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Explain the role of international tourism on the balance of trade (deficit or surplus)...

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sta112 | Teacher | (Level 1) Salutatorian

Posted April 1, 2013 at 3:11 AM via web

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Explain the role of international tourism on the balance of trade (deficit or surplus) of any nation.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted April 1, 2013 at 3:35 AM (Answer #1)

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While we typically think of the balance of trade as something that applies only to goods that are physically transferred to other countries, services such as those involved in tourism are included in the balance of trade as well.   This impact is sometimes called the “invisible balance of trade.”

When tourists come to a country, the money that they spend is counted as export income for the country that is being visited.  When tourists come to a country, they need to get that country’s currency.  For example, a Japanese tourist coming to the US must use yen to buy dollars.  This is similar to what a Japanese company would do if it wanted to buy physical goods from the US.  Therefore, it makes sense to have the yen that the tourist uses to buy dollars count as export income for the United States.

Thus, tourism can help a country’s balance of trade.  If tourists coming to the country spend a lot of money, it can help lead to a trade surplus if the country’s imports are not so high as to cancel that effect out.

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