Tourism's Economic Impact - Tourism: Principles, Practices, Philosophies - page 309

tourism import for the Japanese economy. In tourism exports, the flows of tourists and payments are
in the same direction, whereas in commodity exports, the two flows are in opposite directions. Therein
lies the confusion. However, if one were to look at the direction of payment flow to determine what is
an export, there is no contradiction between the two cases. When payment flows into the United
States, something has been exported—travel experiences, for instance, or commodities. Both payment
flows are in the same direction.

Balance-of-Payments Effects

Tourism is one of the world ' is largest international industries. As such, it has a noticeable impact on the
balance of payments of many nations. We have heard much about the balance-of-payments

problems of the United States, and, indeed, tourism imports do affect the balance of payments and
economic conditions generally. We de ne tourism imports as those expenditures made by American
tourists in foreign countries. An easy way to remember this is to ask, '' Who got the money? '' If, for
example, Great Britain received American funds, it makes no difference whether an American bought
some English china or an American tourist visited England.
Our balance-of-payments situation directly affects the gross domestic product (GDP) of the
United States (Y). The formula is

Y ¼ C þ I þ G þð X M Þ

where

Y ¼ gross domestic product

C ¼ consumer expenditures

I ¼ investments

G ¼ government expenditures

X ¼ exports

M ¼ imports

By looking at the formula, we can see that if imports (M) exceed exports (X), then the difference

(X M) will be a negative number, and Y will thus be smaller. Thus, it is advantageous to the U.S.

economy to attract more visitor spending in the United States. These '' tourism exports '' are like credits
and help the U.S. economy. It is economically better to have foreign visitors come to the United States
than it is to have U.S. citizens travel abroad. However, this should be tempered with the realization
that the situation is not entirely positive or negative.
Expenditures by U.S. tourists abroad make possible purchasing power in those countries to buy
American-made products. For example, most airlines of the world use U.S.-made equipment. Purchase of
these aircraft, parts, supplies, repair services, and so forth makes an important contribution to the export
trade of the United States; thus, we cannot charge the U.S. international traveler with a total negative
balance of payments. The purpose of the foregoing discussion is simply to point out the relationships.
Tourism exports become very desirable as far as the gross domestic product and the prosperity of the
country are concerned. Efforts on the part of national tourism of ces to attract foreign visitors have a
great impact on the balance-of-payments situation. Business firms that serve the foreign visitor, provide
desired services, and stimulate sales materially help our national economy. However, during periods
when the U.S. dollar is high against foreign currencies, a dampening effect occurs on our tourism exports
because this situation is seen as unfavorable by prospective foreign visitors. Conversely, if the dollar is
low, more foreign tourists will visit the United States. This increases our tourism exports, improves our
balance of payments, and raises the GDP. These same relationships of comparable currency values exist
between any country that exports tourism and the countries of its tourists ' origin.
In 1998, the value of the Canadian dollar was low in comparison to the U.S. dollar and illustrated this
principle. The number of Americans visiting Canada to take advantage of the exchange rate increased

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