Every country has its own special blend of natural resources that are indigenous to its particular region of the globe. These resources help to drive a country’s economy and fuel the markets around the world. However, very few countries can be entirely self-sufficient in every aspect of the marketplace. Even if a country does have the resources to produce all its basic products domestically, there is always a market for imported luxury items. The following highlights some of the ways in which terrorism impacts how importing and exporting is done throughout the world.
Disease
The threat of biological terrorism raises fears in regards to the importing and exporting of products from one country to another. Terrorists could possibly contaminate a shipment with a biological weapon, such as anthrax, in order to infect those that will receive the contaminated shipment. This has led to many countries making stronger regulations and taking security precautions to help deter the threat of biological contamination.
FDA
The United States has responded to such threats by passing the Bio-Terrorism Act in 2002 which mandates that manufacturers of products that are considered food or beverage be registered with the Food and Drug Administration (FDA) before any shipments will be allowed to enter the United States. Along with the manufacturers being required to have registered with the FDA, notice of the actual shipment must be given to proper authorities before any foreign import will be allowed across the borders of the United States.
Market Effects
The effects of heightened security surrounding the importing and exporting of goods result in higher costs passed onto the consumer. Such price increases serve to shape the financial world of importing and exporting. Due to higher costs, companies may decide that importing or exporting a particular product is no longer cost effective. If importing and exporting continues to occur, profit margins may be effected which will in turn hurt the overall performance of the company and its value on the market. This is how terrorism serves to shape the world economy by affecting the importing and exporting habits of virtually every nation around the globe.
Tourism and Terrorism
For many, a vacation means taking time away from work in order to rejuvenate the mind and body and get away from the hustle and bustle of everyday life. To others, vacations are a key part of livelihood. Countries and regions that depend on tourism to keep their economy afloat are especially susceptible to the negative effects that terrorism can have on tourism. The fear that is caused by terrorist attacks generally compels people to stay closer to home and to play it safe versus risking terrorist activity. The tourism and travel industry, together, are in a much better financial position when there is a minimal amount of terrorism.
Travel
The targeting of mass public transportation such as buses, planes, and trains for terrorist attacks has made many travelers leery of straying too far from home. Events such as subway bombings and plane hijackings serve to hurt the travel industry as well as the hotel industry, especially in Middle Eastern countries. Both India and Nepal experienced a massive drop in tourism after the September 11th attacks on America in 2001. The reason for this drop in tourism was because of their close proximity to Afghanistan and the subsequent war that followed the September 11th attacks.
Industry Effects
Prior to the September 11th attacks that brought terrorism to the forefront of the world’s political scene, tourism was the world’s largest industry. Nearly 10 percent of all the jobs around the world were related to tourism and travel prior to the attacks. After the attacks of 9/11 the public’s reluctance to travel resulted in thousands of employees in the travel and tourism industry to lose their jobs. Since this initial market downturn, fears have cooled and the tourism industry has begun to slowly recover, but this example is an excellent reminder of how fine a line the tourism industry is walking.
Dependence
Any country that depends heavily on tourism for economical stability is playing with fire. The threat of a terrorist flare up can cause the loss of millions of dollars in revenue and cripple an economy. This realization has prompted many of the leaders of tourism dependent countries to begin efforts to promote other industry in their respective regions in order to safeguard their local economies should terrorism temporarily derail the tourism industry as it did after the September 11th attacks.
The basic concept of insurance is simple; pay a premium in exchange for the comfort of knowing that should a disaster occur, an insurance company will foot the bill. Therefore, it is only natural that insurance agencies evolve to offer higher levels of insurance against terrorist attacks in a world that has become increasingly aware of terrorism’s devastating effects.
Government
Many people in the private sector of insurance feel that since it is the government’s duty to provide security to the American public against terror attacks, the government should also help in the rebuilding process should an attack occur. Private insurance agencies are very skeptical about providing terrorism insurance because of the lessons learned from the damages incurred from such attacks as the September 11th attacks on America and the bombings in London in early 2005. The September 11th attacks alone caused the loss of $32.5 billion in insured damages. This was exponentially more costly than any other disaster that had ever been faced by the United States with the previous most costly disaster being Hurricane Andrew that struck in 1992 and caused an estimated $21 billion in damages.
Businesses
Large companies, especially airlines, have seen insurance prices skyrocket due to the costs associated with insuring against terrorist attacks. Prior to 9/11, businesses were paying premiums that were substantially lower. For example, Chicago’s O’Hare airport was paying a monthly premium of around $125,000 before the events of 9/11 in order to receive $750 million worth of coverage. After 9/11, the premium rose to an estimated $6.9 million for a coverage of only $150 million. This is how terrorism affects the economical structure of the insurance industry. As the threat of attack rises, so do premiums, while the amount of coverage that is provided falls. This translates into business paying more and getting less.
Government Help
In response to the 9/11 attacks, the American government passed the Terrorism Risk Insurance Act in 2002 which was designed to allow the United States government to foot most of the bill should another catastrophic attack occur. The Terrorism Risk Insurance Act runs through 2005 and has many debating whether its renewal is needed or whether private insurance agencies should be left alone to insure America against terrorist attack. This illustrates the dilemma that is faced by all nations regarding what is the proper course of action in response to providing insurance against terrorist activities. The world seems to be divided between those that believe governments are responsible and those that want the private sector to take responsibility.
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