STATEMENT SUBMITTED FOR THE RECORD
BY
THE TRAVEL BUSINESS ROUNDTABLE
TO THE

SUBCOMMITTEE ON COMMERCE, TRADE AND CONSUMER PROTECTION
HOUSE COMMITTEE ON ENERGY AND COMMERCEHEARING ON THE EFFECTS OF HOMELAND SECURITY REGULATIONS ON
THE TRAVEL AND TOURISM INDUSTRY

WEDNESDAY, JUNE 23, 2004

INTRODUCTION

The Travel Business Roundtable (TBR) would like to thank Chairman Stearns and Ranking Member Schakowsky for holding this important hearing on the ways in which homeland security regulations are affecting the travel and tourism industry, the nation’s economy as a whole and the image of the U.S. abroad.

TBR is the pre-eminent umbrella organization for the travel and tourism industry. A CEO-based organization, TBR represents the industry’s broad diversity, with more than 85 member corporations, associations and labor groups. The travel and tourism industry is a consistent engine for economic development and job creation, employing some 17 million Americans with an annual payroll of $157 billion. Travel and tourism is the first, second or third largest industry in 29 states and the District of Columbia. In the last decade, travel and tourism has emerged as America’s largest services sector export and the third largest retail sales industry. The industry is in 50 states, 435 Congressional districts and every city in the United States.

No other industry is more affected by the implementation of stringent security measures than travel and tourism, and no other industry has more to lose should another terrorist attack occur on American soil. That being said, TBR vigorously supports the efforts of Congress, the Department of Homeland Security, the State Department and the Bush Administration to establish and implement laws and regulations that will protect our borders, our citizens and our visitors. However, it is vital that the government entities that are implementing these programs consider their collective impact on the traveling public. Being ever mindful of Homeland Security Secretary Tom Ridge’s admonition about the need to create the proper balance between protecting our homeland and promoting free and open commerce, TBR’s goal is to ensure that the paramount objective of protecting our nation’s security is pursued in a manner that is effective, coherent and does not unnecessarily compromise our nation’s economic vitality.

IMPACT ON INTERNATIONAL TRAVEL

International travel is one of the largest exports for the U.S., ranking ahead of agricultural goods and motor vehicles, and it is the largest services sector export category. It continues to be an engine for economic development, directly generating payroll revenues of more than $23 billion and tax revenues of more than $13 billion in 2003. International visitors spend more and stay four times longer than their domestic counterparts. However, according to the U.S. Department of Commerce, the number of international travelers to the U.S. dropped from 41.9 million in 2002 to 40.4 million in 2003. This is a sharp decline from 2000, when a record 50.9 million international visitors traveled to the U.S. At the same time, our travel trade surplus, which peaked at $26.3 billion in 1996, has plummeted to $4 billion in 2003. With every 1 percent drop in international arrivals to the U.S., 172,000 jobs are lost and $1.2 billion in tax revenue is left unrealized. These numbers simply cannot be permitted to continue to decline.

TBR commends the efforts of Homeland Security Secretary Tom Ridge, Special Assistant for the Private Sector Alfonso Martinez-Fonts and others at the Department of Homeland Security for their cooperative efforts with our industry to achieve a balance between our national security and the free flow of commerce. They have taken on the difficult task of protecting our nation while simultaneously serving as passionate proponents for vibrant domestic and international travel growth, among both business and leisure travelers.

Among the many concerns TBR has with respect to balancing security and travel, an immediate one is the impending biometrics deadline for Visa Waiver Program (VWP) countries. Currently, the 27 nations in the program – many of whom are our closest allies – are uncertain if they will soon be required to obtain visas to travel to the U.S. On June 14, legislation that would delay the deadline until 2005 was passed on the House floor. TBR supports this effort as a good first step but believes that time is running out. While the U.S. government debates whether a one- or two-year extension is more appropriate, our international competitors are using this uncertainty to challenge our portion of the international market share. Likewise, these countries are spending millions of dollars to attract those same travelers that might otherwise come to the U.S. For instance, the Australian government just announced a new global marketing campaign to increase travel to and within Australia, committing more than $600 million (AUS) over the next four years to tourism promotion. If it hopes to retain – let alone grow – market share, the U.S. will have to put forth a greater effort and make a financial investment to attract international travelers. The messages of confusing and cumbersome entry requirements are having just the opposite effect, and once patterns of travel have changed, it will be extremely difficult and expensive to bring international visitors back.

BIOMETRIC PASSPORTS

The rapidly approaching October 26, 2004 deadline requiring travelers from VWP countries to present passports containing biometric identifiers was established in the Enhanced Border Security and Visa Entry Reform Act of 2002, and as a statutory requirement, can only be modified by congressional action. While TBR strongly supports efforts by Congress and the Administration to implement this program as an additional means of strengthening security at our nation’s borders, we are concerned that doing so without the necessary technological resources could compromise that security and cause harm to the travel and tourism industry, our bilateral relationships and the nation’s image around the world.

VWP countries are among our closest allies and largest trading partners, representing 68 percent of all overseas visitors to the U.S. in 2002 and spending approximately $38 billion in our country. Without a delay in the passport deadline, VWP travelers will be required to apply for visas to travel to the U.S., thus increasing FY05 visa applications to almost double the FY03 demand. As a consequence, and in addition to a $100 visa fee, these visitors will most likely be subjected to the additional scrutiny and hassle of the visa process, which has already experienced heavy backlogs and turned away legitimate travelers. The State Department has testified on numerous occasions that it would not have the resources to process this additional workload.

On January 28, 2004, Assistant Secretary of State for Consular Affairs Maura Harty testified before the House Select Homeland Security Subcommittee on Infrastructure and Border Security that VWP countries were given only 17 months’ notice to comply with the biometrics requirement – a process that normally takes years for a nation to research, develop and implement. Reports from the United Kingdom and Japan, among many other affected countries, show that they will be unable to technologically comply with this requirement until late 2005 at the earliest. Moreover, the few manufacturers that produce the technology these countries need to fulfill the biometrics requirement have indicated that they cannot meet the demand in such a short timeframe, and given the time constraints, would be unable to vouch for the security of the biometric information contained in the passports. For these reasons, the travel and tourism industry feels a great sense of urgency to delay the deadline. It is noteworthy that even the United States, which is not required to comply with this requirement, will not be prepared to issue biometric passports until 2005. This suggests that we are asking our allies to conform to deadlines that we ourselves cannot meet.

TBR is heartened that Administration officials understand the importance of addressing this issue. In a March 17th letter that Secretary Ridge and Secretary of State Colin Powell sent to House Judiciary Committee Chairman Jim Sensenbrenner, they requested a two-year extension of the biometrics deadline for VWP citizens. Secretaries Ridge and Powell voiced their own fears that if the deadline is not extended, “travelers will vote with their feet and go elsewhere.”

The introduction of S. 2324 by Senate Judiciary Committee Chairman Orrin Hatch (R-UT) and Immigration Subcommittee Chairman Saxby Chambliss (R-GA) and Ranking Member Edward Kennedy (D-MA), among others, requesting a two-year extension, and H.R. 4417 by Chairman Sensenbrenner and others, requesting a one-year extension, are both evidence that those with jurisdiction over this issue are taking it very seriously. TBR is deeply grateful to these Members of Congress and the other co-sponsors. On behalf of the international traveling public, TBR urges Congress to take quick action to reach a consensus that will establish a workable deadline for VWP countries. It is crucial that Congress enact legislation extending this deadline in an expeditious manner to ensure that the affected countries can plan accordingly and so that potential travelers from those countries, who are deciding now where to travel in the fall, have sufficient notice of what will be required of them. The absence of certainty about security measures is hurting the U.S. in the international marketplace, and our competitors abroad are using this uncertainty against us. We are concerned that potential international travelers to the U.S. will decide to travel elsewhere if the deadline is not soon delayed.

TBR believes that the VWP is a valuable component of our relationship with participating countries. Moreover, many believe that abandoning the VWP would significantly impair our nation’s economic activity. The VWP facilitates tourism and trade with our allies around the world. Members of the program undergo biennial reviews by DHS, with help from the State Department. Such reviews are currently being conducted and will be completed by July 15, 2004.

The Department of Homeland Security announced recently that it would further secure the VWP by enrolling all visitors from participating nations in the US-VISIT program upon their entry to the U.S. by September 30, 2004. To date, our friends who participate in the VWP have been agreeable to the changes in the their travel procedures, and we must continue to nurture these relationships. It is imperative that Congress grant VWP countries sufficient time to comply with the deadline for biometric passports. In working cooperatively with these countries, we can simultaneously guard our borders and our economy.

US-VISIT

The US-VISIT program was implemented at 115 airports and 14 seaports in January and requires international visitors holding visas issued by U.S. consulates overseas to submit digital finger scans and a digital photograph upon entry into the United States. These biometric readings are then matched against the existing visa files and national and international watch lists. TBR is pleased to learn from DHS that US-VISIT has matched more than 500 travelers attempting to enter this country against criminal databases and has stopped approximately 200 criminals or suspected criminals from crossing our borders. TBR is also pleased that no significant delays in the process have been reported to date.

While TBR supports the enrollment of VWP travelers in the US-VISIT program as an additional security measure, we are concerned about how efficiently the system will function when these estimated 13 million travelers are added this fall. DHS Undersecretary for Border and Transportation Security Asa Hutchinson testified before the Senate Judiciary Committee on June 15 that the infrastructure in place will continue to function efficiently and accurately through the expansion. However, the General Accounting Office (GAO) recently reported that inadequate testing had been done on the system prior to implementation in January. TBR hopes that these problems have been rectified and that the system is prepared to efficiently accommodate such a large volume increase.

We are encouraged by the effectiveness of the entry portion of US-VISIT to date. However, the deadline to integrate US-VISIT procedures at the 50 busiest land border ports of entry (POEs) is December 31, 2004. While DHS officials have said that they are on track to meet this deadline, it is essential that our land borders be adequately staffed and technologically capable to accurately screen those entering without creating gridlock at our borders.

The exit component of US-VISIT has been in place at one airport and one seaport since January. However, this test phase has not proven to be as successful as the implementation of the entry portion. Additional testing of the exit component is necessary in order for DHS to create a process that is user-friendly and accurate. While it is important that the government know when a visitor has overstayed his or her allotted time frame, it is also important that we not confuse travelers with a complex procedure or burden airline employees to assist in performing this task. US-VISIT, while successful thus far in implementation, has many more hurdles to overcome, and the travel and tourism industry is ready and willing to assist DHS in any way possible.

As the Customs and Border Protection (CBP) inspectors administering the US-VISIT system – and all of our immigration and customs inspection processes – are some of the first faces international visitors see as they step foot on American soil, it is imperative that they maximize the opportunity to create a positive first impression with these travelers. Just because the focus is on security, that does not preclude common hospitality. To these visitors, who have likely heard negative stories about entry into the U.S., a friendly welcome and a smile could be enough to turn a trip into a successful, enjoyable and repeatable travel experience.

VISA PROCESSING

Released earlier this month, a survey conducted on behalf of eight U.S. international business groups, including the Association of for Manufacturing and Technology (AMT), the National Foreign Trade Council (NFTC) and the U.S.-China Business Council (USCBC), estimated that U.S. exporters have lost more than $30 billion in revenue and indirect costs over the past two years due to delays in visa processing for foreign business travelers. Of over 700 companies surveyed, 60 percent said that business travel visa delays had hurt their companies through lost sales and increased costs. In May, at the second annual Travel and Tourism Summit co-sponsored by TBR and the U.S. Chamber of Commerce, Secretary of State Colin Powell acknowledged that more still needs to be done to welcome travelers to the U.S. “Openness is fundamental to our success as a nation, economically, culturally and politically. Our economy will sputter unless America remains the magnet for entrepreneurs from across the world,” he said in an April 21st editorial in The Wall Street Journal. Legitimate business travelers, and leisure travelers as well, must not be locked out of our country by an understaffed or arbitrary visa process, and that process must not continue to deter U.S. economic growth.

TBR was heartened to hear State Department reports that staffing at overseas consular posts has increased, and we hope that this will help meet visa demand in a manner that is timely and systematic. Over the past three years, the visa process, which requires in-person interviews, a $100 fee and travel to sometimes-distant consular offices, has become burdensome to international travelers. The expense and uncertainty is creating a negative image abroad and is causing the U.S. to lose these travelers to other countries as well as lose out on important business opportunities. TBR encourages the State Department to increase its outreach to U.S. embassies abroad and to continually update its website to give clear, factual and timely information about the requirements involved in traveling to the U.S. so that potential visitors know what to expect, can plan accordingly and feel welcomed as they travel to the U.S. Communication is the key to opening our doors to our friends abroad.

DESTINATION MARKETING FUNDING

As a direct result of Senate Appropriations Committee Chairman Ted Stevens’ (R-AK) leadership, the FY03 Consolidated Appropriations Resolution funded a $50 million destination marketing campaign whose goal it was to increase inbound international arrivals from five of our largest international markets – Canada, Mexico, Japan, Germany and the United Kingdom. Two unfortunate rescissions in the Consolidated Appropriations Act of FY04 reduced the available pool of dollars to $6 million and a focus on only one country, the UK. Continued international uncertainty about visa obligations, coupled with an anemic federal destination marketing effort, conspires to continue to disadvantage us amongst the lucrative and bourgeoning international travel market. Confusion among international travelers about the ease of travel to the U.S. is dissuading many from making the trip. To these travelers, perception is reality, which is in turn reflected in real consequences for our economy.

H-2B VISAS

The issuance of H-2B visas, which facilitate the travel of seasonal non-agricultural workers to the U.S. to fill temporary unskilled positions that employers are largely unable to fill with American workers, ended when its cap of 66,000 was reached in March. The travel and tourism industry urged Congress to increase the cap because many seasonal employers had not yet staffed their businesses for the coming summer travel season. Although legislative solutions were sought, an agreement has not yet been reached; attempts to save the summer of 2004 for these businesses have been futile. Non-immigrant workers, many of whom rely on U.S. employment summer after summer, could not be granted visas because of the cap. TBR anticipates that many small businesses will be left inoperable or operating at less than full capacity during the busy summer months. A legislative remedy must be reached before these businesses are forced to suffer harsh economic losses for another summer.

REGISTERED TRAVELER

Homeland security policy not only affects international travel to the U.S., but also can serve to delay and frustrate domestic travelers. Passenger screening lines at some of the nation’s busiest airports have taken hours to go through. One proposed remedy is the Registered Traveler program, whose pilot phase was announced on June 16 by the Transportation Security Administration (TSA). Slated to begin on a voluntary basis later this month in Minneapolis, the program will ask participating travelers for personal information, have their names matched against existing government databases, have their fingerprints taken and irises scanned. The same basic screening procedures will apply to these passengers, but they will be exempt from checks in secondary screening. TBR supports the development of this program, as it expedites the screening process for patrons of the airline industry without compromising airline security.

CAPPS II

The Computer Assisted Passenger Pre-Screening System (CAPPS II) initiative has undergone serious scrutiny recently. As a fully functioning system, CAPPS II would require airlines to provide personal information to the government on all passengers traveling through the U.S. Risk assessment technology would then rank passengers according to their possible threat to security and assign them to one of three risk categories – acceptable, unknown or unacceptable. According to homeland security appropriations legislation that is currently pending in the House and Senate, CAPPS II will not receive further federal funding until certain privacy requirements set by DHS and the General Accounting Office (GAO) have been met. TBR is supportive of efforts by congressional appropriators to ensure that TSA is held to the highest standards of transparency and conducts thorough due diligence as it seeks to develop and implement an effective program. It is imperative that the U.S. refrain from putting in place any security measures that have not been adequately tested.

AIRPORT STANDARD PROCEDURES

TBR is fully aware that TSA is working diligently to provide the tightest security possible at our nation’s airports. We recognize that the task before them is a daunting one and applaud their efforts to date. However, the lack of standardization of screening procedures among the nation’s airports confuses and frustrates travelers. From the screening of checked baggage to the submission of identification cards at check-in and at the gate, the experience is always different from airport to airport. TBR believes that informing passengers of what to expect at each airport and ultimately establishing consistency among the airports will make the process go more smoothly for both passengers and screeners.

RAIL SECURITY

Last month, DHS issued a directive outlining minimum federal security standards for the nation’s passenger rail systems and other mass transit systems. TBR commends DHS for recognizing the need to implement security measures for our nation’s rail systems. A passenger and baggage screening pilot program was tested in New Carrollton, Maryland in May, and here at Washington’s Union Station, screening of baggage is now underway. We encourage Congress to work with DHS to ensure that America’s railways are safe from terrorist threats and are able to financially provide that security to its passengers. We further urge Congress and the Administration to remove all funding barriers and make intercity passenger rail eligible for the grants funds available to assist commuter properties in enhancing their security.

INFORMATION SHARING

Recent events have unfortunately placed one segment of the travel and tourism sector, the shopping center industry, in the spotlight as a target for a terrorist attack. In April there was a phone threat of an alleged terrorist bomb at a Los Angeles mall. Two weeks later WNBC-TV in New York ran a news story that local shopping malls in the Tri-State area were on high alert for terrorist activity following the reported release of DHS bulletins and classified documents warning of such events. Last week Attorney General Ashcroft gave a press conference about a Somali immigrant who had been trained in terrorist camps and had hatched a plan to attack a Columbus, Ohio mall. Thankfully, none of the alleged attacks or incidents became reality. Yet sadly, stories like these will continue to make the news. While we respect the public’s right to know and the valid concerns about security, we would strongly encourage DHS to become more pro-active and sensitive to the public relations aspect of its terror alerts and to carry over that sensitivity to those conducting press briefings. Clearly this is an area where DHS must direct more resources. We would recommend that DHS extend its communications outreach with the shopping center industry and other relevant business sectors when situations occur.

When the incidents mentioned above unfolded, DHS’s interaction with the shopping center industry was inadequate. For example, the day after the WNBC-TV news story aired, the trade association for shopping centers contacted the Private Sector office at DHS. Neither that office nor the Public Affairs office knew of the news report and to date has not provided a written explanation of the information contained in it. The experiences with the Department can be best described as a series of disconnects. TBR believes that information sharing between the government and the private sector is a critical component in safeguarding our nation against terrorist threats but one that demands improvement and better coordination.

TERRORISM RISK INSURANCE

The provision of the Terrorism Risk Insurance Act (TRIA) of 2002 requiring insurance companies to make terrorism insurance available on the same terms and conditions as property and casualty insurance was set to expire at the end of 2004. Treasury Department Secretary John Snow’s recent announcement of the extension of the “make available” provisions of TRIA through the end of 2005 was most welcome.

Following the terrorist attacks of September 11, insurance coverage for terrorist acts was largely unavailable, thus affecting billions of dollars of commercial real estate and threatening the potential economic activity that would come with creating new shopping malls, hotels, sports stadiums and other public spaces. The “make available” provision created by TRIA stabilized the insurance market and would have been devastating to the economy should it have expired. Further, TBR encourages Congress and the Administration to work together to extend TRIA beyond 2005 so that the marketplace for terrorism risk insurance and the economic stability it provides can be sustained.

CONCLUSION

Clearly, there are myriad homeland security policy measures that, while aiming to protect our homeland, are simultaneously having a negative impact on our country’s image, industries and economy. International travelers and domestic travelers alike are confused about what will be required of them to visit America. Uncertainty about airport screening procedures and visa and passport requirements, combined with a lack of communication and a large-scale marketing campaign, are discouraging travelers from making the effort to come to the U.S. It is incumbent upon Congress, the Administration and the U.S. travel and tourism industry to work together to show potential international visitors that travel to this country is both achievable and desirable. Through careful implementation of policy procedures, effective communication and hospitable execution of those procedures, we can revitalize the travel and tourism industry while safeguarding our nation’s borders. In doing so, we can reshape our nation’s image, bolster its economy and workforce, and attract travelers back to the safe and welcoming United States. TBR appreciates the efforts to date of this Subcommittee, as well as other congressional stakeholders and Administration officials, and we pledge to work with all interested parties to make this goal a reality.

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