Tuesday, April 17, 2012

The Benefits of Open Travel: They Will Come and They Will Spend

The US has a significant balance of payments problem. We import much more than we export. We can solve this problem the hard way by restructuring our economy to either produce more goods for export or to depend less on imports. Neither is an easy path to follow and neither can be accomplished quickly. But do not lose faith—there is a relatively easy solution to the problem. All we have to do is invite more people with money to spend to come and spend it in the US.
If one goes to this government document one will find more than anyone wants to know about who spends how much money on what when they visit the US. The main point—there is a lot of money at stake—is summarized in the following chart (including travel dollars on domestic carriers).

Ylan Q. Mui published an article in the Washington Post that illustrated the desire and the need to go after more tourist dollars.

"For the first time, lawmakers, businesses and even White House officials are courting consumers from cash-rich countries such as China, India and Brazil to fill the nation’s shopping malls and pick up the slack for penny-pinching Americans. They are wooing travelers with enticements such as coupons, beauty pageants and promises of visa reform. The payoff, they say, could be significant: 1.3 million new jobs and an $859 billion shot in the arm for the economy over the next decade."

These developing countries are generating a large number of wealthy persons looking for interesting places to go to and spend. While they are not the dominant sources of tourist dollars, they are the fastest growing.

"The bulk of international tourism dollars comes from Canada, Japan and Britain. But Chinese spending is growing the fastest, up 39 percent in 2010, to $5 billion. Brazil’s growth was not far behind, with a 30 percent increase to $6 billion. India’s spending rose 12 percent to $4 billion."

With the indicated growth rates in income from their tourists we are talking big bucks. All we have to do is keep inviting more to come—right? It turns out that it is not that easy. Our paranoia about illegal immigrants has made life much more difficult for visitors from these countries. Edward Alden has an article in Foreign Affairs where he explains the issues involved: The Rewards of Open Travel.

"If you want to travel from Spain to the United States, the process is simple. You register online through the Electronic System for Travel Authorization (ESTA), pay a fee of $14, and either get an instant answer or wait a day or two while the U.S. government checks to make sure that you are not a terrorist or a wanted criminal. Your stay can last up to three months, no questions asked."

"If you want to travel from Brazil to the United States, however, you will first need to apply for a visitor visa, pay a fee of $140, and then wait two to six weeks for a consular interview. If that goes well, you then wait a little longer as your visa is processed. And this is good news; a year ago, before the Obama administration made speedier visa processing a priority, the wait time was much longer -- usually three months or more."

The purpose of the consular interview is to attempt to weed out those who might be planning on overstaying their visa and remaining in the country indefinitely. The two approaches to visitors derive from the 1986 Visa Waiver Program (VWP). Tourists from the wealthier countries are deemed more likely to return home as intended and are granted visa-free visits.

"Today, all but a handful of the 36 countries in the VWP are European. The rest are developed Asia-Pacific countries -- such as Australia, Japan, and, recently, South Korea. Not a single Latin American or African country is part of the VWP."

There is justification for concern.

"By the best available estimates (although they are crude ones), some 40 percent of the 10 million to 11 million unauthorized immigrants living in the United States originally arrived on legal visas, and then simply did not return home."

To gain entry to the VWP, a country must pass a rather arbitrary test.

"It is with those very concerns in mind that, in 2007, Congress adopted the current standard for adding new countries, stipulating that those with a visa refusal rate greater than three percent (meaning, roughly, that the United States granted visas to no less than 97 percent of applicants from that country) could only be admitted to the program if and when the United States is able to verify accurately the departure of travelers through its airports."

Taiwan meets this criterion with a rejection rate from consular interviews of only 1.9%, but Brazil languishes back at 3.8%. Is the system really that accurate? Highly unlikely.

Pressure is building to continue to facilitate the entry of visitors either by relaxing the VWP or vastly speeding up the visa process itself.

"The tourist industry is pressing hard to reverse what it calls a "lost decade," during which overseas travel to the United States stayed flat, even as the world travel market grew enormously; between 2000 and 2010, the U.S. global share of overseas travel fell from 17 percent to 12 percent. Meanwhile, tourist-dependent (and politically important) states such as Florida are looking for an economic boost and lobbying the administration to ease travel restrictions."

"The U.S. Travel Association recently estimated that, if Brazil and the other ten countries that are the most serious candidates for VWP status were admitted, the growth rate for visitors from these countries would double. And that would add $41 billion to the U.S. economy each year and create more than 250,000 jobs."

Alden’s article provides more details about the various issues for the interested reader.

One would hope that a satisfactory way forward can be found. Is there a more straightforward way to stimulate our economy than just by asking visitors to come and deposit their money with us?

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