Senator MORSE. Under Exhibit No. 2, the letter from the President of the Civil Service Commission, if we adopted his amendment it is my present interpretation subject to further analysis of it that the professional engineers would automatically be blanketed in by the passage of the act?

Mr. LOVELADY. That might be true.

Senator MORSE. Is that your understanding?

Mr. LOVLADY. That is my understanding from that.

Senator MORSE. And your position is that all you are asking for at the present time is that we leave the power as it now exists in the President and/or the Civil Service Commission to blanket new classifications such as professional engineers in the civil service when in their sound judgment and discretion they decide that the time has come to do so.

Is that your recommendation?

Mr. LOVELADY. That is my recommendation.

Senator MORSE. I understand your position.

Mr. LOVELADY. There is another point I would like to make. Under the Panama Canal Act of August 24, 1912, the Governor of the Panama Canal may pay not to exceed 25 percent more than is paid for similar work within the continental limits of the United States. That 25 percent now is applied to practically all jobs down there with the exception of some of the higher paying jobs where the application of the full 25 percent would disturb coordination of salaries.

Only with the thought that this incorporation bill might possibly be interpreted as not applying 25 percent to those in the corporation, I recommend that some such phraseology be incorporated in this bill that the President of the Panama Railroad or the Governor of the Panama Canal may pay not to exceed 25 percent in exactly the same manner as is now applicable under the Panama Canal Act.

The men in these two units, the Panama Railroad and the Panama Canal work side by side. It is not uncommon for two men working side by side at the same desk under the two organizations, one as a worker for the railroad and one for the Canal, and if it were to be interpreted that this bill does not give authority to pay the 25 percent it is quite possible that one man sitting next to the Panama Canal man would get 25 percent less.

Senator MORSE. What is your position on that, Mr. Burdick?

Mr. BURDICK. My position on that is that we will have the same authority after the enactment of this bill that we have had since the permanent organization was set up in 1914; that no action is necessary for the company to pay that.

Senator MORSE. Certainly no action is necessary to put in any specific percentage.

Mr. BURDICK. No, sir.

Senator MORSE. Is there any harm in putting in a so-called enabling language that makes it clear that this corporation will have the same authority as was granted in the original act with respect to labor . hiring contracts?

Mr. MORSE. Is that not covered by section 250?

Mr. BURDICK. I think the section makes it perfectly clear.

Senator MORSE (reading):

The corporation shall so far as consistent with the terms of this article, be deemed subject to all provisions in treaties and in acts of the Congress of the United States now in force, which relate or apply to the New York company; and shall have all the rights, privileges and exemptions, and be subject to all the obligations, liabilities, and responsibilities as applicable to the New York company under or by virtue of such provisions.

Is that the provision to which you refer, Mr. Morse?

Mr. MORSE. That is right.

Mr. BURDICK. It gives us all of the authority we have had in the past.

Senator MORSE. What do you say to that, Mr. Lovelady?

Mr. LOVELADY. The main thing I wanted to get on record in this, Mr. Chairman, is for the historical background of the bill; that it be evidenced in the testimony that it is the intention of the President of the Corporation to continue the present status.

Senator MORSE. Have you drafted any particular language that you would suggest be inserted?

Mr. LOVELADY. I have a section 248 (e) which I would like to submit for consideration.

Senator MORSE. It will be marked for purposes of identification as Exhibit No. 4 in this hearing and received in the record, a proposed amendment submitted by Mr. Lovelady which will be considered by the committee when we come to this question concerning the hiring policies of the corporation, considered along with our consideration of section (e).

(Sec. 248 (e) submitted by Mr. Lovelady, was marked for identification as "Exhibit No. 4," and received in the record.)

(Exhibit No. 4 is as follows:)

Section 248 (e) of bills S. 2002 and H. R. 5104 does not provide employees the civil-service protection they now enjoy nor does it provide a basis for fixing compensation. The American Federation of Government Employees of the Canal Zone and the Central Labor Union, both affiliates of the American Federation of Labor, submit the following as section 248 (e) and urge the committee to adopt it in lieu of the present language:

"(e) May appoint such officers, agents, and employees as may be necessary for the conduct of the business of the corporation, define their authority and duties, fix their compensation, delegate to them such of the powers of the corporation as may be necessary, require that such of them as it may designate be bonded, and fix the penalties and pay the premiums of such bonds: Provided, That in the appointment of officers, agents, and employees to positions now or which may hereafter become subject to competitive civil service requirements, such appointments shall be made in conformity with appropriate civil service laws, rules, and regulations: Provided further, That in fixing the compensation of employees under authority of this Act, such compensation shall be based on rates paid by Government agencies for similar work in the continental United' States plus not to exceed 25 percent except in the case of those employees whose compensation is based on prevailing native wage rates: Provided further, That persons employed by the corporation whose compensation is paid on any basis other than a per annum basis shall not be included in making computations pursuant to the provisions of section 607 of the Federal Employees Pay Act of 1945."

Senator MORSE. Is there anything else, Mr. Lovelady?
Mr. LOVELADY. That is all I have.

Senator MORSE. Mr. Jones?

STATEMENT OF WALTER JONES, LEGISLATIVE REPRESENTATIVE, CENTRAL LABOR UNION, PANAMA CANAL ZONE, WASHINGTON, D. C.

Mr. JONES. I want to go along in support of Mr. Lovelady's testimony and also the proposed subsection (e) of 248.

Senator MORSE. You are supporting exhibit No. 4?

Mr. JONES. That is right, sir.

I wish to say now that Mr. Lovelady represents the white-collar workers and I represent the majority of the building trades and mechanical crafts.

Senator MORSE. Are the building trades now blanketed in the civil service?

Mr. JONES. No, sir, they are not; neither are the boiler makers, the carpenters, or any of the others.

Senator MORSE. Are you asking that this be done?

Mr. JONES. I do not believe that there would be any objection if that were done.

Senator MORSE. There would be no objection if these building employees were blanketed under civil service?

Mr. JONES. Not the building trades but your crafts.
Senator MORSE. Sheet-metal workers, and so forth?
Mr. JONES. Sheet-metal workers and boilermakers.

Senator MORSE. Let me ask you another question on that, Mr. Jones, because I am a little interested in that. There are some Government operations in this country in which the trade-unions do not like the idea of being blanketed in under civil service because they think civil service is a handicap to them rather than a help, but you do not share that opinion in the Panama Canal Zone?

Mr. JONES. To be very frank, the building trades do not apply in the Panama Canal, am I not right, Mr. Burdick?

Mr. BURDICK. You are entirely right, they have asked the civil service to exempt them and put them under schedule A, in this agency. Actually when you get that authority we ask the civil service to get your group out.

Senator MORSE. In other words, you are strong for status quo?
Mr. JONES. Yes.

It does not point out in this bill that there is any guaranty for our compensation.

It says that there is an intention to carry out as in the past. I feel like you expressed yourself a few moments ago in a hypothetical case that if the company decided in the future to change the rates they would have the authority. I would like to see the language now called exhibit No. 4 adopted, sir.

Senator MORSE. Do you have anything further?

Mr. JONES. That is all, thank you very much.

Senator MORSE. I want to thank you for coming up here and presenting the point of view of your men on this bill.

Mr. Krebs?

STATEMENT OF ALFRED U. KREBS, LEGISLATIVE COUNSEL, NATIONAL FEDERATION OF AMERICAN SHIPPING, INC., WASHINGTON, D. C.

Mr. KREBS. My name is Alfred U. Krebs. I am counsel for the National Federation of American Shipping, Inc., an organization representing approximately two-thirds of the active privately owned dry-cargo merchant vessels under the American flag.

The shipping industry understands that the primary purpose of S. 2002 is to comply with the provisions of section 304 (b) of the Government Corporation Control Act, prohibiting the continued existence, as any agency or instrumentality of the United States, after June 30, 1948, or any wholly owned Government corporation created by or under the laws of any State, Territory, or possession of the United States, and requiring the proper corporate authority of every such corporation to institute dissolution or liquidation proceedings before that date, unless such corporation is reincorporated by act of Congress for such purposes and terms of existence and with such powers, privileges, and duties as authorized by such act.

As Mr. Burdick has pointed out, the Panama Railroad Company was set up as a private corporation, under an act of the Legislature of the State of New York, enacted on April 7, 1849.

The incorporators were constituted

a body corporate, by the name of the "Panama Railroad Company" for the purpose of constructing and maintaining a railroad, with one or more tracks, and all convenient buildings, fixtures, machinery, and appurtenances, across the Isthmus of Panama in the Republic of New Granada, under the grant made by the said Republic to the said (incorporators), and of purchasing and navigating such steam or sailing vessels as may be proper and convenient to be used in connection with the said road, and for such purposes all the necessary and incidental power is hereby granted to said corporation.

The corporation's charter was amended by an act of the Legislature of the State of New York on April 12, 1855, so as to increase the borrowing power of the corporation, but no further powers were granted thereby.

As Mr. Burdick has pointed out the control of the corporation passed to the United States in 1904 as part of the assets of the new Panama Canal Co. and the remainder of the stock was acquired in 1905.

Subsection (b) of section 249 of the Canal Zone Code which would be added by S. 2002 would specifically authorize the corporation to "construct or acquire vessels, and operate the same for transportation of passengers or freight and for other purposes."

It is clear that this subsection would extend to a considerable extent the authority now vested in the corporation to operate vessels. The New York statute restricts the corporation to the operation of— such steam or sailing vessels as may be proper and convenient to be used in connection with the said road

The subsection does not place a similar restriction on the corporation, and it would be possible for the corporation to operate vessels in any trade in the world.

We know of no need for extension of the corporation's authority in this respect and we object to it. The Panama Line which is operated by the corporation between New York and the Isthmus adequately

serves the needs of the railroad. Furthermore, there are more than 20 American-flag steamship companies offering liner service between the Atlantic Coast of the United States and the Canal at the present time.

We also object to extension of the corporation's authority in this respect for the reason that it would result in an expansion of the Government's interest in the shipping business.

The Congress of the United States declared in the Merchant Marine Act of 1936, as amended, that the policy of the United States was to foster the development and encourage the maintenance of a privately owned American marine. The declaration of policy was repeated in the Merchant Ship Sales Act of 1946.

The Congress directed in both acts that the Government be removed from the shipping business as soon as possible. We do not believe that your committee will wish to recommend the enactment of any legislation which is in conflict with the policy expressed by these acts.

Representatives of the Panama Railroad Company have assured us informally that there is no intention to give the corporation any greater authority with respect to the operation of vessels than it now has under the New York statute.

There should, therefore, be no objection to amending subsection (b) of section 249 so as to restrict the authority of the corporation to the operation of vessels "in connection with" its railroad. We respectfully urge that such subsection be so amended.

Senator MORSE. Mr. Krebs, do you have a proposed amendment? Mr. KREBS. I do, sir. It is not typed up in formal style, but I do have something here which I could offer for the record.

Senator MORSE. Mr. Krebs will provide the committee with a typewritten copy of the proposed amendment of the subsection on which he has testified, which will be marked for purposes of identification and received into the record as exhibit No. 5.

(A copy of the proposed amendment submitted by Mr. Krebs was marked for identification as "Exhibit No. 5" and received into the record.)

(Exhibit No. 5 is as follows:)

Section 249 (b). May construct or acquire such vessels, and operate the same, as may be required for the transportation of passengers or freight in connection with the operation of a railroad across the Isthmus of Panama under the provisions of subsection (a) of this section.

Senator MORSE. Mr. Burdick, what have you to say in regard to Mr. Krebs' testimony?

Mr. BURDICK. Mr. Chairman, we would oppose that amendment as being neither appropriate nor necessary. We take the contrary position that this does not give us authority to expand it beyond what the present company would have.

There they use the language "operate such vessels as proper and convenient. This section, together with the bill-and you certainly cannot read a particular subsection of a charter without regard to the rest of the charter, clearly provides that the company is authorized to operate these vessels as we say in section 245, necessary in doing these things that the President has decided as necessary to do in the operation of the Canal Zone.

Senator MORSE. What do you think would be the disadvantages of the proposed amendment, if any?