the heaviest onslaughts of European tourists that we have ever seen. In fact, I understand from a major air carrier that for the first time in the history of this particular airline's recordkeeping that more than 50 percent, in fact 75 percent, of the passengers traveling to the United States were foreigners coming to the United States for a vacation, which is quite a change from the traditional modes. Also, we know that travel and tourism by Americans in Europe has been changed dramatically. Plans and cancellations have been made known, which have hit the local tourist industry and the European community with a phenomenal impact. In Greece, we have had a cancellation rate reported to us of minus 63 percent, or 63 percent cancellation; Italy, 33, almost 34 percent; Western European countries in general, 34 percent; Mediterrean cruises, 32 percent. The numbers go on and on; so there is an economic impact. I can't think of an industry that would be more appropriate to come forward and talk a little bit about it right here today and with that, we will ask Under Secretary Tuttle to please proceed with her testimony. [The statements of Mr. Mica and Ms. Snowe follow:] PREPARED OPENing StatemeNT OF HON. DANIEL A. MICA, CHAIRMAN, SUBCOMMITTEE For at least three years now we have focused all our efforts on focusing the attention and resources of the United States Government on the need to develop policies to enable the United States to combat terrorism. Unfortunately, today, very little information has been accumulated to begin understanding the impact of terrorism outside the political sphere and how it is changing our lives. I propose that a careful study of the economic impact will improve our understanding of, and ultimately, our ability to deal with terrorism. As a starting point, I invite my colleagues and our witnesses to focus their attention on a particular industry, travel, and tourism, and how it has been affected by terrorism. Tourism lends itself very well to such an inquiry not only because it has borne the brunt of terrorism and therefore probably has the most meaningful statistics available, but because a meaningful impact in this field implies that the terrorist has been able to: Disrupt the largest and fastest growing industry in the services sector of the United States economy and other Western economies; Hurt these same economies where they are the least prepared and able to defend themselves; and, Affect every man woman and child by denying them their "human right to travel freely." I hope that today's hearing will bring to the surface the real dimensions of the problems we face. But before we look at the damage that has been done to this particular activity, I believe it will be useful to review what the tourism industry really means to the United States economy and to the rest of the world. Armed with these facts and a better understanding of the manner in which terrorism inflicts its wounds, then only can we begin to reflect on a course of action. Without any further ado, I wish to welcome today's witnesses. PREPARED OPENING STATEMENT OF HON. OLYMPIA J. SNOWE, SUBCOMMITTEE ON Mr. Chairman, over the past few years this subcommittee has held hearings on a wide range of topics related to terrorism. We have dealt with the problems of diplomatic security, counter-terrorism policy, airport security, and compensation to the victims of terrorism and their families. But a broad look at the economic impact of terrorism is important to our dealing with the issue in any comprehensive way. The true cost of terrorism is much greater than the cost of beefing up security to protect Americans and other innocent victims. As many Europeans are learning this summer, lost tourist revenue alone is proving to be greater than many times the cost of isolating Libya economically and politically. Beyond that, there are other costs that are not quantifiable, and these may be the greatest of all: that is, the potential loss of the free exchange of ideas and cultures made possible by the easy movement of people. In many ways, the movement of people forms the basis of western civilization, and stands as a stark contrast to the severe restrictions on travel in the Soviet bloc. We must do more to understand the full economic costs of terrorism. It is no understatement to say that the basic tourism industry of Europe and the Mediterranean is at risk. This industry is so important to a number of key nations in the region, that its decimation could lead to severe economic hardship and instability. And who can say with certainty that terrorism will not soon move into the United States itself? Many in the tourism industry are fearful of admitting just how severe the impact has been in countries such as Israel, Egypt, Greece, and even france. They fear that admitting the seriousness of the damage might only lead to further damage. But I hope our witnesses will speak frankly and fully on this issue. I suspect that the nations of the West will only come together on a coherent policy against terrorism when they publicly admit the fundamental threat it poses to one of our most basic human rights. I look forward to your comments. STATEMENT OF HON. DONNA F. TUTTLE, UNDER SECRETARY, MS. TUTTLE. Thank you, Mr. Chairman. I am pleased to testify on the impact of terrorism on international tourism. First, however, I would like to define what tourism is and explain some of the reasons why governments promote tourism and why terrorists make it a target. DEFINITION OF TOURISM Contrary to what most laymen believe, tourism is not the act of touring. The official definition of the term, as applied by the United Nations means, "Temporary visitors staying at least 24 hours in the country visited." Those who are traveling on business, for study, health treatment, or religious reasons, to attend a meeting or carry out a specific mission, to participate in a sporting event, or to visit family or friends or for recreation are tourists. The French economist Jean-Maurice Thurot once wrote, I am sure with apologies to the Prussian military strategist Karl Von Clausewitz, that "Tourism is a simple continuation of politics by other means." That was an apt observation. To open a country to tourism from abroad is basically a political action. It puts that country, its political institutions, and its economic system on public display before the tribunal of world opinion. It tells the world that a country is not only willing to receive foreign nationals, it is willing to be critically compared and it is confident that its international standing and reputation will survive close scrutiny. To allow the citizens of a country to freely travel abroad is likewise a political action. It enables them to compare their standard of living, their quality of life, and their political rights and freedoms with those found in other countries. It also shapes the traveler's perceptions of the country he visits, and the opinion he forms while traveling help to shape his political judgment after he returns home. Governments promote and encourage tourism from abroad for a number of reasons. Tourism increases export earnings, stimulates economic development, promotes closer ties with citizens living abroad as expatriates, and increases foreign public understanding of the host nation's institutions, policies and cultural contributions. ECONOMIC BENEFITS OF TOURISM To give you an idea of how tourism contributes to export earnings and economic development, the United States earned $14.1 billion in international tourism receipts and international passenger fares in 1985. In 1984, the U.S. Treasury collected almost as much foreign exchange from sales of tourism services to visiting Japanese as from sales of manufactured goods to Japanese companies. We earned more from sales of tourism goods to visitors from the Federal Republic of Germany, France, Switzerland, Sweden, Spain, and New Zealand, than from exports of manufactured goods to firms in all six of those countries. Tourism accounted for more than one-half of U.S. sales of services to Canada; more than two-fifths of U.S. sales of services to Latin America and other western hemisphere countries; one-fourth of such sales to Japan and to Australia, New Zealand, and South Africa, and one-fifth of such sales to the so-called EC-6. I might add, parenthetically, that although the United States has a $50 billion trade deficit with Japan, our travel account with that country is in surplus by $1 billion. In 1983, the most recent year for which data are available, 30 of the 50 States earned more than $50 million from sales of tourism services to foreign visitors. That is not domestic; that is just to foreign visitors. Twelve earned more than $100 million; five earned more than $1 billion and two earned more than $2.6 billion. Foreign visitor spending supported more than 2,000 jobs in each of the 20 States and the District of Columbia and more than 312,000 jobs throughout the country. That same spending generated more than $800 million in city and State sales tax receipts and $837 million in Federal tax reve nue. LOSSES DUE TO TERRORIST ACTIVITIES Terrorists attempt to disrupt tourism to reduce national export earnings; slow down economic growth; cripple a country's ability to generate jobs, especially for the unskilled and semiskilled; and reduce public confidence in a government's ability to maintain law and order and insure public safety and, of course, to attract worldwide press attention. Terrorist acts have taken their toll on tourism. The U.S. Travel Data Center reported that after the attacks at the Rome and Vienna airports last December, 35 percent of U.S. international travelers changed their reservations. Of those who made reservation changes, 78 percent, 1.4 million, either canceled or substituted a domestic destination. On April 29, the European Community Commission released a statement expressing concern, "About the tourism situation in the community which has resulted in substantial losses for all member countries, especially with respect to American tourists. This development is linked to economic factors such as the declining value of the dollar, but above all, the fear of terrorists attacks." Commission President Jacques Delors and Commissioner in Charge of Tourism Carlo Ripa De Meana, said the "situation threatens to compromise severely the stability of the tourism sector." The economy of the United States is also feeling the impact of terrorism abroad. Many of the 27,193 travel agencies in the United States exist because of outbound travel. These small businesses, as well as tour operators who specialize in packaging foreign destination, air carriers who operate international routes and hotel chains with properties abroad, have experienced both canceled and declining bookings, a loss in commission income, lower revenues, and smaller profits. I am especially concerned about evidence that Americans are not flying on U.S. carriers because of the misconception that they are safer traveling via foreign-flag airlines. To understand the full economic impact of terrorism on tourism, it is necessary to note tourism's global dimensions. In 1985, international tourism receipts worldwide totaled $105 billion, according to the World Tourism Organization. Europe's share of those receipts was 56 percent, or $59 billion. International tourist arrivals numbered 325 million worldwide. Europe's share of those arrivals was nearly 68 percent or 220 million. Americans constitute a significant portion of Europe's tourist arrivals: about 20 percent of the United Kingdom's, 19 percent of West Germany's, 18 percent of Norway's, 16 percent of Switzerland and the Netherlands'. When those arrivals decline by one-half to two-thirds, or even by one-third, an impact is felt. About 3 million Americans visited one European country in 1985. A 30-percent drop in U.S. bookings is expected this year. That represents 1 million fewer tourists. The mean expenditure per U.S. traveler on goods and services obtained outside the United States is about $1,000. While not all of this is spent in a single country, and half of all U.S. nationals who travel abroad visit more than one country, it is obvious that a million in decline in U.S. tourist arrivals could result in a revenue loss as high as $1 billion. Tourism is big business. Terrorists have long recognized this fact. Ironically, it has taken terrorism to give many foreign political leaders an appreciation of the same fact. LIBYAN BOYCOTT When Secretary Whitehead first asked European support for a United States proposal to quarantine Libya, he received a negative response. Most European countries place greater priority on their trade with Libya than on United States public opinion, or their tourism from the United States. Belatedly, one country has real ized that the revenue it earned last year from United States tourists exceeded the value of its total trade with Libya. For all of these reasons, I think it is important that we view the present situation objectively and try to deal with it rationally. AMERICAN TRAVEL ABROAD Americans should continue to travel abroad as well as within the United States. Tourism in its highest form is a quest for knowledge. It has the ability to inform and instruct, to teach Americans about the civilization to which they belong and about other civilizations which share our planet. We must not allow the threat of terrorism to interfere with this learning experience. It is true that the random nature of terrorist acts makes it almost impossible to accurately predict when or where such an incident will occur. That means that timely information about travel conditions and governmental measures to improve travel security is essential. While our Commerce Department role is to increase the number of U.S. companies, States, and cities which are actively competing for the export travel market, we also have a responsibility to defend the interest of that segment of the industry which sells outbound-imported travel services. INQUIRIES ABOUT SAFETY OF FOREIGN TRAVEL Accordingly, since the hijacking of the Achille Lauro, when we began receiving telephone calls from nervous travel agents, and would-be overseas travelers, all inquiring about the safety of foreign travel, we have tried to be responsive. We have referred callers to the State Department, Citizens Emergency Center, which issues travel advisories. We have collected information about measures other agencies of Government are taking to improve traveler safety, and have funneled that information to the travel industry. We have arranged for members of the industry to meet with the Departments of State and Transportation and report on how terrorism is affecting their business. I have distributed copies of the unclassified Vice President's task force report on combating terrorism to members of the Commerce Secretary's Travel and Tourism Advisory Board, and to members of the Traveler's Security Policy Council, a group which USTTA help found. WORLDWIDE CONCERN ABOUT TRAVEL SAFETY I might mention that the council met this morning with members of the Inter-agency Tourism Policy Council to discuss traveler security issues. USTTA is monitoring surveys of public opinion on the safety of traveling abroad and on the public's travel plans. We have played a leading role within the intergovernmental World Tourism Organization in achieving the adoption of resolutions, one, condemning terrorism and two, promoting accession to the principal, international instruments on the suppression of hostage taking and unlawful interference with civil aviation. |