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COHA: Bush Admin. Onslaught On Caribbean Economy


Council On Hemispheric Affairs
MONITORING POLITICAL, ECONOMIC AND DIPLOMATIC
ISSUES AFFECTING THE WESTERN HEMISPHERE
Tuesday, November 21st, 2006
Press Releases, Front Page, Caribbean

Washington (Perhaps Unwittingly) Unleashes Another Onslaught on an Already Precarious Caribbean Economy


• Just as the predecessor Clinton administration dealt a mortal blow to the Caribbean banana sector in exchange for a hefty donation from the then head of the Chiquita Corp., Karl Linder. President Bush’s initiative – perhaps inadvertently – similarly could bring great woe upon the Caribbean tourism industry
• Costly U.S. travel initiative will require Caribbean-bound U.S. tourists traveling by air to carry passports
• The Western Hemisphere Travel Initiative (WHTI) will snuff out “impulse tourism” as barely 17% of U.S citizens possess passports
• New measures will prove costly and counter-productive
• The WHTI will foster crime and illicit money laundering throughout the Caribbean, stimulate drug trafficking, and encourage illegal immigration, thus undermining important regional interests and objectives

The Clinton administration, fought to strip away the preferential benefits provided by the Lomé agreement to small-scale banana producers in the English-speaking Caribbean. This was done at the behest of campaign donor and CEO of Chiquita banana, Karl Linder. Just as with the Clinton initiative, the Bush administration’s Western Hemisphere Travel Initiative (WHTI) is now heedlessly threatening the region’s all-important tourist business, regardless of the negative consequences that could follow. These include increased drug trafficking because gainful employment will be more difficult to find.

On October 4, President George W. Bush signed into law the Western Hemisphere Travel Initiative (WHTI), which will severely impede travel by U.S. citizens to the Caribbean. Beginning January 8, 2007, U.S. citizens, specifically those returning by air from any Caribbean destination, will be required to carry passports. By June 1, 2009, more than two years and a half later, this mandate will also begin to apply to those taking cruises and making border crossings as well as start being applicable in Mexico and Canada. The leading Caribbean hotelier, Gordon ‘Butch’ Stewart, has described the initiative as “the single most destructive economic catastrophe that could happen, short of a nuclear attack on Caribbean countries.” While this may be hyperbole, nevertheless, the effects of the WHTI are sure to be widespread and will prompt a series of damaging consequences upon the Caribbean tourism industry as well as causing significant job losses. Essentially, the WHTI translates into an act of trade war against a series of Caribbean nations with already marginal economies, and their ministers of tourism, who will soon witness an undeniable reduction in the inflow of U.S. dollars. Caribbean officials will have to stand by, watching a shrinking economic sector incomparably vital to the region’s survival. More crime, drug trafficking, money laundering and illegal immigration is sure to come about as a result of a loss of jobs stemming from cut backs in the local tourism industry.

The Immediate Impact on U.S. Citizens
The Western Hemisphere Travel Initiative dictates that, by the time it takes full effect, any U.S. citizen without a passport will no longer be permitted to return to the U.S from a trip to the Caribbean, Mexico, or Canada for vacation, business, or otherwise. This measure seems extreme, considering that only a scant 17 percent of Americans currently possess a passport. Instead of making impulse decisions to travel to the Caribbean, many American travelers will have to settle for domestic tourism, trips to U.S. territories, or, for the next two years, to Mexico and Canada. For those who do decide to undergo the hassle of obtaining a passport in time for their vacation, the costs could be considerable. The U.S. Custom and Border Protection Office of Regulations and Rulings’ own advisory team conservatively estimates that within the first year of the WHTI implementation, 5.9 million new passports will be requested. Currently, a passport costs $60, in addition to any expediting requests being made as well as postal service fees (which are over $30), passport picture charges, plus the time and bother to gather proper documentation and file forms. In total, it is estimated that U.S. travelers will pay around $940.8 million in processing fees in 2007. The advisory team’s “worst-case scenario,” however, places the cost at an astronomical $2.8 billion figure.

Other difficulties to be stirred up by the WHTI include additional delays and constraints placed on large groups traveling together, which will now have to coordinate passport filings for all of their participants. In the future, such traveling cohorts are likely to be less frequent or with fewer members, as the pre-event stress would be more than some are prepared to bear. Travel-related exasperations will make visits to U.S. territories, including to the Virgin Islands and Puerto Rico, all the more attractive. In fact, the advisory team’s main supporting document, which is 300 pages in length, outlines the estimated impact of the new law and even lauds the likely gains to domestic travel and tourism. However, the U.S. transport sector centering on hemispheric travel, as well as ancillary services, such as travel agencies, airline ticketing booths, airport shops, and travel-accommodation retailers, catering to Caribbean tourism, will be less fortunate. They will probably see significantly reduced profits during the normally highly coveted Christmas travel season, as the customary holiday crowds will be too busy being lured by other festive activities to take the time to engage in protracted passport application processes, only in order to venture forth on trips to nearly hemispheric locations.

Cruising Instead of Flying: A Script Featuring Double Standards
Despite the significant burdens faced by Americans and U.S. businesses resulting from the new travel regulations, the major casualties of the WHTI will be the Caribbean countries, whose GNPs disproportionately depend on tourism. The director general of the Caribbean Tourism Organization, Vincent Vanderpool Wallace, insists that the Caribbean has yet to recover from the international air-travel recession caused by 9/11. While this loss of business is sufficient reason for dismay, the new initiative also exhibits an inherent bias, discriminating in favor of the cruise ship industry, for which passport restrictions do not take effect until June 1, 2009. Now, instead of booking flights, staying in local hotels, and bringing revenue to the destinations of their choice, potential travelers who have not yet procured passports may in the short-term be tempted instead by cruise deals rather than flying.

Anticipating the Skid in Caribbean Tourism
The Caribbean tourism industry will be devastated by a declining number of U.S. visitors. Locations such as Aruba, the Bahamas, the Cayman Islands, the Dominican Republic, and Jamaica, where U.S. citizens can currently arrive and depart using only basic personal identification forms such as driver’s licenses, will suffer the greatest impact. By receiving more cruise travelers, at the expense of the preferred air travelers, these island destinations will find themselves feeling the financial shortfalls well into the future, as port-by-port visitors tend to spend significantly less when ashore, brought on by the new regulations, due to sleeping in their own staterooms, than those having land accommodations.

This prejudice, to the detriment of air travel, is no small matter. Even before the WHTI initiative was gaining momentum within the Department of Homeland Security and the State Department, many industry analysts were expressing concern over the widening gap between those arriving by air rather than by cruise ship. Bahamas’ Hotel Association president Earle Bethell was quick to observe that “the cruise industry already enjoys a huge competitive advantage over the hotel sector, not incurring the same costs of operations and taxation levels.”

The declining number of travelers having land accommodations eventually translates to higher unemployment and business foreclosure throughout the Caribbean basin, particularly affecting the six economies presently open to U.S. citizens with merely a driver’s license: the Bahamas, Barbados, Guyana, Haiti, Jamaica, and Trinidad and Tobago. In such countries (some of which already are plagued by a substantial level of crime) an economic vacuum of this magnitude caused by the WHTI, could bring about financial destabilization. Upsurges in unemployment will heighten crime rates and drug trafficking in places where gangs already have a free reign due to an undermanned police force.

Costs Outweigh Benefits
In the short term, border ingress as it affects ocean and automobile conveyances for U.S. nationals coming from Canada and Mexico, remain unchanged. The new initiative strictly pertains to passport requirements and includes no specific procedures to prevent dubious individuals or would-be terrorists from infiltrating into the U.S. The proposed benefits of increased security at U.S. borders, are pale in comparison to the costs and nuisance factors that will soon confront U.S.-bound travelers. Destination countries will face declining revenue flows generating Katrina-like devastation on their economies, but in this case there is little prospect that international aid will be on its way. Essentially, the WHTI has demonstrated that the Bush administration is prepared to sacrifice cooperative relations with its neighbors by implementing costly new rules likely to prove ineffective in protecting the American public.

The immediate impact of the new regulations will occur at the height of this year’s vacation season, when spontaneous travel plans are usually being made. The U.S. Ambassador to the Bahamas, John Rood, has acknowledged that a negative economic impact on the Caribbean is inevitable as a result of Washington’s new hemispheric travel security initiative. Wallace, of the Caribbean Tourism Organization, has likened the blow to that of a category six hurricane, a hit worsened by its timing.

Because of the January 8, 2007 enactment date, passport processing is likely to cause a maelstrom of disappointments as well as chagrin, beginning in the next few weeks and likely to continue into the early months of 2007. The ensuing chaos will create more than enough incentive for Americans to avoid the Caribbean for the time being. Additionally, the written advisory supplement to the WHTI expresses the hope that some passport-lacking travelers, who would normally be headed to the Caribbean in the coming months, will temporarily forego such travel and wait to apply for passports until the traffic jams caused by the new legislation starts to slow. This essentially means that the advisory team working to ease the impact of the new legislation may be somewhat insensitive to the baleful economic consequences that the new initiative will have on deterring U.S. nationals from traveling to the Caribbean.

*************

This analysis was prepared by Research Associate Brittany Bond
November 21st, 2006
Word Count: 1700

The Council on Hemispheric Affairs, founded in 1975, is an independent, non-profit, non-partisan, tax-exempt research and information organization. It has been described on the Senate floor as being “one of the nation’s most respected bodies of scholars and policy makers.” For more information, please see our web page at www.coha.org; or contact our Washington offices by phone (202) 223-4975, fax (202) 223-4979, or email coha@coha.org.

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