Business Beyond the Reef

President Obama swung by Disneyworld Thursday to announce his new executive order on promoting travel and tourism to the United States. Finally, it seems, somebody is taking this magnificent export industry seriously. Crippled by post-9/11 restrictions on visas and the TSA’s constant hassles at airports, travel and tourism still account for 7% of total U.S. exports and are by far our leading service export. What’s that in real money? A cool $134 billion. The industry as a whole employs 7.5 million people, with overseas visitors providing much of the profit margin that enables the industry and its jobs to grow. Unlike more stingy domestic travelers, or foreign travelers who can walk or drive into the country, long-haul international visitors spend, on average, about $4,000 per trip to the United States.

The White House press release emphasized three markets for growth in U.S.-bound tourism: Brazil, China and India. But India somehow got left out of the specific plans and proposals. There is much in the executive order that will boost travel from Brazil and China, some that is global, and a big potential boost to traffic from Taiwan.

Tourism promotion has largely been left in the hands of the states and individual destinations. True, there have been Federal boosts to tourism over the years, often at the behest of Hawaii’s Senator Inouye, but Washington support for tourism has hardly been consistent. It makes supreme sense to do some joint marketing for the whole country. After all, few tourists are interested only in Mount Rushmore, but they might be attracted by a trip that would also take in Yellowstone, the Grand Tetons, Devils Tower and Glacier National Park – none of which are promoted by South Dakota. So I am pleased to see a new national approach.

The executive order doesn’t say much about tourism promotion beyond ordering the secretaries of Commerce and Interior to come up with a strategy. The order does, however, address some of the major impediments to attracting foreign visitors to our country and its sights. The departments of State and Homeland Security have been ordered to increase visa processing capacity in China and Brazil by 40% in 2012, presumably based on the successful visa processing program piloted at the American Consulate in Shanghai over the past couple years. Both China and Brazil have a huge backlog of non-immigrant visa applications and the goal is to be able to process 80% of applications within three weeks. No more waiting months to even see a consular officer.

The Global Entry Program is a “trusted traveler” program in which frequent visitors to the United States can have background checks done in advance so that processing through immigration at U.S. airports is accelerated. They scan their passports and their fingerprints, and they are on their way. Despite the pilot nature of the program and its availability at only twenty airports, nearly a quarter million foreign travelers have signed up. The executive order makes GEP permanent and orders expansion to more airports.

Listed last, but certainly not least, is a decision to add Taiwan to the 35 countries that already are covered by the Visa Waiver Program. Technically, Homeland Security has to approve this, but with an instruction from the President, it seems likely to happen quickly. We already see a lot of visitors from Taiwan, but expect a profound increase when they get the visa waivers.

One small thing puzzles me from my parochial perspective in Honolulu. The President announced new appointments to the U.S. Travel & Tourism Advisory Board, an advisory committee housed in the Commerce Department which should be heavily involved in developing tourism promotion strategies. There are 32 private sector members of the board, not one of whom comes from Hawaii, which I understand is a major U.S. tourism destination. Four out of the 32 come from Florida – and the announcement was made at Disneyworld. Now, let’s see, Hawaii is a safe state for Obama and has few electoral votes. Florida, on the other hand, … Silly me! The President wouldn’t play politics, would he?

Heard some good arguments for going into China via Hong Kong or Taiwan last week. As one of our series of Honolulu workshops on doing business with the APEC economies, sponsored by the U.S. Commercial Service and the Hawaii Pacific Export Council among others, last week’s workshop centered on Taiwan and Hong Kong. I missed the first half of the program, so can only give you a truncated report.

One of the themes that came through loud and clear – one that I have often pushed here – is that China is no place for new or small exporters. It may be in the headlines and sexy, but there are so many easier ways to start out in international business. The thrust of the workshop was that it is a good idea to go into China with a Hong Kong or Taiwanese partner – and let them do a lot of the heavy lifting. Hong Kong has been playing this tune for many years now (especially since the British pulled out), but it is only in the past decade that American companies have begun working with Taiwan partners to go into China. Either one can work, just don’t go it alone unless you have very deep pockets and immense local knowledge. Even Taiwan and Hong Kong companies get their heads handed to them, just not as often.

Another point is that either Taiwan or Hong Kong can be used to arrange to have goods made in China. Again, this is an old game in Hong Kong and more recent in Taiwan, but both own thousands of factories in China and have contacts with many more. (One of our speakers said that Hong Kongers own about 40,000 factories in China. The Hong Kong Trade Development Council will be happy to set you up with one.) A long-time importer from China cautioned that you should hire an independent agent (Hong Kong is a good source) to do quality control for you. An agent can look over the production facility, drop in while they make the products you have ordered, and check out the products before they are shipped to you.

Drawing on experience working in public relations in Hong Kong, one of our panelists reminded the audience that business never sleeps in Hong Kong. You can be rousted out by a client at any time of the day or night, and you had better be ready to perform. She also said that networking (not just the electronic kind) is exceptionally important in Hong Kong, and recommended that foreigners in the city join local social clubs. Sailing clubs had worked well for her as a source of business contacts.

Steve Green, just arrived in Honolulu after an assignment as commercial officer in Kaohsiung, a southern Taiwan city, for the American Institute in Taiwan (AIT), noted that there aren’t many pitfalls to doing business in Taiwan. Steve pointed out that, where Hong Kong is influenced by British training and an English legal heritage, the United States plays the same role in Taiwan. In fact, he said, it is far more common for deals between Taiwan and U.S. companies to go sour due to problems in the U.S. home office, not at the Taiwan end.

David Day, a lawyer and fellow member of the Hawaii Pacific Export Council, pointed out that the international legal community ranks Singapore, Hong Kong and Taiwan as the three best places to use for dispute resolution in Asia. The first two have been in the game for years, but Taiwan is a recent addition to the top league.

Finally, our PR exec told of us of an awful faux pas she made when she first arrived in Hong Kong. She was at a Chinese banquet, when she suddenly noticed an important client at a neighboring table. She rose in a hurry and, in doing so, stuck her chopsticks points downward in her bowl of rice. That was when she heard the gasps and saw the looks of horror. Chopsticks sticking into a bowl of rice is a sign of impending death. It pays to know the culture anywhere in greater China.

Another in our series of workshops on selling in the APEC markets! Don’t you need a business excuse to come to Hawaii?