Fourth, no judgments have been made as to the Government's future budgetary commitments to the merchant marine. Such judgments will be affected by your contribution here, as I have explained. We are prepared to consider any proposals which are well developed, documented, based upon a systematic analysis of our national needs, and which would increase productivity of the merchant marine in terms of shipping capability per subsidy dollar. But I can tell you that it is highly unlikely that the administration will consider a greatly increased subsidy expenditure so long as the structure of our martime programs, shipping capability, productivity, and labor-management relations remain as they are today.

Finally, let me repeat that we would like to have an expanded merchant marine with more ships and more jobs, a fleet capable of carrying a greatly increased proportion of our total trade, a fleet to rival any in the world in terms of high productivity. The Maritime Administration, with the cooperation of labor and industry, is constantly seeking for ways to improve the merchant marine and has just made public one of its studies of the surface effect ship. Just last Friday a meeting was held on the status of the retrofit program involving a Federal investment of $27 million in 100 ships. The Government has proposals for barge and container ships under consideration. We are prepared to consider proposals from any source for a more productive use of the subsidy dollar.

You may be interested to know that the Shipbuilders Council of America has come forward with a proposal to make a 4-month review of Government shipbuilding policies and procedures with a view to isolating those areas where substantial cost reductions may be made. The review will be made by the shipbuilding industry alone, without Government financial assistance.

I am very pleased with this proposal. The shipbuilding industry is performing an important and essential task in the partnership of Government and industry in American maritime affairs. Shipbuilders can often be helpful to the Government in determining those areas where procedures and policies can be simplified. As businessmen they are often in the best position to know where improvements can be made. This is one example of the kind of initiative that will lead the way to a stronger American merchant marine.

I also want to emphasize again that the Government is not simply trying to decrease our financial commitment to this industry. We are trying to increase its contribution to our economy.

I am optimistic about the future of this industry. There is no limit upon its expansion save that which is self-imposed. We support you. We are prepared to work with you. We want to help. But we have much work to do together. And we must be getting on with it. For all agree that a mere perpetuation of the status quo is an unsatisfactory to management and labor as to Government. I would like to call another meeting of this committee 1 month from today. Prior to that time I am going to ask Ted Kheel and his group to come forward with proposals that incorporate your views expressed at prior meetings and today. If the subcommittee remains unable to do so, within 2 weeks I am going to ask the Maritime Administration and my staff to put together a proposal for you to consider.

I hope this statement has been useful to you, and responsive to the need the subcommittee expressed.

I would like to open the meeting up for full discussion at this time, and hear your response to this statement and such ideas and suggestions as you may have. The CHAIRMAN. Were you present at that meeting, by any chance? Mr. BOYD. No, sir; I was not present.

The CHAIRMAN. Also, followed by Secretary Connor's press conference at the World Trade luncheon in New York concerning the need to promote the development and growth of the American-flag bulk carrier fleet, there is pending before the Department of Commerce my latest figures this morning, applications for construction differential aid, in connection with 10 new bulk carriers, and we are way behind, and I want to leave this with you, and you and I have discussed this before.

We will discuss it again, because this committee is deeply concerned about this whole American merchant marine problem and the way it

has been lagging, or sliding, or whatever you want to call it, in the past 18 months, particularly in the bulk carrier field.

Mr. BOYD. I expect my first priority to be to fully acquaint myself with the maritime situation, and hopefully to be able to follow through on the recommendations which you have made this morning,

The CHAIRMAN. All right. The Chair will turn the meeting over to Senator Monroney.

Senator BARTLETT. Mr. Chairman, before you leave, it is going to be my pleasure to leave when you do, because I want to be there when they pin the medal on you, but apropos of the present situation, having no questions to ask, I shall only say that I have no doubt whatsoever, Senator Monroney, of Mr. Boyd's ability to make definite and perhaps even definitive decisions on any issue which comes before him. Mr. BOYD. Thank you, sir.

The CHAIRMAN. All right. I will turn the meeting over to Senator Monroney. We will be back as soon as we can.

Senator MONRONEY (presiding). Senator Morton, do you have any questions?

Senator MORTON. I want to just congratulate and commend the President for this selection. I share Senator Monroney's view; I hate to see you leave the CAB. We haven't gotten everything we want in Louisville, but we have always gotten fair treatment whenever we have gone before you with a problem.

However, I feel that Mr. Boyd's qualifications are unique for the position which he takes. He has had experience certainly in aviation. At one time he was treasurer of the Florida Turnpike Organization, which gives him highway experience. This turnpike is a problem we are going to have to face up to, especially these toll roads, in the next few years here in Congress, and I wish him well and look forward to working with him.

Mr. BOYD. Thank you, sir.

The CHAIRMAN (presiding). Thank you very much, Senator Mor

ton.

Senator Brewster?

Senator BREWSTER. Mr. Chairman, I would like to congratulate Mr. Boyd and ask him to comment on one general subject, the development of an SST and the role of commerce in the SST program.

Mr. BOYD. I would be delighted to and I trust you will accept, sir, that I am stating a personal view this morning, and not either a Civil Aeronautics Board view or an administration view.

If I may give you my personal opinion, I will be glad to do so. I think that this Government should support an undertaking to build a supersonic transport, given the conditions that such a transport can be built to be operated in an economic atmosphere; i.e., without the requirement of operating subsidies.

It seems to me that speed has been the thing that we have sought throughout civilization, that the supersonic transport rather is a quantum jump in speed, and that the United States is today a leader in world aviation. If it is going to continue to be a leader, it must get into the supersonic business. The supersonic, assuming always we can build one that will operate economically, the supersonic transport has a potential to earn, in terms of foreign exchange, somewhere in the neighborhood of $5 billion for the United States. This, in

turn, means a tremendous amount of employment to the citizens of the United States.

I don't think that we should build such an airplane purely as a matter of prestige. I think that the cost of doing that outweighs the prestige value that could come. I do feel, however, that building such a transport is going to have a lot of technological throw-off that we can utilize in other phases of our industrial society, which I cannot attempt to identify at the moment.

But I think the various space projects to date have had enough technological throw-off to be able to see the advantages that can come from going into new procedures with new materials.

The second part of your question, as to the role of the Government, my own view is that so far as the risk is concerned, the manufacturers cannot be expected to undertake the full risk that is involved because if an effort is made to develop one or two types of transport and neither of these proves to be economically feasible, then we are going to have a loss somewhere in the neighborhood of $2 billion, I would guess, and there is just not that type of strength in the manufacturing industry to support a loss of this magnitude, even viewed on an after-tax basis, where the loss would be reduced by only 50 percent. I think my own preference, as I see it to date, would be to have developed an organization which, for lack of a better example, I would call the Comsat type, whereby the Government could underwrite the cost of financing. I think the financing should be done privately, if it is at all possible, and I believe it will be possible, given some sort of Government backing.

We cannot escape the fact that we are in competition with the British and French operation to build a Concorde and it certainly is a factor in our approach to building a supersonic transport.

My own belief is that we can move faster in the development and construction of a supersonic transport if it is not done purely through Government operation. There may be the danger of a little more waste through a private or semiprivate company; I don't know.

I think my concern about pure Government operation is that there are so many safeguards which are built in, either by statute or by attitude of the Government employee to be sure that nothing goes wrong or nothing results in criticism of the agency, that this tends to slow down the process. And in this particular area, I question that slowdown is worthwhile. In fact, I think it is not.

It would be preferable to have the matter dealt with, the prototypes and production handled through the private or semiprivate company, such as the Comsat operation.

Senator BREWSTER. Thank you very much, sir, for a very careful

answer.

Mr. BOYD. Excuse me, sir. One more thing I wanted to say, I believe that the Government has got to be prepared to provide the bulk of the money for research without much thought of getting it back in terms of dollars. I think the benefits will flow back in many ways, but I would not say-I would feel it a mistake if a decision were made to say we will not go ahead unless we can guarantee that we can get our contribution for research back.

I don't think that should be a factor, a no-go factor in this operation. Senator BREWSTER. Thank you.

Thank you, Mr. Chairman.

Senator MONRONEY. You would have no objection, would you, Mr. Boyd, if we did advance three-quarters of a billion dollars, we will say, for the research and the original development necessary to go in there, even in conjunction with a sort of corporate setup?

Mr. BOYD. No, sir.

Senator MONRONEY. Say, a continuing royalty tax on the planes? Mr. BOYD. I completely agree.

But my point was merely this: I think it would be a mistake to say we have got to have an ironclad commitment that we are going to get this money back; otherwise we don't go ahead. I think that would be a mistake.

Senator MONRONEY. It is too big a proposition to expect private industry to underwrite, as you mentioned, if it fails. It can be a $2 billion failure and there is no tax advantage that could occur to any corporation wealthy enough to take advantage of that where it could not be a catastrophic blow.

Mr. BOYD. That is correct, sir.

Senator MONRONEY. With reference to our speaking of supersonic speeds, I would like to get some of your ideas, if you have formulated them, as to improving the speed of the railroad trains.

For instance, the through train from Washington to New York to Boston, I think, would be of great interest to the committee and to those who follow this very critical railroad situation that we are in today, to do something to preserve the high-grade passenger service that apparently is becoming one of the forgotten, along with the dino

saur.

Mr. BOYD. I certainly agree with that, and expect to go to work on that matter and immediately, subject to confirmation, but at the moment, I have not formulated any ideas.

I don't have sufficient detailed information to make any intelligent statement on this, other than to express my agreement with your sentiment, that we have to make arrangements and soon, to improve the interurban transportation, in the Northeast particularly, to handle the problems, which are staring us in the face today and have been for some years.

Senator MONRONEY. May I put it this way, then. You do feel that there is a place in the transportation picture that is still to be filled by surface transportation?

Mr. BOYD. Very definitely, yes, sir. There is no question in my mind about that.

Senator MONRONEY. You would have no objection if the proper planning and proper utilization of funds were found to be needed, to develop some of this as a matter of subsidy, at least on the research and original engineering?

Mr. BOYD. In fact, I certainly hope that the Congress will be willing to do that, because I don't think we will move very far without some Government money.

Senator MONRONEY. And probably, as Under Secretary of Commerce for Tranportation, this would be a big function of your office, to make the case for and to administer probably the utilization to the best advantage.

Mr. BOYD. Yes, sir.

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Senator MONRONEY. Of these research and development funds? Mr. BoYD. That is my understanding, that the northeast corridor project, for example, will come under the purview of my office.

Senator MONRONEY. This is a very important assignment. We think of transportation as a lot of the new things. But preserving of the benefits of the old with modernization will be very proper and there might be laws necessary to provide a certain umbrella against competitive cutthroat competition in servicing an area that would otherwise have no service.

So that a man making an investment in deluxe equipment might be protected for a certain number of years against this, in the same way the airlines are now protected on their runs.

Mr. BOYD. Yes, sir.

I think that, as I see this matter of transportation, the basic requirement that we have to keep in mind is to assure a strong defense posture for the United States, and that we also have to assure a free flow of traffic-both passenger and cargo-so that our standard of living can be maintained and improved.

Senator MONRONEY. Senator Hartke?

Senator HARTKE. Mr. Boyd, I want to congratulate you upon your change. I was wondering in this field, since you still are going to stay in the transportation field, what do you see in the future of the helicopter and so-called movements of this type, with the recent cutoff, as far as the big cities are concerned?

Mr. BOYD. Senator Hartke, I am thoroughly convinced that there is a role, a very important role for what are characterized as V/STOL aircraft. In order to reach their full flower, there must be some engineering breakthroughs. The Department of Defense is spending a great deal of money on research in this area for military usages of both vertical and short takeoff in landing equipment.

The big problem is in the powerplant, the thrust of rate ratio, and I am confident there will be a breakthrough. I am also firmly of the belief that the evolution with existing equipment on the helicopter will make it possible, given sufficient capital resources, to provide a very worthwhile service in today's time.

Senator HARTKE. Do you believe that the present termination of the subsidies for the helicopter service, which is now in existence, is serving the national interest?

Mr. Boyn. Well, the Board's position has been made, and I think pretty clear, Senator Hartke, and we have urged continuation of the subsidy, and I assure you we feel that all of our actions are taken in the national interest.

Senator HARTKE. Doesn't it make just as good commonsense to talk about the full development of the helicopter as it does the supersonic transport, especially with the problems you have now with concentration of population and traffic jams, and at this moment, at least, not a real development of a rail transit passenger service?

Mr. BoyD. I think the helicopter is a very necessary part of our transportation system, and I think it should be expanded rather than restricted. It is of a different magnitude than the supersonic transport.

Senator HARTKE. It is of a different magnitude in what regard, as far as expenditure of funds which will not be recaptured?