Business Beyond the Reef

Pooh understands it.

Second best is often the best you can do – and it sure beats finishing further back.  “Second best” is a concept that, simply put, says don’t let your pursuit of perfection defeat the possibility of doing good.  It’s the pursuit of perfection that is defeating the Obama Administration’s trade policy.  I speak, once again, of free trade agreements.

FTAs are on my mind again because the European Union and India are on the verge of signing an agreement that has been in negotiation since 2007.  Trade between the giant of South Asia and the Europeans has reached €53 billion – and negotiators on both sides say the pending FTA could help triple that in the coming five years, bringing jobs to Europe and boosting India’s development.  Achieving agreement, and it isn’t finished yet, has not been easy.  India and the EU have had nine rounds of talks, and both say that they would have preferred a successful Doha Round.  But they have come to realize that a Doha agreement isn’t going to happen any time soon, and that an FTA is the best “second best” option they have if they want to grow their economies.

That’s what the Obama White House and the Democratic Party have not discovered.  I see an approach to trade that is perhaps more typical of a trial lawyer’s viewpoint: you go full tilt toward the perfect outcome, no matter what the cost of doing so.  For Obama and the Democrats, I fear that the “perfect” outcome has more to do with the wishes of certain trade unions or environmental organizations than the world trading system can support.  It’s not that I oppose environmentalism or better working conditions, or that I am a Republican.  I’m not.  It’s just that the world trading system is not the appropriate vehicle to carry all that water.  You solve those issues on their own merits or demerits, not because Washington threatens to raise tariffs on cut flowers.  Obama’s failure to pursue free trade agreements is a classic example of not seizing the opportunity of the “second best”, of continuing to pursue perfection at the cost of the good.  And the good in this case includes jobs for Americans.

“Second Best” is often the best you can achieve and it is no small accomplishment.  We have three good trade agreements waiting for a decision from the White House.  We have no others in the pipeline, despite interest in better trade by most of the world, because Obama and the Democratic Congress have not authorized our negotiators to work on more.  Besides, given that you never know what American politicians will insist on including in a “trade agreement”, I suspect most of the world is reluctant to go through the effort of talking to Washington.

Stick to the subject, and go for the second best if the best is not obtainable.

I think the recession really is ending – and not for the reasons that most of the pundits tout.  Certainly not for the reasons that most politicians use, since they all want to claim credit for ending it.  No, it’s all about containers.

Filling up? (photo: steve gibson)

Boxes.  When a recession ends, business picks up and boxes begin to move.  First, last week, came Federal Express’ most recent quarterly report.  The stock market focused on the financial numbers going forward (which missed “expectations”, by the way), but what caught my eye were the positive comments by FedEx execs on what seems a worldwide pick-up in volume.  That tells you something positive is happening out there.

Then came an article in the South China Morning Post about a surge in demand for ocean-going containers.  This time a year ago, says the article, millions of 20′ and 40′ containers were stacked up in Chinese ports because there were no cargoes to be moved.  Now, not only have those containers been pressed into service, thousands of new containers are being built and empty containers in North America and Europe are being brought back to Asia to meet demand.  Clearly, this take-off in demand begins in Asia, but those newly filled containers are being shipped out everywhere – which means economies are healthy enough that buying has started again.

The spot leasing rate for containers has risen about a third in Hong Kong since the first of the year.  Cosco Pacific, one of the world’s largest container leasing companies (you don’t think Matson and Maersk own all those boxes, do you?), has taken delivery of 40,000 new containers since January 1 and expects to receive another 60,000 containers in the next three months.  The first 40,000 cost about $2,200 a box, so that’s a sizable bet that economies are turning up. And the bet gets bigger: demand has driven the sales price of a new 20′ container to $2,800 per container.

It takes a bit longer to put whole container ships back into action, but that is happening, too.  A Cosco spokesman commented that, while 10% of the world’s container ships were laid up a year ago, only 4% are laid up now – a significant increase in carrying capacity in a short time.

This doesn’t mean that the danger of a double-dip recession is definitely behind us, but the surging demand for containers does tell us the probability for a double-dip is dropping.

But can it float?

It strikes me, not for the first time, that Beijing has no confidence in its own currency.  Not to mention the ability of China’s exporters or the resiliency of the Chinese economy.  That seems strange, given the demonstrated strength of the economy and the growing international experience of Chinese companies.  But what else can explain Beijing’s seemingly schizophrenic currency policy?

We hear periodic diatribes from Beijing about how the U.S. dollar is long in the tooth and should be retired as a reserve currency or even as a currency for trade transactions.  It is always implied that the yuan should be the new reserve currency, or at least an important part of a basket of reserve currencies.

And yet the yuan has yet to prove itself as an internationally viable currency.  Why criticize the dollar when the yuan is effectively pegged to the dollar?  (Yes, there is a bit of movement allowed, but not enough to notice.)  And how can Beijing claim the yuan is an internationally accepted currency when it doesn’t even allow free use of the yuan by its own traders and companies?  This was highlighted in a Wall Street Journal article yesterday about China’s “trial program” to allow trade settlements in yuan.  Beijing has had such a lack of confidence in its own currency that it has not been allowing even Chinese companies to settle transactions in the yuan.  Now they are beginning to experiment with using their own currency.  If this is still a “trial program”, why should the rest of the world have any confidence in the yuan?

I am also mystified that the “trial program” only applies to “most” of the country, apparently twenty provinces and cities.  Isn’t this something like allowing New York to trade in dollars while telling Rhode Island to try another currency?  It passeth understanding.

Perhaps due to the trial nature of the yuan program, or perhaps for competitive reasons, very little trading is going on in the yuan.  Using the odd period of July 2009 through May 2010, the total value of yuan-based transactions was about $6.5 billion.  If you consider that China’s imports and exports were more than $1 trillion in the first five months of 2010, the value of yuan transactions is trivial.  If the yuan is trivial in China, why should the rest of us care?

Aside from the question of whether or not the yuan is properly valued, no one should take the yuan seriously until it is allowed to float freely and has done so successfully for several years.  China has much to gain from flotation.  If the yuan is truly overvalued, then floating it will help China to contain its inflation by reducing the relative cost of imports.  If it should prove to be undervalued, which I doubt, then China’s currency critics will have been stiffled.  And, by dropping the peg to the dollar, Beijing’s economic policies and the value of the yuan will no longer be dependent on the decisions of the U.S. Federal Reserve – which cannot reasonably be expected to take China’s interests into account.  Or perhaps the Middle Kingdom now prefers to be monetarily governed by Ben Bernanke?  One wonders what Confucius would say.

Perhaps there is a glimmer of sanity in Washington.  Federal Reserve Chairman Ben Bernanke told the House Budget Committee Wednesday that it is time for Congress to “push forward” with the three stalled free trade agreements with South Korea, Panama and Colombia.  Chairman Bernanke made the point that you have seen often on this blog, that the three FTAs can contribute materially to the U.S. economic recovery by encouraging exports and creating or protecting jobs for Americans.  The U.S.-Korea FTA should mean 345,000 jobs, Panama is a key market in Central America, and Colombia is the top Latin American market for U.S. agricultural goods.  That would seem to be a good thing.

The Obama Administration doesn’t appear to see it that way.  They periodically say nice things about the FTAs, but never get around to asking the Congress to approve them.  The longer this goes on, the more it reeks of resisiting agreements that were negotiated by the previous administration, no matter how much that resistance hurts American companies and workers.  Strange behavior for an administration that claims to be pro-labor and says it wants a fast-track to economic recovery.

Uribe & Clinton: Excited About Trade?

Coincidentally, while Chairman Bernanke was testifying, Secretary of State Hillary Clinton was in Bogota answering a question about the U.S.-Colombia FTA.  Secretary Clinton and President Uribe avoided mentioning the FTA during their opening remarks, though Uribe pointedly referred to Colombia’s improving labor rights and the fact that the International Labor Organization has seen enough improvement to remove Colombia from the ILO list of sanctioned countries.  That should make the labor union opposition to the FTA somewhat more comfortable.

Clinton took a question from Felipe Arias of RCN Television:

Madam Secretary, good afternoon…

I would like to ask you, you’ve made great efforts here by President Uribe in recent years to achieve the signing of the FTA with the United States. Can we expect more decisive support from the Obama Administration in order to get the signing of the FTA in the upcoming months? …

SECRETARY CLINTON: Well, first, let me underscore President Obama’s and my commitment to the Free Trade Agreement. We are going to continue to work to obtain the votes in the Congress to be able to pass it. We think it is strongly in the interests of both Colombia and the United States. And I return to Washington very invigorated by the dialogue that we have had and the questions and answers that we have shared to work with your ambassador, who does an excellent job for you in Washington, and your trade minister and foreign minister and others, to begin a very intensive effort to try to obtain the votes to get the Free Trade Agreement finally ratified.

So, the Obama Administration continues to blame a purported lack of votes in the Congress, while many in Congress say they are waiting for Obama to ask them to move the FTAs forward.  Stalemate.

• Business Beyond the Reef received a good review this week from friend Alex Olah, a former Australian trade commissioner, who told his readers:

“If you want to follow the ins and outs of US international trade policy and developments I can highly recommend a look at Steve Craven’s blog. Steve was head of the Commercial Section of the American Embassy when we were stationed in Singapore in the mid-1990s, and we have kept in touch over the years.

After a distinguished career with the US Department of Commerce, Steve (& Donna) retired in Honolulu where he acts as a guru on international trade matters when he is not racing dragon boats or paddling around the Hawaiian Islands.

If you like your international trade served with generous helpings of wit, insight and candour, have a look at Steve’s blog.”

High praise, indeed.  Mahalo, Alex.  Alex and his wife have spent almost a year teaching English in China and he has written a magnificent diary of their experiences that I am encouraging him to publish.  I’ll let you know if he does.

• Political buying power.  That’s what China is using to woo Taiwan, according to a June 2 article in Asia Times.  The opposition DPP party charges that China is sending provincial procurement officers to buy in Taiwan and thereby gain friends and supporters among Taiwan’s business community.  China’s provinces are said to be buying flat screen TVs and monitors, biotech pharmaceuticals, cosmetics, chemicals, electronics, textiles and more.  Shandong Province is said to have spent $620 million in Taiwan last month, and Hubei has ordered more than $25 million in Taiwanese goods.  Seems cheap if political influence is being bought.
• Remember the ballyhoo about a year ago when seemingly everybody was predicting the end of the U.S. dollar’s status as a reserve currency?  Some wanted the Euro, others promoted a basket featuring the Euro and the Yuan.  All is silence now.  The South China Morning Post even published an article this week about how China’s exporters, many of whom had switched their billing to the Euro last year, are now quietly, but quickly, moving their accounts back to the dollar.
• Take a look at my friend Jargalsaikhan Dambadarjaa’s blog post on business ethics.  Jargal is a Mongolian businessman with long experience in the United States.  I found it an interesting read.

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I hope to be back to regular blogging by next Tuesday or Wednesday.  Our travels have taken us to Wooster, Ohio – where our daughter delivered our first grandchildren last night.  That’s right: grandchildren, plural.  Twins, one boy, one girl.  The girl, Rosie, was born just before midnight, with the boy, Brack, not putting in his appearance until nearly two hours later – so our twins have different birthdays!

Mom and babies are due to come home Sunday.  I plan to fly back to Honolulu Monday, leaving the new grandma to help out for a while in Ohio.

Blowing bubbles ...

I have several friends and correspondents in China, and some have recently commented on the presumed bubble in China’s housing sector.  The nutshell summary is that these “insiders” don’t see a bubble.  I don’t either, though many Wall Street gurus do.  That’s not to say that China has no economic weaknesses.  But, as usual, weakness is not likely to come from the “obvious” source.

The comments come from friends in China’s largest cities and from smaller places (at least by China’s standards), people who brave the traffic in Beijing and Shanghai – as well as country roads.  Some are newcomers to China, while others are “old China hands” who have been there for decades.  Some are even Chinese!  In short, my sample – while unscientifc – covers a braod spectrum.  Here’s what they’ve got to say.

As with most everything in China, you have to put the residential housing market in a political context.  One of the things largely missed by Western analysts and media before Tiananmen Square in 1989 was that the prime mover for the protesters was the lack of decent residential housing.  This was focused on the major cities, as the agricultural areas had not yet realized how much better housing could be.  But people flocking to Beijing were dismayed at the hovels they had to live in.  Beijing’s leaders realized this at the time, but underestimated the depth of feeling – a major miscalculation, the lessons of which have not been lost.  They have been battling to increase the supply of housing ever since.  This isn’t altruism or the American-style dream of everyone owning their own home.  This is an attempt to the keep the lid on political fallout.

That is not to say that Beijing wants an unfettered housing market.  Beijing doesn’t trust anything that is unfettered, and they do see the dangers of a potential housing bubble.  Beijing is walking a fine line between bubble and stability, while growing the housing stock, and is doing a reasonably good job of it.  This spring’s tightening seems to have cooled off the residential markets in the big cities.  I’ve seen comments that sales dropped by 70% and that prices for housing in the major cities are down around 10% (I never entirely trust Chinese statistics, so take these as an order of magnitude only.)

What’s happening in smaller cities and in the countryside is less clear.  There are reports that housing continues to boom beyond the big cities and that some of the city money (up to Y300 billion) is moving into the countryside, into precious metals, and into commercial or industrial real estate.  Assuming overall demand has been dampened, however, still leaves Beijing with a huge problem, the problem they have faced for decades: the need to hugely increase the actual supply of housing.  Demand won’t stay down for long, so growing supply is the only long-term method of avoiding future political disturbance – Beijing’s real aim.

Beijing has lately focused on the demand side by trying to control credit and by jawboning the market down.  They now “recommend” that no one own more than two homes, one for your immediate family and another for your parents or children, in a valiant but belated effort to prevent speculative investment.  Unfortunately for policymakers, China already has more than a taste for speculation and this toothpaste simply won’t go back in the tube.  Too much money has already been made to stop it.  Again, only an increase in the housing stock can cure this.  And China hasn’t figured out how to do it.  Maybe they should invite Western housing developers to compete!  Don’t get your hopes up.

The bottom line is that residential housing is not a bubble.  When prices resume their rise, and they will, the focus for Beijing must be on solving an extreme supply problem.

Not so’s you’d notice.  Long-time readers know that I occasionally rant about the Obama Administration’s insincere approach to free trade agreements and apparent disinterest in using them to create or protect American jobs.  I’m not the only one.  Says Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce, referring to the overwhelming positive economic impact of past FTAs: “I defy anyone to name another budget-neutral government initiative that has generated anything like this number of jobs.”

Do we want jobs or not?

It’s been tough with my travel lately, but I finally got around to looking at the Chamber’s new study:  Opening Markets, Creating Jobs: Estimated U.S. Employment Effects of Trade with FTA Partners. Some of the stats in the study are eye-popping.  The Chamber study examined the agreements that the United States had in place with fourteen countries in 2008 and found that 17.7  million American jobs depended on trade with those countries.  More to the point, 5.4 million jobs were created by our much-maligned free trade agreements.  Can you think of any other way that more than 5 million Americans can be put to work with no adverse impact on the federal budget?  I can’t.  But this isn’t good enough for the Obama Administration which, while claiming to like FTAs, still doesn’t ask the Democrats in Congress to move forward the stillborn agreements with South Korea, Panama and Colombia.  The South Korea agreement is estimated to mean some 345,000 jobs. Our politicians should ask their voters if they would like a job or two.  And export-related jobs tend to be higher paying than other jobs in the U.S. economy.  Who besides an out-of-touch politician in Washington would say no to such a deal?

The fourteen FTAs that our politicians despise added 2.1% to our GDP in 2008, putting $3.4 billion into the hands of their constituents.  Our exports to these markets grew nearly three times faster than our sales to the rest of the world.  One wonders how this is bad?

The rest of the world has seen the light and is merrily negotiating and implementing new FTAs while our negotiators are left sitting on their hands – and while our exporters find themselves increasingly disadvantaged in foreign markets.  Yes, it would be nicer if our trading partners kowtowed to the wishes of our Congress on labor standards and environmental policies, but when did we get the right to legislate for other sovereign nations?  Would we allow another country to hold up an agreement if they wished to change, say, U.S. military policies in Afghanistan?  Somehow I doubt it, but that is what we are trying to impose on others.  By using FTAs as the tool, we are merely condemning U.S. export sales and killing jobs that our country desperately needs. Wake up, Washington.

I wonder how many people are aware that May is World Trade Month in the United States?  Not as many as those who know that May is also National Hamburger Month.  Now that’s a month you can sink your teeth into!

Despite things like President Obama’s National Export Initiative, and occasional Congressional fulminations against trade, relatively few Americans think about international trade on a regular basis.  That is probably due to the sheer size of the American domestic market, where we have much of a continent to play with.  A shipment from Utah to Ohio is not an export, while a far shorter shipment from Denmark to Norway is.  Gives one a different perspective.  Here in Hawaii, if I approach a local company to talk about exporting, they often think I mean selling in California.  California can seem foreign at times, I’ll admit, but those sales don’t show up in our export statistics.  While many U.S. manufacturers do export and do it well, the average factory worker may not know where that day’s production is going – and likely doesn’t care.

Americans are far more conscious of imports, but often for the wrong reasons.  They hear commentators shout that other countries are taking advantage of us, and neo-mercantilists argue that we need to protect against imports (and subsidize exports).  Despite the billions spent on imported consumer goods at Wal-Mart or Costco, there is rarely much understanding that imports bring variety and help keep prices down.  There is even less consciousness about the role of imported materials and equipment in keeping American manufacturing going.

So, how important are exports to the United States, really?  Absolutely critical, whether our citizens appreciate it or not.  The big picture is that, using 2008 data, U.S. exports supported 10.3 million American jobs (6.9% of total U.S. employment) and accounted for 12.7% of U.S. GDP.  Between 1993 and 2008, exports chalked up 40% of job growth in the United States.  There’s a lot more detail in a recent article published by the U.S. Department of Commerce. You can bet exports are critical to the 288,747 U.S. firms, mostly small businesses, known to be exporting.

Source: U.S. Department of Commerce

Commerce’s data on the sectoral distribution of export trade caught my eye.  In manufacturing, the sector that mainstream media, many labor unions and most politicians think has been killed by trade and outsourcing, exports provide nearly 3.7 million jobs (27% of total manufacturing employment).  And, while manufacturing is still very important, the pie chart shows how important our exports of services have become.  Take a look, too, at my earlier post that detailed U.S. services trade.

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There are World Trade Month events all over the country.  If you are going to be in Honolulu on May 19, come join us at the Foreign trade zone from 9:00 AM to 1:00 PM for informative talks and a chance to meet people in the export business.  That afternoon, Governor Lingle is scheduled to present special awards to some of Hawaii’s outstanding exporters.

Premium Fuel

Here we go again.  Politicians using a laudable, popular objective as a front for what is perhaps not so laudable.  Joined by 28 others, Representatives Earl Pomeroy (D – North Dakota) and John Shimkus (R – Illinois) have introduced H.R. 4140, a bill to extend for five years the lives of the various subsidies and import restrictions that have been boosting the corn ethanol industry in the United States.  The bill would extend the Volumetric Ethanol Excise Tax Credit, the Small Ethanol Producers Tax Credit, and the Cellulosic Ethanol Production Tax Credit (the latter for three years).  No, I don’t understand the differences, either.  What prompts this post is that the bill would also extend a special tariff that applies an effective tariff of more than 29% on imported ethanol.

Ask most economists and many environmentalists and I expect they will tell you that this bill is a bad idea.  On the environmental side, there is mounting evidence that corn-based ethanol production harms the environment as much as it helps it.  Sugar and a few other crops, I’m told, are far more ecologically sound – and Brazil’s sugar-based ethanol is often looked to as the model for the industry.  Unfortunately, sugar cane can’t be grown in the sponsoring politicians’ states, but corn can.  The economic rationale for corn-based ethanol appears increasingly unsound.  To simplify, production of corn ethanol reduces the availability of corn for other uses, such as feed for animal production or, indeed, corn for human consumption.  Obviously, this raises the price of corn, and raises the price of everything the consumer buys that is derived from corn.  Most economists would say we would be better off if we can produce our ethanol (if it is really needed) from crops or on land that do not compete with as many other uses.  Again, sugar, certain quick-growing grasses and various other sources of cellulose come to the fore.  This is without considering the costs of operating the corn ethanol industry itself.  In a nutshell, it is an industry with doubtful environmental or economic credentials, largely surviving due to the government handouts that Mssrs. Pomeroy, Shimkus and the others wish to extend.  And I haven’t even gotten to the part that worries me.

Responding to oil shocks and wanting to nurture an ethanol industry that showed all the signs of becoming a political cash cow for the Midwest, the U.S. Congress in 1980 established a “temporary” import duty of 14.27¢ per liter of ethanol.  As many “temporary” things do in Washington, this duty has persisted for a generation.  It was argued at the time that the duty was necessary to give our home-grown ethanol industry a chance to get started.  We generally complain when we hear the “infant industry” arguments of other countries, but why bother with consistency?  Energy independence was the watchword then, not the environment or even economic sense, and our Congress wasn’t going to let us fall prey to a global conspiracy of predatory sugar farmers.

It didn’t matter that our temporary ethanol duty was a pretty clear violation of our GATT (now WTO) commitments.  Our U.S. trade negotiators (the same ones the politicians like to say can’t negotiate a good deal) went out and dutifully negotiated a legal figleaf for the duty.  So, thirty years later, the previously illegal duty remains in place.  The United States imports a bit of ethanol despite the duty.  Canada sells us some more corn ethanol duty-free under NAFTA, and Trinidad & Tobago ships in some sugar ethanol at a reduced duty under the Caribbean Basin Initiative. Who gets left out?  Brazil, the world’s most efficient producer of sugar-based ethanol.

Where does that leave us?  We have an environmentally and economically doubtful industry, propped up by hefty Federal subsidies, and supported by a “temporary” customs duty that keeps out ethanol that makes environmental and economic sense.  When applied to 2009 prices, that 14.27¢ per liter duty equals something north of 29%, making it one of our highest tariff walls in any industry.  To “temporarily” protect a 30-year-old “infant” industry.  When do they grow up?

Ready for Visitors

Tourism is Hawaii’s top industry, but it is pretty important to the United States and, indeed, to the entire world.  Whether you call it the tourism industry, the hospitality industry, the visitor industry or the travel industry, tourism has been a major influence on the world for centuries.  Pleasure travelers were a privileged few until the 20th century, but those earlier tourists set the tone for the rest of us – and we merrily followed them beginning in the 1950s.  Something to do with the emergence of jet-powered passenger aircraft.

The World Travel & Tourism Council computes a global travel and tourism GDP.  Their numbers aren’t exact, given that they combine stats from all countries – some of which don’t even produce such numbers.  But they are still a good estimate of trends and orders of magnitude.  The Council forecasts that world travel GDP will be about US$5.75 trillion this year, growing to more than $11 trillion within a decade – almost doubling.  They say that travel and tourism provided humanity with more than 235 million jobs last year and they think that will be over 303 million by 2020.  To bring it down to our level, that would be one job out of 11 – worldwide!  World export earnings from travel (imports, too, if you think about it) will be over US$1 trillion this year.

What do they see for the United States?  WTTC forecasts U.S. travel and tourism GDP at a shade less than $1.4 trillion in 2010, compared to our total GDP of about $57 trillion in 2009.  That makes travel and tourism a little more than 2% of the American economy, and they expect our travel and tourism GDP to grow to nearly $2.5 trillion in 2020.

Those numbers include all travel, both international and domestic, and most of America’s travel GDP is domestic.  If you live in Hawaii and travel to paddle in an outrigger canoe race on Lake Las Vegas (hey, I do that every October!), that is counted in travel GDP.  Same for the business trip to Detroit.  Since my interest is travel and tourism as an export industry, I need to back those numbers out and take a look at them.  Fortunately, WTTC has already done it.  They show U.S. travel and tourism exports as likely to hit close to $141 billion this year; that’s money spent by foreign travelers coming to the United States, whether for business, pleasure, schooling, whatever the reason for the travel.  The WTTC number is slightly below the U.S. Department of Commerce figures for 2008, which showed exports of $142 billion, but I won’t quibble.  What is interesting is that WTTC expects U.S. travel and tourism exports to grow to $295 billion by 2020.  That’s 109% growth for the decade!  With that kind of consistent growth, we’re bound to hear about a travel and leisure ETF any day now.

Almost everything above relies on estimates, guesstimates and forecasts.  The latest “real” numbers from the Commerce Department for U.S. travel and tourism exports go only through November 2009.  Through November, the United States drew about 44 million international visitors, down from the same period in 2008.  Those 40 million spent more than $111 billion while they were here, but that was down by nearly 15% from 2008.  (Good I thing I didn’t quibble with the WTTC in the previous paragraph.  Looks like a recessionary drop in 2009, with expected growth nearly back to 2008 levels in 2010.  Not unreasonable, but also not guaranteed.)

Bringing them in

Finally, where are all these travelers coming from?  And where are they going?  We have to go back to Commerce’s 2008 data (the latest full year available) to answer these.  So, which state is the big winner for attracting travelers?  (Imagine a drum roll here.)  New York, by an overwhelming margin.  Fully one-third of all visitors to the United States are headed for New York, most of those just to New York City.  Nothing else comes close.  California and Florida are next up with about 21% apiece (ah, the magic of the mouse).  Nevada wins about 8%, followed by Hawaii with roughly 7%.  But the big surprise for me was Guam, a magnet for 4.7% of visitors to the United States in 2008 – though they don’t generally stay for long.  Mostly quick trips from Japan for sun and sand.

48% of our foreign customers came from Western Europe, led by the United Kingdom with almost 18% of the total, so you aren’t imagining those British accents in the shops of Manhattan.  But look to Asia for our next biggest market for travelers: Japan with more than 13%.  Some of our other top sources?  Germany (with 7%), France (4.7%), Italy and Brazil (3.1% each), South Korea (3%), Spain and Australia (tied with 2.6%).  I noticed an oddity about Commerce’s statistics: travelers from Canada and Mexico weren’t included.  I assume all the day-trippers across the border would overwhelm everything else and skew the picture.

Enough of all these numbers!  The next post in this series will take a deeper look at Hawaii’s international tourism industry.