Why Trump shouldn't kill Brand USA
Posted June 6
President Trump's recent budget proposal may inadvertently make it harder to achieve one of his central economic goals -- curbing America's $500 billion annual trade deficit.
Specifically, the budget plan would zero out funding for Brand USA -- a public-private partnership that promotes America as a travel destination in key international markets such as Australia, India, Brazil and other nations around the world.
Brand USA is an unlikely target for the budget ax for several reasons. First, the program doesn't receive a dime of taxpayer money; it's funded entirely through a fee on foreign travelers and matching contributions by the private sector. Second, every $1 invested by Brand USA generates $28 in spending by international visitors, boosting US GDP. And importantly, by boosting international travel to the US, Brand USA is critical to reducing America's trade deficit.
International travel plays a key role in boosting American exports. The underlying premise is simple. Every $1 spent by an international visitor in the US reduces our trade deficit by $1. That's because visitor spending on airfare, lodging, food, entertainment, education or medical services counts as an export. And like other exports, this spending drives US growth and middle-class employment.
How big is this trade bonanza? In 2015, international travelers spent $246 billion in the US, accounting for 11% of all American exports and generating a trade surplus of $98 billion. That's America's largest service export -- higher than financial services, for example.
The economic benefits of this surplus are widespread. Across the country, the travel and tourism industries create opportunities for middle-class workers and support one in every nine US jobs. International travel spending alone supported about 1.2 million American jobs in 2016, invigorating local economies and reaching across areas like hospitality, entertainment and aviation. And, unlike jobs in other industries, these travel jobs can never be shipped overseas.
While increasing exports of American-made goods is obviously critical, there has never been a better time to capitalize on the immense proven potential of travel.
The world is in the midst of a global travel boom. By 2025, the number of international travelers is expected to grow roughly 50% to more than 1.8 billion. America cannot afford to lose our rightful share of that market to our competitors.
There are several steps the US government can take to encourage global travel, increase America's travel exports and subsequently reduce our overall trade imbalance.
First, use trade agreements to continue creating export opportunities for US service industries, including travel and tourism. While promoting US manufacturing is important, government trade negotiators should also consider the impact of trade agreements on service industries, which employ roughly 80% of the American workforce. Robust services commitments in US trade agreements will lower both direct and indirect barriers to travel and tourism, building a legal and regulatory framework to boost this vital sector of US exports.
Second, increase our bilateral engagement with key travel partners. The current administration has indicated its preference for bilateral agreements, which opens an avenue to facilitate bilateral travel. Through two-way talks, the US could create a set of tailored agreements -- or Memoranda of Understanding, to use the technical term -- that address country-specific barriers for top travel partners. This could include enhancing convenient, affordable transportation infrastructure -- another priority of the new administration.
Third, support strong travel promotion efforts, like Brand USA. This means not just enticing travelers with America's natural beauty and exciting destinations, but also ensuring that foreign visitors are well educated about the rules governing travel to the US. If prospective travelers understand visa and other travel regulations, they are more likely to complete the necessary requirements, visit the US and enjoy their experience.
Closing America's trade deficit without boosting international travel to the US is impossible, making Brand USA critical in achieving the administration's economic goals. Policymakers committed to improving our trade balance should stay committed to Brand USA.