Tourism And The Trump Letter To Renegotiate NAFTA

Donald Trump plans to renegotiate NAFTA. He has sent the letter activating the process to Congress. After 90 days from 5/18/2017, the process of renegotiating can begin.

But what does Trump hope to accomplish? He hopes to accomplish higher wages for Americans. However, forcing higher wages to make up for higher prices and tariff restrictions seems to be a big negative for economic growth. The idea that American companies can make everything and Americans must pay higher prices will mean more losers than winners in the US economy.

Manufacturing makes up about 12-13 percent of US GDP. Yet the rest of America will have to pay higher prices for goods we are able to procure more cheaply due to the world economy.

As the chart shows towards the end of this article, Mexico and Canada are important neighbors, tourist neighbors, like no other nations. NAFTA renegotiation could jeopardize these relationships. 

I have said it before, that globalization has its faults. Yet economic isolationism is not the solution!

Donald Trump appears to be painting the US economy into a corner. It will remain to be seen how a tariff laden economy will prosper. It would only prosper if there was an uptick in exports, a huge uptick and an uptick in tourism to the USA. But alienating allies will not bring that uptick in exports to nations not happy with the US. And it is not as if the prices for US goods will become more affordable as this ill fated plan is put into place.

I believe that exports could decline, unless US quality was so vastly superior that it would compel buying by foreign customers. Donald Trump does not respect foreigners. In the spat with Israel, it has been said, but not verified, that Donald Trump gave the exact location of the spying operation that helped uncover the laptop bombing scheme that could have played out on US aircraft.

That seems to me to have gone over the top. I am no fan of a lot of Israeli behavior for various reasons, including treatment of the Palestinians, but giving secrets as to the exact location of spying activity seems to be the wrong thing to do. Israel happened to do us a big favor in warning of this laptop attack, although one could argue our support of Israel gets us into a lot of conflict with other peoples and nations. Anyway, bottom line is,  if Donald Trump exposed the agents responsible for gathering this information, that seems to be plain stupid.

But banning laptops plays into the hands of president Trump, who would like fewer people to come to America anyway. He could expand the ban to all of Europe. Trump does not care that one of the US's major industries in the age of globalization, tourism, is potentially  bleeding billions of dollars since he became president. It is an economic truth that tourism helps offset the ravages of globalization. The richer the world becomes, the more it will spend in the United States. Donald Trump is putting that path to prosperity in jeopardy. From the site:

And the president of Dubai-based airline Emirates, Sir Tim Clark, confirmed in March that the travel ban, which sought to stop nationals from seven mainly Muslim countries from travelling to the US, immediately triggered a drop in bookings from Dubai by over a third.
All this has resulted in an estimated loss of $185 million in business travel bookings from January 28 to February 4, as calculated by the Global Business Travel Association. The drop-off in tourism is predicted to result in 4.3 million fewer visitors this year, which adds up to a staggering loss of $7.4 billion in revenue for the US.

UK passengers have begun booking elsewhere as well. This inability to attract tourists will cause economic trouble in the USA if it gains steam. From the World Bank we have a gauge of importance of tourism as a legitimate economic activity which adds to world prosperity.  

Incoming tourism is counted as an export. The importing of visitors acts like an export sold overseas: 

 

Tourism is officially recognized as a directly measurable activity, enabling more accurate analysis and more effective policy. Whereas previously the sector relied mostly on approximations from related areas of measurement (e.g. Balance of Payments statistics), tourism today possesses a range of instruments to track its productive activities and the activities of the consumers that drive them: visitors (both tourists and excursionists). An increasing number of countries have opened up and invested in tourism development, making tourism a key driver of socio-economic progress through export revenues, the creation of jobs and enterprises, and infrastructure development. As an internationally traded service, inbound tourism has become one of the world's major trade categories. 

Please note from the following chart that Mexico and Canada are by far our greatest tourism partners with a combined contribution of over 30 billion dollars annually to the US economy. Here are the numbers for 2014 and 2015: 

 

 Mexico 19,175,345 18,889,281 Canada 11,671,122 11,289,743 United Kingdom 4,691,874 4,549,934 Japan 3,750,667 3,933,941 Brazil 2,383,822 2,275,588 China 2,309,654 2,001,302 Germany 2,208,145 2,283,086 France 1,915,725 1,966,335 South Korea 1,742,422 1,576,328 Australia 1,399,615 1,389,358 Italy 1,229,115 1,282,485 India 1,175,153 1,111,738 Spain 953,969 955,737 Colombia 928,424 924,916 Argentina 765,576 730,089 Netherlands 749,826 766,936 Venezuela 745,097 744,666 Sweden 682,178 751,455Total (worldwide) 69,025,896 67,519,113

Source Wikipedia 

The way I look at it, tariffs on imported goods, through NAFTA renegotiations, coupled with loss of revenue from exports and from tourism, could all add up to a major defeat for the American economy and the North American economy. From living in Las Vegas, it is not hard to see the tremendous affect tourism can have on general prosperity. 

We can't go back to a time and place that was causing business to be noncompetitive. And Trump seems to partially understand this, by backing off of his efforts to crack down on China. He just wants to crack down on Canada and Mexico. our closest neighbors, our greatest tourism customers, and instead seeks to institute a way of life that has long since been relegated to history. 

 

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