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Report: Travel Restrictions Inflicting Substantial Toll on Global Growth and Trade

August 11, 2021 by Dan McCue
Report: Travel Restrictions Inflicting Substantial Toll on Global Growth and Trade
Terminal C at Reagan National Airport. (Photo by Dan McCue)

A year and a half into the COVID-19 pandemic, travel bans meant to stem the crisis are taking a significant toll on global growth and trade, according to a new report from The Conference Board, the nonprofit business and research group.

According to Trade Risks: Travel Bans, the travel services industry — slammed by abrupt border closures in 2020 — may only recover to 50% of 2019 levels by the end of 2021. 

A full recovery of travel services would add 0.7 percentage points to 2021 global GDP, lifting The Conference Board forecast of 5.3% growth to a full 6.0%. 

However, if travel bans persist or even tighten, current consensus growth forecasts may be too optimistic, the group says.

“For much of the world, the travel bans enacted as emergency measures in 2020 remain in place,” said Dana Peterson, chief economist of The Conference Board. 

“The continued emergence of new virus variants and stubborn vaccination challenges — whether due to supply, logistics, or hesitancy — are understandably prompting governments to extend policies that heavily restrict the movement of people across borders,” Peterson said. 

“But with no certain end in sight, pandemic-era travel bans risk transforming long standing expectations around the free movement of goods, services, cash, and people—and becoming a perpetual headwind holding back global economic potential,” she added.

Peterson and her co-author on the report, Gurleen Chadha, a research analyst at The Conference Board, found that companies dealing with their own ongoing struggles from the pandemic, are continuing to cut costs by forgoing business travel.

The fact 63% of governments still have either total or partial bans on foreign visitors in place, is further accelerating a long-term trend toward virtual meetings.

“Over the long term, this shift may threaten industries that thrive on in-person connections that drive innovation and/or sales and customer relationships,” Peterson and Chadha wrote.

And travel bans on foreign tourists are an even greater risk to economies worldwide, they said.

Tourist spending accounts for 87% of total global exports of travel services — which collapsed worldwide in 2020. 

The ongoing negative impacts of this collapse have extended beyond tourist industries directly affected by travel bans, to pummel adjacent sectors like entertainment, amusement, and food services, as well as national and regional governments dependent on tax revenues from visitors. 

Tourist hubs in Asia and the Caribbean have borne the brunt of these challenges, but even some of the world’s largest and richest economies — including Germany, Italy, Mexico, and Hong Kong—face outsized exposures to continued restrictions, Peterson and Chadha said.

They go on to write that the path to recovery for travel and tourism activity remains uncertain given the tangle of conflicting restrictions on foreign visitors around the world. 

Ideally, international people flows would return to pre-pandemic levels by the end of 2021 or early next year. 

However, as coronavirus variants spread, such a return to normalcy is highly dependent on the degree to which individual governments roll back travel bans and people regain confidence in the safety and reliability of international travel, they said.

The report goes on to say travel bans threaten to sour relations between economies that choose to reopen borders quickly and those that do not. 

Even before the pandemic, rising geopolitical tensions were already fueling a surge in tariffs, sanctions, and protectionist sentiments. 

As governments choose different paths to reopening their borders, travel restrictions may become the next front for international trade friction and another prime risk to the future of globalization, Peterson and Chadha wrote.

The next level of global trade risks includes not only the threat of more tariffs and sanctions but also restrictions on the free movement of goods, services, cash, and people around the world, reflecting in part the ongoing effects of the pandemic, the authors said.

Moreover, the roughly 334 million people globally who are dependent upon trade in the travel services sector may face additional layoffs and, potentially, permanent job losses as their industries shrink, they added.

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