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The $100bn cost of making tourists get visas

"Tough on migration" can't help but meaning "tough on tourism".

The US Embassy. Photograph: Getty Images

There's a lot written about the extent to which restrictions on immigration hurt the UK economy. People settling in Britain and working is a good thing: someone else has paid for their education and upbringing, and we reap all the rewards. When we stop that happening, we hurt our economy.

On top of that, overly restrictive limitations on migration have spillover effects. The most obvious one is that caps on international student numbers – who are, bizarrely, counted as migrants in national statistics – severely limits the ability of our university sector to export its services. That sector punches well above its weight internationally; if we can't even make policy which lets it compete, what hope have our smaller industries?

But other spillover effects are less discussed. One of the possible wounds of our closed-borders policy could be on tourism. A new study, highlighted by Alex Tabarrok at Marginal Revolution, looking at the effects of visa restrictions in India, finds that particularly onerous requirements can lead to a 70 per cent reduction in inbound travel.

The authors take those findings, and apply them to the case of the US. Although they caution that "extreme counterfactuals…should always be judged cautiously", the estimates are nothing short of stunning:

What would happen if the United States opened up tourist travel to all comers without requiring visas? … We calculate a 112% increase in total inbound travel. In 2010, the U.S. recorded 59,791,000 inbound visitors who spent an estimated total of $109,975,000,000 (approximately $2000 per visitor) according to World Bank data. Increasing these figures by 112% yields an additional 67 million visitors and $123 billion in spending.

That's around one per cent of US GDP a year from tourism alone; and it still doesn't take account of the extra disincentive effect of immigration checks. British people, for instance, don't require a visa to travel to the US, but the unpleasant, borderline-abusive reputation of border guards in the country may well have a deterrent effect of its own.

Tourism restrictions have to get stronger the harsher limits on legal migration are, to prevent people entering the country through back routes, so liberalisation in both areas would have to proceed hand-in-hand. But if it did, the possible gains seem to get higher every day.