Trends

OCEAN MINING CLAIM FILED

Minerals lying on the bottom of the sea in international waters are unclaimed property, available to whomever makes the effort to obtain them (see "The Seabed Power Struggle," REASON, July 1974), despite the emotional complaints of Third World diplomats. Just exactly this point has now been put forward in the form of the world's first ocean mining claim, filed on Nov. 15, 1974 by Deepsea Ventures, Inc. of Gloucester Point, VA. Deepsea's president John Flipse filed a "Notice of Discovery and Claim of Exclusive Mining Rights, and Request for Diplomatic Protection and Protection of Investment" with Secretary of State Kissinger, and recorded a copy at the Gloucester County Circuit Court. In addition, copies of the complete data package were sent by registered mail to the principal U.S. Cabinet members, the Senate and House committees concerned with maritime issues, ambassadors of the leading maritime countries, leading oceanographers, and a number of other firms engaged in or interested in ocean mining.

Deepsea's claim asserts exclusive rights over a deposit of manganese nodules in the northeastern Pacific Ocean, establishes the priority of the claim in time and as to other seabed resource uses, and describes the nature and location of the activities associated with lawful exercise of the rights. The claim sets forth the coordinates of the 60,000 square kilometer tract and notes that it is on the deep seabed, "beyond the limits of seabed jurisdiction presently claimed by any state." Deepsea states that it will commence commercial production within 15 years, for a production period of 40 years. Based on legal research indicating that the company has validly established the exclusive rights claimed, under international law, Deepsea asserts that it now has "the exclusive rights to develop, evaluate, and mine the Deposit and to take, use, and sell all of the manganese nodules in, and the metals derived therefrom." The claim also makes it clear that "Deepsea does not assert, or ask the United States of America to assert, a territorial claim to the seabed or subsoil underlying the Deposit." But it does ask for "diplomatic protection" in terms of U.S. policy (presumably referring to future sessions of such bodies as the U.N.'s Law of the Sea Conference, scheduled to reconvene in Geneva next year). The claim quotes existing U.S. Government policy statements to the effect that mining of the deep seabed is a high seas freedom under existing international law.

In short, it looks as though an important precedent is being set, in favor of private property rights on the seabed. It is to be hoped (1) that other ocean mining companies follow Deepsea's principled example, and (2) that the U.S. Government doesn't interfere, either directly, or by lending any kind of support to U.N. attempts to collectivize the seabed.

SOURCE:
• News release and data package issued by Deepsea Ventures, Inc., Nov. 15, 1974.

FIGHTING THE AIRLINE CARTEL

The two airlines which have been trying for several years to undercut the government-sponsored international airline cartel (see "On Saving Dinosaurs," REASON, Nov. 1974) have each taken new actions to attempt to begin service. Air Europe International, which plans Tijuana to Luxembourg service, has sent out a letter to travel agents stressing that the operation is legally outside the CAB's jurisdiction, and announcing plans to start service early this spring. The CAB, meanwhile, has issued a "notice of proposed rulemaking" which would amend the law to require that the CAB grant a specific permit for any air carrier operating aircraft of foreign registry on flights over U.S. territory (which AEI must do). The permits could be granted only if the CAB found such flights to be "in the public interest." A CAB official has admitted that that phrase "gives the board great latitude" to disallow anything it doesn't like. If AEI is prohibited from overflights, the extra distance involved in flying around the U.S. would wipe out much of its planned 70 percent cost advantage over current airline cartel members.

Meanwhile, Laker Airways of England filed suit in October against Pan American, TWA, British Airways, and British Caledonian, on grounds that the four airlines conspired to prevent Laker from establishing its low-fare transatlantic "Skytrain" service. The suit hinged on a specific clause in the four airlines' government-sanctioned capacity limitation agreement. Within two weeks of the suit's filing, the four airlines dropped the offending clause and the suit was withdrawn. Approval of Skytrain, however, still awaits action by President Ford. The Aviation Consumer Action Project has spoken out in favor of Skytrain, on the grounds that free competition, as represented by Laker's attempt to buck the cartel, is in the consumer's best interest.

SOURCES:
• "Air Europe Tries Again," Harold D. Watkins, Los Angeles Times, Nov. 5, 1974.
• "Overflights," Aviation Week, Nov. 11, 1974, p. 13.
• "Four Airlines Sued by Laker," Aviation Week, Oct. 21, 1974, p. 24.
• "Laker Withdraws Suit," Aviation Week, Nov. 11, 1974, p. 25.

CAN TRUCKING BE DEREGULATED?

Many pessimists argue that the special interests of those receiving government favors (such as regulated truck lines that are shielded from competition by the ICC) are so strong as to make real reform well-nigh impossible. Thus, they would argue that despite calls for deregulation by FTC chairman Lewis Engman (see "Trends," Jan. 1975) and President Ford's call for a National Commission on Regulatory Reform, nothing much will actually be done.

Yet in recent months the case for deregulating trucking has been getting considerable exposure, fueled in part by recognition of the role of truck regulation in (1) keeping prices higher than necessary, and (2) wasting energy—both highly charged issues today. Thomas Gale Moore of the Hoover Institution estimates that ICC trucking regulation cost consumers some $10 billion in 1968 and nearly $15 billion in 1974, due to inefficient use of trucks and the resulting inefficient use of rail transportation. John R. Meyer of Harvard and the National Bureau of Economic Research notes that in addition to these static inefficiencies the "dynamic inefficiencies" (due to locating factories in economically wrong places and building too many highways) may be even larger. The Federal Task Force on Rail Productivity concluded that the ICC, by regulating trucking, is restraining competition, in effect creating "local monopolies" in what should inherently be a highly competitive market. Prof. James C. Nelson (who has been urging deregulation for 30 years) points out that trucking regulation originated out of Depression-era fears that have now been frozen into our economic system. "Why regulate an industry of 17,000 firms?" he asks. "Let the market regulate." And Prof. James R. Nelson of Amherst emphasizes the lack of service options produced by regulation, and the industry's wasteful overcapacity. The Department of Transportation is about to release a study that will "explode the whole myth of cross-subsidization" of rates, i.e., the argument that controls are needed to force trucking firms to subsidize service in remote areas out of their urban-area revenues. And the Office of Management and Budget is making an inventory of the cost of various ICC (and other agency) regulations.

Will all this logic and evidence have any effect? It's difficult to say, but Business Week recently laid out a possible program of reform, encompassing the following:

• Greater freedom of entry—shifting the burden of proof on the "need" for new service from the applicant to the existing truckers, and allowing lower cost to be considered as a factor in this decision.

• More flexible rate-making—allowing railroads to lower rates to compete with truck lines.

• Fewer restrictions on cargoes—ending the rule forbidding truckers to pick up cargoes on return trips (thereby saving fuel and reducing highway congestion).

• Rationalization of routes—ending the "gateway restrictions" which prevent many carriers from taking direct routes (again, wasting fuel and increasing costs).

The benefits of deregulation are evident: Britain, Australia, and Canada have largely deregulated trucking and have obtained the benefits of competition—better service and lower rates. And agricultural trucking in the U.S. has never been under ICC control, with the same results. It's high time the sacred cow of ICC trucking regulation received the coup de grace.

SOURCES:
• "The Economic Case for Deregulating Trucking," Business Week, November 2, 1974, p. 86.
• News item, Research Institute Recommendations, Sept. 20, 1974.

ENDING THE POSTAL MONOPOLY

Criticism of the government postal monopoly appears to be reaching a new peak. A House small business subcommittee recently charged that in its first three years of operation as a quasi-public corporation, the Postal Service (USPS) has abused its special legal position and "has failed to noticeably improve the quality of mail service." Further, "its operating deficit has doubled and the cost of first-class mail has increased by 25 percent." The subcommittee logically enough called for ending the USPS's monopoly status.

Another illustration of USPS incompetence was revealed in November by the General Accounting Office. The GAO investigated the $1 billion mechanized system that USPS is developing to handle packages. GAI's report noted that the new system will in many cases result in slower delivery of parcels, especially those traveling 600 miles or less (which make up some 58 percent of the total volume). Further, the delivery standards being set by USPS do not match those of United Parcel Service, the government's principal competitor, which may help to explain why the Postal Service keeps losing business to United Parcel. USPS parcel post volume has dropped from 644 million in 1969 to 475 million in 1973.

The case for extending postal competition to first class mail is argued comprehensively in a recent study by John Haldi and Joseph Johnston, sponsored by the American Enterprise Institute. The authors review the history of the private express statutes (which outlaw competition in carrying letters), and describe the types of competition which are currently permitted. They then project the types of competition which can be expected when the private express statutes are repealed, and discuss the related policy issues. They conclude that virtually everyone would benefit if private companies were allowed to compete with the government. They find specious the argument that private operators would "skim the cream" by providing only the most profitable classes of mail; this argument implicitly admits that rates charged to some users reflect monopolistic exploitation. They urge instead that the public should be protected from monopolistic practices by a policy of free competition. Because new competitors would have to charge less and/or provide better service in order to attract business, they would have to keep their operating costs (including taxes, which USPS does not pay) low. The result would probably be the introduction of many cost-saving innovations, such as those introduced by the private companies now delivering parcels and third-class mail.

SOURCES:
• "End Monopoly of Post Office, Study Urges," UPI (Washington), Feb. 28, 1974.
• News item, Los Angeles Times, Oct. 22, 1974.
• "$1 Billion System Slows Parcel Delivery, GAO Says," UPI (Washington), Nov. 8, 1974.
• Postal Monopoly: An Assessment of the Private Express Statutes, John Haldi and Joseph F. Johnston, Jr., American Enterprise Institute for Public Policy Research (1150 17th St., Washington, DC 20036), 1974, 70 pp., $3.00.

MILESTONES

Transportation. One more taxi monopoly has bitten the dust. The Los Angeles City Council has ended Yellow Cab Company's 40-year monopoly on pickup of passengers at Los Angeles International Airport and its 39-year monopoly in the city's central core. The moves are part of the Los Angeles Department of Public Utilities and Transportation's master plan to "spread competition throughout the city." Unfortunately, the plan does not call for complete laissez-faire. In most portions of the city only two companies will be franchised, rather than one as in the past. At the airport all franchised cab companies will be allowed to make pickups after delivering other passengers, although only two (Yellow and Red Top) will be allowed to maintain regular stands. Still, the plan is a step in the right direction. (Source: "Airport Taxi Monopoly Ended by City Council," Erwin Baker, Los Angeles Times, Aug. 29, 1974)

Education. Britain's first privately-financed university is being set up, in competition with the country's 45 state-financed universities. The new school's backers include 100 dons and teachers who four years ago signed a declaration calling for a university totally independent of the state. They argued that the autonomy of existing schools was restricted, since "he who pays the piper calls the tune." The school is to be established in Buckingham early this year, with 120 students and a planned enrollment growth to 3000 within 10 years. All costs will be met by student fees and endowments. The emphasis will be more on teaching than on research, and the traditional four-year program will be shortened. The backers are currently seeking to raise $3 million in start-up capital. (Source: "First Privately-Financed University Due in Britain," Copley News Service (London), Aug. 11, 1974)

Racial Discrimination. Special university admissions policies favoring minority students have been ruled unconstitutional by a Superior Court judge in California. The case was brought by a 34-year old Sunnyvale engineer who sought admission to the school of medicine at the University of California at Davis. The plaintiff charged "reverse discrimination" because he was rejected while minority students with poorer records were accepted. The judge, though stating that this contention "has not been sustained by the evidence," nonetheless ruled that the special admissions program (similar to many others across the country) violates the equal protection clause of the 14th Amendment. If the decision is upheld on appeal, it would jeopardize any admissions policy which uses race as a criterion. (Source: "Minorities Admissions Policies Called Illegal," William Trombley, Los Angeles Times, Nov. 28, 1974)