Tourism and Foreign Investment: Tackling the Easy Problems

Many of the things the United States needs to do to strengthen itself economically are hard. Improving education is a lengthy, complex undertaking with no obvious road map. Bringing the deficit under control involves politically perilous decisions to cut spending and raise taxes. Streamlining burdensome regulation requires difficult trade-offs between business efficiency and environmental and consumer protection.

So it’s encouraging to see the Obama administration and Congress finally doing some of easy things. The White House Wednesday released a six-month progress report on its efforts to speed up visa processing, and there has been significant progress in easing the burden facing overseas travelers eager to come to the United States. Wait times are down and visits are up.

And last night, by unanimous consent, the House passed the “Global Investment in American Jobs Act of 2012,” which directs the Secretary of Commerce to “develop recommendations to make the United States more competitive in attracting and retaining strong investment flows from abroad.” Senator John Kerry (D-MA) has introduced similar legislation, and Senate action is likely in the lame duck session.

What these initiatives have in common is that they leverage existing American strengths. Travelers from around the world want to come to the United States to see the great cities like New York and San Francisco and explore natural wonders like the Grand Canyon (or more likely, just to shop). Foreign investors want to be on the ground in what is still the largest and most dynamic consumer market in the world. Small steps to clear away obstacles and encourage tourism and investment can pay outsized dividends.

The Obama administration has made travel and tourism a top priority, with the president announcing in January a new initiative that blessed efforts already under way in the State Department and the Department of Homeland Security. Between October 2011 and July 2012, the State Department added 220 temporary consular officers in Brazil and 48 in China to help with visa adjudications, and is expanding the number of permanent positions. Similar efforts are kicking off in India. There is a new pilot project to waive visa interviews for very low-risk travelers, which has already benefited 63,000 travelers. And there has been new investment in consular facilities and streamlined procedures to speed up visa processing. Currently, 85 percent of visa applicants are being interviewed within three weeks, compared with just 57 percent a year ago.

Word seems to be getting out. Overseas travel to the United States is up 8.6 percent over last year, even as the U.S. dollar remains strong, and demand for tourist visas is expected to grow by 20 percent this year. In Brazil, visa applications are up 38 percent this year; in China they are up 48 percent. This is easy money for the United States. International tourism supports about 1.2 million jobs.

Foreign investment is a similar story. After a lost decade in which the U.S. share of global direct investment dropped from more than 40 percent to less than 20 percent, FDI was up 14 percent in 2011 and is growing strongly so far this year. The Commerce Department has stepped up its investment promotion campaign through what is known as SelectUSA, but most of the effort to lure foreign companies is still done at the state level. A 2009 World Bank study put the United States near the bottom of the wealthy countries in the effectiveness of its investment promotion efforts. A 2012 OECD study on openness to foreign investment put the United States 34th out of 55 countries studied, behind such countries as Brazil, South Africa and Argentina.

Even small improvements in “attracting and retaining investment,” as envisioned in the House legislation, would have large payoffs. Foreign companies that invest in the United States already employ more than 5 million Americans, and including spin-off jobs the number is probably more than 20 million.

Certainly the United States has no choice but to tackle the hard challenges that must be faced to create stronger future growth. But if we tackle the easy problems – and reap the benefits of more money flowing into the U.S. economy – the hard ones become much easier to solve.