U.S. Protectionists Find Travel Tax Plan Useful

Press, Volume CVIII, Issue 31614, 27 February 1968, Page 22

U.S. Protectionists Find Travel Tax Plan Useful

(From

FRANK OLIVER,

N.Z PA.

special correspondent)

WASHINGTON. Not only is it going to be difficult for Mr Johnson to secure from Congress tax on travel to help the bal-ance-of-payments deficit but his idea is giving the protectionist lobby a lot of help in the effort to nullify the achievements of the Kennedy Round.

Armed with facts and figures supplied by the lobbyists, members of Congress who favour protectionism have begun to speak up loud and clear for a curb on Imports. One of the most powerful voices is that of Senator Hugh Scott, of Pennsylvania, a Republican, who has been urging in the Senate import quotas on foreign goods as an alternative to the controversial travel tax. And it is very controversial. Members of the House Ways and Means Committee, which soon will consider the President’s "travel tax package,” say their mail is running about 100 letters a day from voters opposing the travel tax.

Senator Scott is strong for reductions in the importation of steel and textiles. European steel caused a big deficit for the American steel industry last year he asserts, while imports of textiles from Hong Kong and Japan also accounted for a big loss. Sentiment for curbs on steel and textile imports is said to be rising while the White House tries to stifle the demands.

A leading Republican member of the House Ways and Means Committee says he won’t give the travel tax plan his support unless it is accompanied by a 10 to 15 per cent tariff surcharge on all imports. It is now ciear that the Administration underestimated the extent of public reaction to plans to keep American travellers out of Europe for a couple of years. Not only have various carriers opposed the plan but also masses of the general public who object to any interference with their right to go where they please when they please. Parents object to the

scheme because it would ruin plans of student sons and daughters to broaden their horizons by means of a trip to Europe. Ethnic groups began to howl. Every year many of them look forward to a visit to “the old country," whichever it may be, and do not want their plans interfered with. Some airlines protested that the scheme would practically put them out of business, though the known facts scarcely support this. Travel agents said they feared very thin times, if not bankruptcy. The uproar forced the Administration to back down

from tjie original plan of an almost prohibitive head tax (except for the rich) on American travellers and substitute the idea of a tax on any daily expenditure of over $7 a traveller. Reports from Congress indicate even this scheme has little or no chance of getting through the legislative mill as it is now framed.

The situation was ideal for the protectionism lobby to move in and get busy and all indications are that they are making the best of their opportunity. If they get round to formulating a slogan

it is likely to be, “Let the people travel and keep out foreign goods." It is a good election year ploy anyway. No lawmaker likes to raise taxes or add new ones just before approaching the voter for reelection. Foreigners, whose goods would be affected by import curbs, do not vote. To the average legislator it is as simple as that. The “Washington Post" says it would be naive to hope that the Treasury can impose a stiff tax on foreign travel without providing an opening for the protectionists who want to erect new barriers to the international movement of goods The prospects are frightening, it says, “but who can deny ' that a shift towards trade protection is not the logical concomitant of restrictions on the movements of capital and people?” The “Wall Street Journal” says in Congress and elsewhere that the Administration has fought long and hard for freer trade, “but now it seems ready to meekly abandon the field to the protectionists.” The administration, it adds, has so denuded itself of intellectual armour with its grab bag of measures taken and proposed to try to deal with the chronic deficit in international accounts that it should be “an easy opponent for the steel, textile and other industries eager to curb competitive imports.” To many observers it begins to look as if it is accompanied by some form of import curbs and that probably dooms the whole idea. Meanwhile, it came in for criticism from a number of newspapers. One speaks of officials trying to dissuade Americans from travelling to Europe as “pennywise and pound foolish.” It said that the travel tax might do something for the balance of payments, but what, it is asked, would it do to American exports? It is stated that foreign flag airlines are now flying or have on order American aircraft valued at $4600m and in addition have ordered 35 supersonic aircraft to cost over sl4oom. If foreign travel is choked off foreignflag aircraft will not be needed to carry Americans overseas, and the loss in aircraft orders could be much lai ger than Mr Johnson proposes to save by his travel tax, says the newspaper.