To bring people in large numbers to the United States there is a well developed transportation system capable of meeting additional demand that is created.

On the negative side, it is true that there is still too much red tape involved for prospective visitors to obtain permission from our public authorities to visit the United States. Visa and other formalities deter tourist travel. The clearance procedures and the physical plant required by the public authorities add significantly to costs of operation. The inabilities of the public authorities to handle increased traffic are causing expensive delays to aircraft on the ground awaiting clearance, adversely affecting aircraft utilization and forcing uneconomic scheduling. Serious consideration must be given to finding the ways and means of establishing new facilitation measures including aircraft clearance procedures more nearly in tune with existing needs of the international traveling public.

On balance, however, and unlike many other developed and developing countries, the United States finds itself in the fortunate position of not having to invest excessive capital for the development of accommodations, facilities, services and attractions for foreign visitors. All the U.S. Government needs to do is provide the most vital missing ingredient for a foreign visitor development program. That is to finance an effective advertising and promotion effort to increase the volume of foreign visitors.

We have studied closely the policy statement containing the seven recommendations proposed in the Final Report of the National Tourism Policy Study to provide guidance for the numerous government agencies who now adopt policies and administer programs directly or indirectly impacting on tourism.

We have also reviewed the forty-five goals and objectives included in the seven policy recommendations and believe that, with certain modifications which we will suggest for legislation, they will give the necessary directions to assure that the Federal Government effectively responds to the national interests in tourism.

Likewise we have examined the Federal Government Interagency policy council organization proposed in the Report. We understand its purpose is to refine national policy and make certain policy is actually implemented by all the multitude of Federal agencies involved. This is the key to bringing cohesion to the extensive Federal involvement in tourism and, while the organizational structure may appear to some to be unwieldy, it must be the most practical arrangement to eliminate the uncoordinated Federal involvement in tourism.

At this stage of the hearings we will attempt to illustrate why a tourism policy is needed and how a congressional mandated interagency Policy Council provides the basic solution to the problem of implementation of policy relating to important international tourism objectives.

Take the recommended policy statement to "Encourage the free and welcome entry of foreigners travelling to the United States, while balancing this goal with the need to monitor persons and goods entering the country, and with laws protecting the public health." The objectives of this goal, according to the Report, are to (1) facilitate the entry of foreign travelers into the United States and (2) increase the awareness of United States travel and recreation opportunities among potential foreign visitors in their home countries.

As a policy to facilitate air travel to the United States this statement is inadequate. It is suggested that the policy statement be broadened to include the concept of facilitation of international air transport as it is used in the Facilitation Annex Nine to the Chicago Convention on International Civil Aviation (1944). Annex 9 establishes guidelines governing the clearance of aircraft and the persons and goods they carry across national borders. These guidelines, including provisions relating to services and facilities of the Customs, Immigration, Public Health and other public authorities concerned, are aimed at eliminating the costly "red tape" which is still prevalent in international travel by air. Many of the Annex 9 Standards and Recommended Practices were reinforced by the facilitation recommendations of the United Nations Conference on International Travel and Tourism (Rome 1963), concerning passports, unilateral or reciprocal waiver of visa requirements for temporary visitors, foreign currency and exchange controls, taxes, charges and fees levied on tourists on arrival or on departure.

Most of the legislation governing the activities of the Federal agencies, some of it predating this century, was enacted to carry out other public policies with inadequate consideration to the potential negative effects on tourism much less to its positive promotion. A national tourism policy to facilitate international air transportation would bring positive results if implemented through coordi

nation by an interagency body mandated by Congress. There are a number of Federal agencies involved: the Treasury Department, Customs Service; the Attorney General, Immigration and Naturalization Service; State Department, Passport, Visa and Consular Affairs; Health, Education and Welfare, Public Health Service; Agriculture Department, Plant and Animal Quarantine. Another recommended policy statement is "Optimize the contribution of the tourism and recreation industries to economic prosperity, full employment, regional development and improved balance of payments". According to the Report important objectives of this goal, among others having a bearing on foreign visitor development, are to:

"Stimulate and maintain growth in demand for travel to and within the United States in primary and secondary foreign visitor markets".

(At present the "primary markets" are Canada, Mexico, contiguous to the United States, and the overseas markets of France, Germany, Japan and the United Kingdom. The secondary or "special" markets are Australia/New Zealand, Brazil, Belgium, Italy, Netherlands, Sweden/Norway/Denmark/Finland, Venezuela.)

"Support growth in the number of meetings and conventions (international) held in the United States."

"Stimulate growth in the number of international fairs and sporting events held in the United States."

"Increase public knowledge of United States travel and recreation opportunities among potential foreign visitors."

An effective program to encourage increased foreign visitor travel would bring positive results on the U.S. economy. The tourism industry is not a production-oriented industry. Rather it is an important labor-intensive service industry with unutilized capacity. It can be stimulated without creating significant inflationary pressures with positive results for the public and private sectors of the economy, particularly by creating more jobs, decreasing public spending for income maintenance and providing more tax revenues.

The U.S. Department of Commerce estimates that 1977 foreign visitors spent $6.2 billion in the United States and $1 billion for fares on U.S. Flag carriers; these expenditures supported 270,000 jobs. The $6.2 billion spent in the United States resulted in at least $434 million in Federal, state and local taxes.

In balance of payments terms in 1977 the United States registered receipts in tourism accounts of $7.2 billion and payments of $10.3 billion resulting in a deficit of $3.1 billion.

If it is the policy of Congress to improve the balance through tourism, a very constructive way to achieve an improvement is for Congress to give specific directions which would require Federal agencies to undertake positive promotional programs abroad to stimulate greatly increased foreign visitor travel to the United States and such programs in the United States and in all foreign markets which would result in an equitable share of passenger fares for the U.S. Flag carriers.

For Congress to state policy giving the necessary directions is one thing. Implementation is another. We concur with the finding of the Report that it will take a high level interagency coordinating body to resolve the differing viewpoints of the several Federal agencies and bring about implementation of this policy and its objectives. Agencies in State, in DOT, in Treasury, in Commerce and in the CAB are among those involved.

Some of the economic objectives encompassed in this policy to optimize the contribution of the industry to an improved international balance of payments are now stated as purposes or can be inferred in existing tourism related legislation such as the International Travel Act of 1961, as amended, and the Act of July 29, 1940 (relating to the encouragement of domestic and international travel). For example the Commerce Department, at times joined by Treasury Department, understands that the promotion of tourism can result in a significant contribution to the foreign and domestic commerce of the U.S. and to an improved international balance of payments. The State Department does not always share this view although one of its agencies, ICA, formerly the USIA, is providing support for Commerce's export expansion and tourism promotion programs. And other State and DOT agencies, along with the CAB, are negotiating trade and transportation agreements to provide equal opportunities for United States interests for these reasons. While measures are being taken to improve the balance of payments, many in government still seem to ignore the significant contributions that can be realized from expanded tourism receipts.

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When it comes to promotion of travel to achieve economic goals and objectives, there is the question of how much does it take and who will do it.

The Report contains the findings of an examination made by A. D. Little of the areas of funding in the official tourism organizations of eight countries. However, there was no attempt to assess the funding needs to stimulate and maintain the growth in demand for travel to the United States. Apparently this assessment.would be left for consideration by the Federal mechanisms established to carry out policy. We believe that the legislation should indicate that it is the policy of Congress in cooperation with public and private organizations to use all practical means and measures including financial resources, to stimulate and maintain growth in demand for travel to the United States recognizing that foreign tourism is a good business for the government to be in and that commercial advertising, publicity, and other promotional activities are the most effective way to stimulate this activity.

As a helpful guideline to determine the "financial resources" that might be required, the experts on tourism at the United Nations Conference on International Travel and Tourism held in Rome in 1963 suggested that a national tourist office budget for the purpose should be comparable to that of private sectors of the industry such as the transportation companies, particularly air carriers, who spend three to five percent of their sales revenues on promotional and selling activities.

The Conference felt that a working target of the budget amount to be allocated by governments to activities promoting their country as a travel destination should be three to five percent of the total expenditures made by foreign tourists in the country after arrival. The Conference realized that such promotion benefits a broad enough spectrum of the population to justify its being supported by public taxes. Some countries, notably Ireland, have reached this target amount. Thirty-five countries collectively spend $420 million in promotional activities; the U.S. spends less than $15 million. Foreign governments alone, not counting the expenditures of their national carriers, spend $22 million in U.S. measured media advertising their countries as a travel destination while the U.S. Government allocates a mere $2.0 million in countervailing consumer. and trade advertising in the six primary markets where there is a USTS presence. For the United States, taking only the three percent of tourist receipts would result in a total promotion budget of $185 million which, if allocated to overseas markets on a tourist revenue receipts basis, would mean, for example, that $30 million would be allocated for Western European markets-an amount possibly adequate for the task.

Mr. Chairman, it is difficult for government officials even those in agencies that have a direct interest in stimulating the domestic and foreign commerce to understand the need for commercial advertising and promotion. In the case of the United States the difficulty is compounded by the fact that there are so many agencies concerned. We thus look to and strongly endorse the Interagency Policy Council recommended by the Report as the mechanism to achieve necessary understanding among the agencies and see to it the policy is implemented. I realize that the Federal implementing mechanisms will be the subject of hearings next month and early next year. However, I foresee that it may be determined as a policy matter that a government agency is subject to so many constraints that it cannot effectively carry out marketing programs. In this case the solution would be to turn to Discover America Travel Organizations, Inc. (DATO) as the private sector non-profit national organization for tourism in the United States through which the government would implement its policy goal to stimulate the growth in demand for travel to the United States. Responsive to the conclusions of the 1968 Presidential Commission on Travel, it was after all largely set up for that purpose and in its present form is a less complicated and more effective mechanism than that discussed in the Final Report. A parallel approach to this methodology can be found in the Defense Department's allocation of funds to private enterprise advertising agencies for their military recruiting campaigns.

Mr. Chairman, that concludes my statement. We hope to participate in the hearings on implementing agencies and programs. We are particularly interested in facilitation procedures, travel research and data collection methods, training resources and techniques for the tourism industry and the development of an attitudinal tourism consciousness throughout the general populace.

Thank you for hearing me.

Senator INOUYE. Before proceeding with questions, I would like to hear from the rest of the panel, so may I now recognize Mr. Russell Stephenson.

C

STATEMENT OF RUSSELL V. STEPHENSON, PRESIDENT AND CHIEF EXECUTIVE OFFICER, HUGHES AIRWEST

Mr. STEPHENSON. Thank you, Mr. Chairman. In the interest of time, I will summarize my statement if you like.

Senator INOUYE. Without objection, your full statement will be made a part of the record.

Mr. STEPHENSON. I'd like to first establish the credentials by which. I'm here. I'm Russell V. Stephenson, president and chief executive officer of Hughes Airwest, which is headquartered in the San Francisco Bay area.

Let me summarize by saying that my company is the second largest among the so-called regional airlines in the United States. We are the only one that serves both Mexico and Canada. We have a very substantial interest in traffic from overseas.

For example, 140,000 foreign visitors, not including Canadian and Mexican-most of those from Japan, but we have a very fine balance of visitors from throughout the world on our airline tour system.

Senator INOUYE. May I interrupt. Just a matter of curiosity. You're the second. Who is the first?

Mr. STEPHENSON. Allegheny is the largest.
Senator INOUYE. Thank you.

Mr. STEPHENSON. Because, of the importance of the international tourism, we have sales personnel of our own in Tokyo, Sydney, and in the U.S. entry cities of Honolulu and New York City. In addition, we maintain sales offices in Hong Kong, Rio de Janeiro, Brazil, Costa Rica, and three cities on the European Continent.

In terms of financial resources, that's a very substantial investment for us. I'm not sure that that couldn't be done much better by USTS or by some Federal budget rather than by us. I think more could be got from the same money perhaps.

Let me say that the programs that we have remind me of à French proverb which goes like this: "A good archer is not known by his arrows but his aim." Our view from our relatively smaller position than the three gentleman on my right suggests that we have different directions at different times at various thrust levels, by diverse uncoordinated groups and, quite often, without comprehensive awareness of what the precise target is and where it is located. In short, it all goes to say the thing you have been saying, we'd like a cohesive national tourism policy. We think that's very important.

We think that tourism, to summarize, is vastly understated not only as to what it contributes to the economy today but for its potential, and I would like to offer these observations as a summary of the strength of our feeling.

We think your national tourism policy, the one that you are now in the process of designing, should be very, very strong because if you have been unable to reach the White House so far we believe it's unlikely you will be able to reach them without a very, very strong policy. Second, we believe that there is need for some kind of interagency

policy council or whatever to give direction and focus to the 18 to 50 or more Government agencies that are involved directly or indirectly in tourism. Certainly there needs to be some sort of a guiding force.

However and I think this is one of the important points and here I endorse what I believe Mr. Bud James of the Sheraton Corp., said, a gentleman whom I don't know but whose views I share, that unless a sparkplug is appointed whose job it is to ignite the ideas and keep the finger on what I like to call the "hot button" of tourism, all of this is going to be just so much rhetoric and self-stroking and the kicking around of ideas, which is a phrase which I refuse to let my people use because all that means is we're going to have fun talking about something but doing nothing about it in the ultimate and I think that's a disaster-and unless your next series of hearings which as I understand it will focus on the who is successful, I'm afraid all the tremendous work that you have been doing is going to go for nought.

I have suggested in my paper that someone like Nevada's Governor Michel Callaghan, who not only believes in tourism, but encourages, exhorts, cajoles, jawbones, and commends to make tourism work in Nevada, is the kind of person that is required.

Last, we feel that there are three levels of tourism. There's the international, which I suspect can best be done by the Federal Government. That is to say, bringing our neighbors from other countries to the United States. Then there's the regional-State which the Council of Governors as reported by Governor O'Neill and the USTS study has done a lot of work on and some tremendous good could come from that-could-because it will only come if it is focused on it.

Finally, there's the more local variety, which is best left it seems to me to the States and local communities.

Now I can skip over all of this because unless there is a focus on the "who" that's going to do this, all of the reams of paper and the rhetoric are going to do absolutely no good, in our judgment.

Senator INOUYE. I agree with you, sir.

Mr. STEPHENSON. The one example that I offer as an addition to those Mr. Renda cited is in Phoenix where we have attempted for 5 years now to get a coordinated program among Customs, Immigration, and FAA, to get an expedited program for the entry of Mexico customers to the United States and we have so far failed with everybody doing his own thing. This is an example of the type of thing that Mr. Renda was talking about in Los Angeles and other places and the type of thing we would hope would be improved.

Now, if I may, just go to a summary, I think the Pacific Regional Seminar on Travel and Tourism held in Las Vegas, Nev., which was one I believe of five that Governor O'Neill was referring to, is the type of thing that can provide a tremendous amount of valuable information as to how things can be done, coordinationwise, among the Federal, State and local governments as well as private industry, and I would urge that when this report Governor O'Neill talked about comes out it would be worth studying as part of your recommendations. It seems to me that Nevada is a good example of where there is very active government tourism but they don't have a massive budget and a massive budget is not necessary. So we're talking about the need for action. The caveat it seems to me are twofold: One is the proposition 13 syndrome, and the other is the environment. Let me point out that like