just a moment?

Where you started on the preceding page in quoting Governor Potter, you said that the Panama Canal is a vital adjunct to security. Do you mean the Panama Line?

Mr. LOVELADY. No, the Panama Canal. I think the Governor meant that the Panama Canal is a vital adjunct and that the Panama Line is a vital adjunct to the operation of the canal.

Mrs. SULLIVAN. Thank you.

Mr. LOVELADY. May I repeat and emphasize that Governor Potter's letter was not written at the request of employees on the Canal Zone. It was written, apparently, at the request of a Member