Venture: Are tourists key to shrinking the trade deficit?
Investors this week will be paying close attention to the stock market after last week's drop, but trade will also be a big focus.
Thursday we find out just how much more stuff countries like China have been selling to us than we’ve been selling to them. The U.S. trade deficit last year was almost half a trillion dollars. But we do export more than we import in some areas – like dairy products, eggs, nuts, and rides on the Navy Pier ferris wheel.
You may not have thought of that last one as an export. But, surprisingly, it is.
If you think about what we export from Illinois, you probably think of corn, soybeans, farm equipment, but how about what people from around the world buy when they visit downtown Chicago?
It turns out everything an international tourist spends money on while they're in downtown Chicago, or elsewhere in the U.S., is counted as an export. That means a chocolate ice cream cone or cup of coffee or even intangibles like going up to the top of the Willis Tower are all considered U.S. exports.
Mark Doms, chief economist at the U.S. Department of Commerce, helped explain it.
ASHLEY GROSS: So if somebody comes here from Germany or Indonesia and buys a Frappuccino, that’s considered an export, so why?
MARK DOMS: Sure, so international trade simply means when someone from one country buys something from another country. So if someone from Japan buys a bottle of California wine in Japan, then that’s considered a U.S. export because there’s a non-U.S. person trading their money for a U.S. good. So then what if that Japanese person buys that bottle of wine not in Japan but, say, at a hotel in Chicago when they’re on vacation. So that’s still a foreign person purchasing a U.S. product.
GROSS: So how do you calculate that? Because you can’t go to a bicycle rental shop on the shores of Lake Michigan and say, What percentage of your sales did you sell to people from Canada or Germany?
DOMS: So we have to estimate this, and we estimate it using two pieces of information. First, from the Department of Homeland Security, we have a pretty good idea of how many people are coming to the United States, so we know the numbers. The second thing we do is there are surveys that ask people when they come and visit how much they spend. So if we know how many people are coming and know on average how much they spend, we can get a pretty good estimate of the total spending they do. So what we don’t have a very good idea of is where they’re spending that money – on hotels, bicycle rental shop or restaurants or tour buses or whatnot.
GROSS: Okay, so then the flip side of this is also true, so if an American goes overseas to Paris and buys a baguette, than that is considered an export to France and an import to the U.S.?
DOMS: Exactly. Because when you’re buying an import, say you’re in Chicago and buy a French-made product, I know the baguette would probably be stale by now, but say you buy some French chocolate, in some sense you are giving your money to buy a French product. Now if you were in Paris buying the exact same box of chocolate, that would be very similar, it’s an American citizen who’s purchasing a French product. That transaction just happens to take place on French soil versus American soil.
Okay, but why is any of that important?
HOLLY AGRA: Well, it’s definitely important when you think about jobs.
Holly Agra is president of the tour boat company Chicago’s First Lady Cruises. And she’s on an advisory board to the U.S. Commerce Department about tourism.
She says the U.S. could reduce its enormous trade deficit – and create more jobs - if we could attract more international tourists. But she says the U.S. has been losing market share in the global competition for tourists.
Europeans are doing a better job by making it easier to get visas. By contrast, Agra says, Chinese people who want to come to the U.S. face a lot of obstacles.
AGRA: You can wait as long as 45 days for your visa interview and you may have to travel as far as 1000 miles to get to the consulate center, there are only 5 consulate centers in all of China to process the visas.
But she says building more consulates will take money and that’s tough when the U.S. government is so strapped.
As for Chicago, we ranked 10th last year in the number of overseas visitors - behind places like Orlando and Honolulu. And we lost market share to places like L.A. and Las Vegas.
Agra says Illinois needs to do a better job of advertising itself overseas, so we can boost our exports of things like Frappuccinos and bicycle rentals.
And now for our Windy Indicator, where we take the pulse of the economy from an unlikely place.
DEANNE LOZANO: There are two forms, this is singing.
Today, how are psychics doing?
Deanne Lozano is showing me her healing bowls that she uses to break up bad energy. She says the economy’s bad energy is starting to break up – at least from her vantage point.
LOZANO: This past year it’s been going up steadily, which is wonderful. Old clients are coming back and new clients are coming, so it’s great.
GROSS: Now I have to ask you, do you have a sense of when the Dow is going to hit 13,000?
LOZANO: No, I haven’t even thought about that.
GROSS: Could you read the Tarot cards for the U.S. economy?
LOZANO: Sure, what the heck. Let’s see what it comes up with.
She has me pretend that I am the U.S. economy. I shuffle the deck three times.
LOZANO: Okay, now I’m going to ask you to cut with your non-dominant hand into four piles.
Then she has me pick six cards while thinking about the U.S. economy.
GROSS: So what are the ones we’re getting here?
LOZANO: We have the ten of rods reversed, the six of pentacles, the three of pentacles, the world card, the five of swords and the page of pentacles. All the pentacles are good. The pentacles are about money. This is gain, this is abundance, and this is called works, and the page represents messengers about money. It still shows it’s depressed some, okay –
GROSS: Because it’s upside down?
LOZANO: Because it’s upside down. But we have the world card, and even though the world card is upside down, the world card is a very strong card so it’s very very positive. It’s saying the comeback is coming, but it’s a slow thing.
But beware - she says the five of swords symbolizes bickering. So we’re probably not done with arguments over the debt ceiling.
Next week our Windy Indicator slides into home base.