The Tourist Gap

How those foreign visitors in Times Square are helping to balance the trade deficit.

Foreign tourism to the United States is on the rise

After traversing a mountain path 6,000 feet up the Swiss Alps, under the face of the forbidding Eiger, where cows with clunky bells far outnumbered the people, I stumbled into a barebones restaurant—and was shocked to see a college classmate whom I hadn’t seen in at least 15 years. The surprise wasn’t so much that I saw someone I knew—we all have tales of random encounters in out-of-the-way places. Rather, it was that I ran into an American at all.

I’ve spent the better part of 10 days investigating vital economic issues, including the impact of European fiscal austerity on France and the sources of the strong Swiss franc, and delving into the ultimate Swiss mystery: how the cost of food rises (and the quality falls) the higher you trek into the Alps. In my journey, there have been a few things I had failed to see: American tourists. It’s An American in Paris, not A Horde of Americans in Paris.

Time was, braving the lines at the Louvre or trundling onto European trains in the summer meant braving busloads of American tourists—seniors, middle-aged church groups, school trips—frequently clad in identical T-shirts, or gaggles of college kids equipped with backpacks and copies of Let’s Go Europe. But not this year. In the first quarter of 2010, according to the International Trade Administration, U.S. air departures to Europe were down 6.7 percent from the first quarter of 2009.

But since the economic crisis hit, Americans have generally decided to stay home. According to the ITA, total outbound air departures from the United States fell 1.4 percent in 2008 and 1.8 percent in 2009. That’s a marginal difference. But journeys to Europe—which require expensive airfare and swapping weakened dollars into stronger euros—have fallen by a much larger amount. Air departures from the United States to Europe were down 6.2 percent in 2008, 4.2 percent in 2009, and were off another 6.7 percent in the first quarter of 2010. Should that decline hold up, 2010 would see U.S. visits to Europe down 17 percent from 2007 levels.

This is clearly bad news for souvenir hawkers, street performers, and the proprietors of the few brasseries that soldier on through Paris’ August doldrums. And it’s a sign of the malaise and fear that have gripped consumers since the onset of the great recession of 2008-09. Trends in foreign tourism are pretty good coincident signs of a nation’s economic confidence. When you and your neighbors are feeling flush and optimistic and your currency has some swagger, you’re much more likely to plot an ambitious foreign jaunt. Given the slowdown in growth, the punk jobs and housing markets, and the generalized fear of the future, splurging is out—up and down the income scale. For some, last year’s private jet to Lake Como has been replaced by an SUV ride to Lake Michigan. Many Americans are rediscovering the charms of their backyards.

Fortunately for the United States, plenty of foreigners are feeling confident. And that—combined with the trend toward staycations—could be good news for the U.S. economy, and for its gaping trade deficit. There is a grand paired trade—industries, stocks, and companies tethered exclusively to the U.S. consumer are weak, while industries, stocks, and companies whose fortunes are tied to global industry and global consumers are strong—and tourism is part of that trade. And as the volume of Americans leaving the United States has fallen, the number of foreigners visiting the United States has risen. In the bewildering months after the fall of 2008, tourism to the United States fell sharply, along with the volume of global trade. But as the world’s economy perked up, so, too, did the world’s interest in visiting the United States. Inbound arrivals from overseas began to rise in the fourth quarter of 2009 and were up about 15 percent in the first quarter of 2010 from the first quarter of 2009, to about 6.9 million arrivals. And it seems as if that trend has continued. This summer, New York was swamped by visitors from the corners of the earth that are growing much more rapidly than the United States—Brazil, India, China, even Europe. One could walk the length of the High Line, the once-derelict elevated railroad track turned chi-chi promenade in Manhattan’s Meatpacking District, without hearing a word of English spoken.

The trends in tourism may be signs of America’s relative economic decline. But they may also hold some promise. Tourism is a service and an important component of trade. When an Indian technology executive visits New York and spends money at the Gap and the Marriott, that’s an export. When an American spends money at the Uffizi Gallery in Florence, that’s an import. With outbound tourism down and inbound tourism up, the spending trends are helping to put a dent in the persistent and massive U.S. trade deficits. Foreigners spend about $11 billion per month in the United States, up sharply from the figures reported in 2008 and 2009. And in the first half of 2010, when foreign tourism spending in the United States was $65 billion, up 7 percent from the year before, tourism generated a $14 billion trade surplus for America, up 29 percent from the figure for the first half of 2009.

A version of this article also appears in this week’s issue of Newsweek.

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