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with the Defense Department about what their needs might be in regard to maintaining service there from the United States?

Mr. GULICK. I have only conferred informally with a gentleman in the Defense Department, Mr. Caputo, since I was given to understand that Defense might have some information on this particular subject. The extent of our conversation was limited to the importance of Guam to the Defense Department and the United States and his desire to see adequate servce by U.S.-flag vessels. .

Mr. DREWRY. Will you identify Mr. Caputo, please?

Mr. GULICK, Mr. Vincent Caputo, Director for Transportation and Warehousing Policy, Office of Assistant Secretary of Defense (Installations and Logistics), Department of Defense.

Mr. DREWRY. What were his comments about the importance of Guam? Is it important any more?

Mr. GULICK. I think, sir, this we did not go into and I would have to ask that Mr. Caputo be questioned on this point.

Dír. DREWRY. Do you have any idea of how much money goes out of the United States into Guam for military purposes each year?

Mr. GULICK. No, sir, I do not.

Mr. DREWRY. Do you have any idea of how much financial support the United States is giving to developing the trust territories?

Mr. GCLICK. No, sir.

Mr. DREWRY. You do not know whether it is any or whether it is substantial ? .

Mr. GULICK. I have only a general, very general newspaper knowledge. I do believe that the Department of the Interior is in the picture as far as supporting the trust territories and also Guam is concerned. I believe that the Department of the Interior has some support for the Pacific Micronesian Line which serves the trust territory possessions, but I have no specific knowledge as to amounts.

Mr. DREWRY. Do you believe that there is a possibility that the combination of ultimate and uneconomic use of American-fag ships without replacements plus a development of foreign-flag ships coming into Guam from the Orient might force American-flag shipping out of the trade? Does the possibility exist?

Mr. GULICK. This is a possibility. Hopefully, as long as outfits such as Pacific Navigation are in the picture and can maintain their service at reduced rates and acquire replacement ships, there is some hope, certainly in this situation.

Mr. DREWRY. And you state that this bill is not the answer. How much attention have you given to what the needs of Guam and the trust territories areas are in regard to receiving adequate transportation services? Does not the situation in Guam present a responsibility to you as the promoter of American shipping policy to carry out our national programs to find some answers ?

Mr. GULICK. It does, sir, and I think that in this connection there is not too much difference except in degree between the situation of the people in Guam, looking at it from the shipper point of view or the consignee point of view, and the situation with respect to Hawaii, Alaska, or any other place which we must serve over a water leg of transportation. Alaska is still pretty well waterlocked, so is Guam. There should be some way found, and this we are dedicated to seeking at the moment, to reduce the transportation costs which seem in these days to be continually going up, in order to permit the people in these areas to develop their territories and States and possessions to the point where they can become more on a par with the rest of us.

I admit that Guam is off a beaten route. To this extent Guam is in a separate category, but some way has to be found to take care of this situation and hopefully we will find it.

Mr. DREWRY. If private ships should go out of the business then the military would have to put military ships in there, would they not?

Mr. GULICK. Yes, sir.

Mr. DREWRY. Does it make any difference to you or is it possible within the scope of your authority to take into account the overall cost to the United States, not to particular appropriations, of maintaining the necessary service? In other words, would the possibility of having to use military vessels 100-percent subsidized be a matter for you to take into account in determining whether it might be better in the overall program if there were subsidized commercial vessels rather than service provided by 100-percent Government owned ?

Mr. GULICK. Obviously we would never wish to see the Government operate any service in competition with any private carrier or in any area in which a private carrier should be operating. I do not have exact figures on the cost of MSTS operations. I think perhaps it would be better to get those directly from the MSTS people if I might suggest it, but an informal request of that agency indicates that for 1962 one type of vessel serving the Guam area costs in round figures approximately $2,800 per day to operate. If we extend this on to a 50-day voyage this would be somewhat in the neighborhood of $150,000 per voyage. This would give an idea of the cost of Government operations to serve Guam.

Now, admittedly, if the commercial cargo could be integrated with the Government cargo carryings we could not attribute this total cost to the commercial cargo alone. Nevertheless, it would be our position that in any case, if there is any way possible, we would prefer to see private operators in the business, hopefully unsubsidized.

Mr. DREWRY. That is all, Mr. Chairman.
Mr. MAILLIARD. Mr. Chairman?
Mr. MAILLIARD. I would like to ask Mr. Gulick one question.

You come up with this figure of $150,000 a voyage. Presumably that would not include any capital costs?

Mr. GULICK. That is right, sir. Mr. MAILLIARD. So, to get a comparative figure that meant any. thing, you would have to figure out-the Government presumably some day would have to replace these vessels, too, and that might change that picture rather materially?

Mr. GULICK. Yes, sir.
Mr. MAILLIARD. Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Gulick, did you read the statement of Mr. Won Pat, the superior of the Guam Legislature?

Mr. GULICK. I did glance through his testimony when he was last before the committee, with a great deal of interest; yes, sir.

The CHAIRMAN. Did he ever talk to you or any other official of the Maritime Administration ?

MaThe Chairmmittee, with a through his

Mr. GULICK. I do not know whether they talked with anyone else in the agency. I think I can say rather definitely that they did not talk with the then Administrator. I am pretty sure in my recollection they did not talk with me.

The CHAIRMAN. Well, this impressed me very much and I wanted to ask you why they were so concerned in this matter. The Department emphatically opposes this. That is the reason I asked you if you looked at this.

Mr. GULICK. I must say, sir, that that is a good question. If I may, sir, may I say that we are not emphatically opposed to this in the sense that this is in any respect a positive or wooden attitude. We oppose this bill reluctantly. We see no way in which this bill would serve the overall situation. Further, it would get us into more difficulty than it is worth and we think the situation ought to be solved in other ways, such as more competitive ships, better types which could engage in the trade we need with our offshore States and island possessions.

The CHAIRMAN. Do you know or have knowledge of the quality and type of ship that Pacific Far East serves this Guam trade with now? I mean just the Guam trade; that is all. Mr. GULICK. Pardon me just a moment, sir.

Pacific Far East serves with two C-2 types and two Victory types. There is not too much distinction between those two classifications as I understand it, although I am not an expert in this area. They are World War II types. There are today ships with better carrying capacity, more efficient cargo-handling gear, better propulsion means, but in order to solve this Guam difficulty and other aspects of our domestic trade we need far more than this.

It is in these other areas that we are attempting to give our time and attention to come up with some concrete proposals that will enable us one day to come in and say: “We are not studying, sir. We are proposing something."

The CHAIRMAN. These are ships wholly owned by this line, Pacific Far East? Mr. GULICK. As I understand it; yes, sir.

The CHAIRMAN. And the witness that testified here this morning is operating with ships that are chartered from hand to mouth, a month or 3 months, and so forth. .

I wanted to get the fact of just what your forecast was for the future of this trade route with these two comparisons. Here is a company that is operating now, it has invested money to operate there, has a long record of operation, and here is one that just operates from month to month, so far.

Should an adverse situation come along what assurance would there be that they would serve it compared to the assurance that the specific company in nothing but the shipping business would continue to serve it?

Mr. GULICK. Hopefully, Pacific Navigation will be able to find the ways and means to acquire tonnage by purchase or through some other means as they have indicated.

The CHAIRMAN. They trade their ships whereas the Pacific Far East serves only. Guam. This other company carries foreign cargo into Guam and out of Guam and stops at Manila and Japan and other points.

Do you recommend that to meet the growing competition there that Pacific Far East divert their vessels to Manila and Japan?

Mr. GULICK. I am unable at the moment, Mr. Chairman, to say whether we would recommend this or not. My understanding is that the Pacific Far East Line engages in this service to Guam certainly on the basis of a fair amount of Government cargo being carried out there, so the ships are available for the carriage of commercial cargo at any time or in connection with these movements.

To divert these ships to Guam as a part of a service to another port would put them in the same category as American President Lines which would mean, I would assume, fewer voyages during the year. This would be something, I think, the Pacific Far East Line would have to come to a management decision on.

The CHAIRMAN. Mr. Drewry? Mr. DREWRY. Mr. Gulick, you mentioned you felt that a solution had to come with things like more efficient ships. Just what do you mean by that? Do you mean modernizing the old tonnage that they presently have or what? Are you working with them or with anybody to attempt to devise and encourage the construction of ships that are sufficiently efficient that they can operate over long distances of this sort in competition with the foreign trade on a nonsubsidized basis?

Mr. GULICK. Mr. Drewry, this is a pretty large challenge to answer your question. At the moment we are not working with an industry group or a committee. We are not yet prepared for this stage of our program planning. Hopefully, however, we will be very shortly.

As to the type of ship operations we are talking about, I think it stands to reason that the faster we can get the ships so as to reduce the sea time, which means upgraded hull forms and propulsion machinery, the faster we can reduce the port turnaround time, which means a saving on their port costs and more voyages during the year for the same investment of money in the ship. The more we can reduce the costs of the handling of the cargo and other overhead operation costs in order to permit rate reductions, the sooner we will come to solving the problems of our domestic trade. But none of these is simple in itself.

Mr. DREWRY. I understand you to hold that out as being the possible answer to this.

Obviously, we can talk about something today and not expect it to actually be delivered and in operation for, perhaps in this case here, for as much as 6 or 7 years, and in the meantime we have wornout equipment which may wear out before that time. The competition from the Far East may drive it out.

Mr. GULICK. Well, we have been able to do one or two things to aid the situation at the moment. An example of this is our C-4 exchange program in which we are offering in place of slow, smaller tonnage now fairly well worn out, an upgraded, fairly new, well preserved C-4 type ship which has been lying idle in our fleets for some years, These when taken out, adjusted so as to gain more cargo carrying capacity will provide one answer, but as I indicated, Mr. Chairman, a temporary answer for the moment, a short range answer on some of the replacements needed, specifically in our domestic fleet operations.

I think by far the majority of these ships have been allocated to domestic operators.

We are giving consideration as indicated by the Under Secretary before the Senate Commerce Committee recently, to the possibility of opening the exchange law further in order to provide immediately some better replacements which would be a temporary answer to some of the needs. This to cover this period you were talking about between the time of the preseent and the time when hopefully there would be some concrete answers to our domestic commerce. Mr.DREWRY. Thank you, Mr. Chairman. Mr. GULICK. Thank you, sir.

The CHAIRMAN. We will stand adjourned until 10 tomorrow morning, when we will hear Mr. Mangan from Interior and the Federal Maritime Commission.

(Whereupon, at 12:28 p.m., the hearing adjourned, to reconvene at 10 a.m., Wednesday, March 18, 1964.)

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