Tourism Agreement Should Be Applauded, But Does It Create an Unfair Monopoly?

On Dec. 11, 2007, the U.S. and China signed a memorandum of understanding on group leisure travel from China to the United States. This MOU should be applauded because it lifts prior Chinese rules restricting the travel industry. Still, a question remains whether travel agencies designated by the China National Tourism Agency (CNTA) will receive an unfair monopoly under the MOU.

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Prior Chinese restrictions prevented travel agencies advertising and organizing group leisure travel to the United States. These restrictions were in place because China and the U.S. hadn’t negotiated an approved destination status (ADS) agreement. Under a typical ADS agreement, China eases these restrictions for CNTA-designated travel agencies that post a bond with the Chinese government. In turn, the agencies collect “insurance” from their clients, the amount of which varies. And the destination country agrees to ease visa application requirements by waiving interview and fingerprinting requirements.
An ADS with the U.S. agreement isn’t possible given post-911 U.S. laws requiring interviews and fingerprints. Still, the MOU essentially provides the benefits of an ADS agreement without requiring the U.S. to change its laws. Under the MOU, CNTA-designated travel agencies may advertise and organize group leisure travel to the U.S. In return, among other things, the U.S. agrees that CNTA-designated agencies may make “exclusive” group interview appointments with the U.S. consular posts in China.
This is a step in the right direction. Chinese tourist dollars benefit the U.S. economy. Also, in the past, there has been a great deal of disembling as Chinese travel agencies sought to avoid market restrictions by organizing leisure travel under the guise of “business” travel. The agencies would then encourage applicants to misrepresent their travel purpose in U.S. visa applications. And U.S. consular posts would often deny such applications for failure to prove the business purpose or for misrepresentation. The MOU should alleviate this problem.
Still, the U.S. may be giving an unfair monopoly to CNTA-designated travel agencies by allowing them “exclusive” group interview appointment rights. It’s not clear what these “exclusive” rights are. Earlier in the negotiations over the MOU, the Commerce Department objected to giving exclusive rights to CNTA-designated agencies. A 2006 Washington Post editorial explained:

Needless to say, the United States cannot give preferential treatment to selected travel companies and grant them the profits from all inbound Chinese travel business. It would violate our laws and our most basic ideas of fairness.

But it’s not clear precisely what “exclusive” rights CNTA-designated agencies get under the MOU. The U.S. consular posts already allow group appointments to be booked if six or more are traveling together at the same time and for the same purpose.The MOU is expected to be implemented in the Spring of 2008. We may find out what “exclusive” rights CNTA-designated agencies have at that point.

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