Border Net Has Become a Noose, U.S. Firms Say

A veteran of the U.S. oil industry, Paul Fairbanks is accustomed to the chaos and bureaucracy of countries such as Venezuela and Nigeria. But in the three years since the Sept. 11 attacks, he has faced obstacles from an unexpected source: the U.S. government.

The Bush administration’s effort to tighten the borders has meant millions of dollars in lost revenue and added costs for Fairbanks’ employer, Dresser-Rand Control Systems. Customers resent lengthy delays in obtaining U.S. visas, and the company’s foreign-born engineers are routinely delayed and scrutinized at U.S. airports. At least one foreign firm has severed relations with the company.

“Security has a price, and part of the price is what we’re seeing here,” Fairbanks said.

Business executives have been reluctant to protest too loudly because no one wants to be accused of opening the door to the next terrorist attack on American soil. But throughout the country’s increasingly globalized economy, concern is growing over the costs of a security-driven foreign policy.

U.S. and foreign hospitals are building medical centers in cities such as Singapore and Shanghai for wealthy patients who no longer can or want to travel to the United States. New regulations threaten to crimp commerce along the U.S.-Mexico border. Experts in the cutting-edge technologies that are likely to drive growth in the 21st century face long waits for visas, or outright rejection. Instead of attending the best U.S. schools, foreign graduate students are heading to Britain and Australia.

Wealthy foreigners are shopping, buying vacation homes and investing elsewhere. That has contributed to a plunge in direct foreign investment in the United States, which dropped to $40 billion last year from $72 billion the year before, according to the Organization for Economic Cooperation and Development.

Firms such as Dresser-Rand, Boeing and Merck are outsourcing work, moving meetings to less restrictive locations abroad or expanding foreign operations.

Administration officials said fears of economic fallout from their policies are overblown, and they cited improvements in exports and job creation. They also said they had dramatically reduced the wait for visas by adding personnel and technology.

Rather than choking off commerce, the tighter border security and immigration controls have provided a more secure environment for business, said Asa Hutchinson, undersecretary for transportation and border security in the Homeland Security Department. “I would make the case it is not costing our economy, it’s the foundation for economic growth,” he said.

Critics counter that Washington has swept problems such as illegal immigration and industrial espionage into its widened security net, bogging down a system that should be focused on more serious threats. Meanwhile, there is no program for expediting visas for frequent business or academic visitors, and it can take several years for workers with specialized skills to obtain them.

“It does have a critical impact,” said Dr. Ismail Kola, vice president of basic research for Merck, a New Jersey-based pharmaceuticals firm that waited months for a visa for an Asian chemist it was hiring to work on a new project. Kola said the company loses millions of dollars each day a new drug is delayed.

William Reinsch, president of the National Foreign Trade Council, whose members include Boeing, Caterpillar, Motorola and Microsoft, said the security restrictions had “ominous” implications for the country’s ability to retain jobs and stay at the forefront of technological development.

Visa delays alone have cost U.S. exporters $30.7 billion in lost contracts, delayed shipments and other areas, according to a study released in June by Reinsch’s group and seven other leading U.S. business organizations. The restrictions impede access to fast-growing markets in countries such as China, which has supported the administration’s campaign against terrorism.

“I think this is in part contributing to the growth of research labs in centers of excellence in China and elsewhere,” said Reinsch, who served as the head of the Clinton administration’s export control program. “Companies are saying, ‘If we don’t know if we can get our guys here, then we’ll put our labs over there.’ ”

Some of the companies hit hardest are those that have been doing business with the Middle East or Muslim countries elsewhere. Since the Sept. 11 attacks, U.S. firms have lost at least $1.5 billion a year in contracts, tourism receipts and tuition from the Arab world, says the National U.S.-Arab Chamber of Commerce, a Washington-based trade group.

Midamar, an Iowa food products trading company, is one of them. Founder Bill Aossey’s customers include the foreign outposts of McDonald’s, KFC and other large U.S. restaurant and hotel chains.

Aossey couldn’t get visas this year for any of his top dozen foreign clients to visit his facility and attend the nation’s biggest restaurant trade show, in Chicago. Last year, only two were able to get into the country.

“I’ve lost hundreds of thousands of dollars in business over the last three years,” said the frustrated 62-year-old, who recently lost an order for $175,000 worth of bakery equipment to a Belgian firm because his Saudi customer couldn’t get its Egyptian engineer into the United States.

Such an example illustrates how closely the U.S. economy is connected to the rest of the world.

Dresser-Rand’s Houston-based controls division builds 40 to 50 highly customized systems a year that operate turbines, generators and compressors used primarily in the oil industry. The company also has an international team that can handle emergencies, meet with clients, and design, build and install machinery.

The unit’s 18 engineers are based in seven locations around the world, and among them they carry passports from seven countries and speak eight languages. Many are from Latin America, Asia and the Middle East.

In the past, getting a U.S. visa for a foreign employee or customer took at most a few days. But after Sept. 11, Washington began scrutinizing prospective visitors more closely, particularly men between the ages of 16 and 45 from Middle Eastern or Muslim countries. Those locations are major customers for the oil industry, as well as U.S. firms such as Boeing.

Applications for visas to visit Dresser-Rand’s headquarters disappeared into a bureaucratic black hole. The company’s foreign-born employees also had problems reentering the United States, particularly if they were returning from a country deemed a security risk. One of its engineers, an Egyptian who has been working legally in the United States for four years, has been delayed at the airport for as long as 10 hours on numerous occasions. With Dresser charging $2,000 a day for the services of an engineer, the losses add up quickly.

“I’m not saying that security measures shouldn’t be in place,” said Elizabeth Dickson, an immigration advisor who works in the New Jersey offices of Ingersoll-Rand, the parent of Dresser-Rand. “I think they should. But I would certainly hope that everybody should not be treated as a terrorist.” Dickson advises foreign customers to go to their visa interviews with information about Dresser-Rand’s operations and products, and she sends supporting documentation. But often, she is told, U.S. consular officers don’t even look at the papers.

“I don’t think it makes us secure at all,” Dickson said. “People keep telling me they get 30-second interviews. How much do you learn in 30 seconds?”

After Sept. 11, Dresser-Rand found it difficult to get visas from a number of countries, including Brazil, for employees who were born in the Middle East or Muslim countries elsewhere. Steve Churbock, 43, manager of the controls field services team, said Dresser-Rand was forced to forgo bidding on a number of contracts valued at $300,000 to $400,000 apiece.

The visa problems also have hurt Dresser-Rand’s cash flow. Since its equipment is sophisticated and custom-made, customers visit the factory to oversee final testing, a process that can take two weeks. And they don’t pay until they’re satisfied.

“Enough is enough,” Churbock said. “We’re being choked by these policies, and Americans don’t have a lot of friends left in the world.”

A joint-venture operator of one of Malaysia’s largest oil and gas drilling operations waited more than five months to get a visa for its engineers to collect a $350,000 upgrade for a gas turbine generator from Dresser-Rand. Another Malaysian customer told Fairbanks that he was through doing business in the United States after the delivery of a piece of crucial equipment was delayed because of visa problems.

“They basically told us they didn’t want to do business with us anymore,” Fairbanks said.

The problems extend far beyond Dresser-Rand.

Boeing has lost millions of dollars because foreign customers -- particularly those from the Middle East or Muslim countries elsewhere -- couldn’t get visas for their pilots to pick up new jets or undergo training. The visa process has improved in recent months, Boeing spokeswoman Amanda Landers said, but the company still has problems getting foreign customers into the United States. The company has shifted some work or meetings overseas.

Terrorism fears, tighter security and worries about border hassles also have contributed to the woes of the country’s half-billion-dollar travel and tourism industry. The number of foreign visitors plummeted from 50.9 million in 2000 to 40.4 million in 2003, representing a $22.5-billion loss.

This year, organizers of a conference for Asian insurance executives moved the event from Hawaii to Hong Kong out of concern that they would not be able to get visas for the 3,000 participants, most of them Chinese. Hawaii lost more than $17.3 million in visitor spending and $1.4 million in taxes.

International travel has begun to rebound this year, but it remains far below pre-Sept. 11 levels.

Healthcare for foreigners, one of the fastest-growing segments of the U.S. service economy, is also at risk. The U.S.-Arab business group said American hospitals that provided heart transplants and treated cancers and other ailments for the elite of the Middle East have lost as much as a billion dollars a year.

Philadelphia International Medicine, a joint venture of nine hospitals, saw its business collapse. Customers are beginning to return, but most of the new patients come from outside the Middle East and revenue is still down 36%, said Leonard Karp, vice president and chief executive.

Karp said visa problems had increased pressure on U.S. healthcare providers, including his own, to set up facilities overseas.

“Look at Asia. Johns Hopkins is in Singapore with an oncology facility,” Karp said. “The city of Shanghai is developing a medical city, and there are multiple organizations from around the world looking to develop a presence there.”

As criticism has escalated, the U.S. government has begun to respond. Acknowledging that security restrictions had given the United States a “black eye,” Robert C. Bonner, the commissioner of U.S. Customs and Border Protection, has announced that visitors who committed minor immigration violations would no longer be put in handcuffs and shipped home without a hearing.

That change affects citizens of 27 countries who can visit the United States without visas. In addition, Congress has given those countries an extra year to provide biometric identifiers -- measurements of physical features, such as a fingerprint, that can be stored in a database -- on the passports they issue.

The U.S. government also has modified a program that requires fingerprinting and photographing of most arriving foreigners. It is to be expanded from air and seaports to the 50 largest land crossings at the end of the year.

But community leaders in Texas, Arizona and California warned that pushing ahead without adequate resources would create gridlock and cost billions of dollars in revenue for border communities and Mexican factories that provide “just in time” delivery for U.S. firms. In response, the U.S. government agreed to exempt approximately 7 million short-term Mexican visitors holding “laser visas” from the program and allow them to extend their visits from three days to 30.

Hutchinson, of the Homeland Security Department, said new programs were being developed to speed up the flow of goods and people. They include a pilot program that creates a fast track at airports for frequent travelers and a team of immigration officers to assist foreign students.

“Any problems that are unreasonable we are trying to address,” he said.

Janice Jacobs, deputy assistant secretary of State for visa services, acknowledged lengthy delays in 2002. Since the Sept. 11 attacks, she said, the U.S. has doubled the number of entries in a database of people ineligible to enter the country because they are suspected of money laundering, terrorism, drug trafficking or other crimes.

But Jacobs said the government also added 969 consular officers last year and invested $1 million in new technology so visa applications requiring extra scrutiny could be transmitted to Washington immediately. The State Department says 80% of visa applications undergoing additional review now are processed within a month.

Those steps helped Calcot Ltd. of Bakersfield, the nation’s second-largest cotton exporter, restore a long-standing educational program for foreign buyers. Visa delays forced them to cancel it in 2002, but this year all 22 students got their visas, said Ron Nickell, assistant director of Calcot’s Annual Cotton Classing and Marketing School.

But scientists and academicians report far-reaching problems undermining the international ties that have long kept the United States at the forefront of scientific and economic developments.

Last year, James Gimzewski, an expert on nanotechnology, was stranded for nearly a month trying to get his visa renewed so he could return to his research lab at UCLA. He said his wait would have been much longer if he hadn’t bought an $8,000 one-way ticket from Zurich, Switzerland, to Los Angeles with a stop in Quebec, where his immigration attorney located a sympathetic U.S. consular official.

Gimzewski, a British citizen, was recruited several years ago to help establish the California NanoSystems Institute, a collaborative venture of UCLA and UC Santa Barbara. U.S. high-tech firms believe that nanotechnology, the science of making products smaller, lighter and more powerful, will drive the next revolution in industrial development, much as the Internet transformed communication.

But Gimzewski said the U.S. needs access to talent in Asia and Europe, where many of the breakthroughs in the field are taking place. He said that several members of his research team had encountered visa problems and that a French national was forced to return home.

“I believe it’s important to have security,” he said. “But I think there are more efficient ways to do it than to have people like me stuck unproductive for 3 1/2 weeks.”

Officials of leading universities told the Senate Foreign Relations Committee on Oct. 6 that an overburdened immigration system and misdirected security efforts were endangering U.S. leadership in science and technology. The number of foreign students admitted to U.S. graduate schools this fall was down 18% from the previous year, according to a survey by the Council of Graduate Schools.

C.D. Mote Jr., president of the University of Maryland, testified that scholars from Iran, Russia and China had waited as long as 18 months for visas. Five students from Tsinghua University, China’s leading scientific institution, waited more than a year and finally gave up spots in the Maryland school’s doctoral program in computer science and engineering.

“The five students from China will tell others coming along not to bother applying here, the United States does not want foreign students,” Mote said. “The students we intentionally keep out or scare today could well be the world’s leading scientists, engineers and doctors of tomorrow, who might have chosen in past years to make the United States their home -- to our lasting benefit.”

Chinese government officials and executives from leading companies also have faced visa delays or been denied permission to enter the United States, U.S. business leaders and others said. Large U.S. firms such as Motorola and Rockwell Automation have had difficulty getting visas for their Chinese employees or clients.

U.S. officials said many Chinese were denied entry because they were considered immigration risks. Chinese companies also have been caught selling restricted technology to countries such as Iran and Iraq.

“They might as well put out a sign, ‘No admittance to the U.S.,’ ” said Alvin Preiser, president of a small West Virginia firm that manufactures high-tech coal-testing equipment. He said he lost a $250,000 order to competitors in Europe last year because his Chinese buyer couldn’t get a U.S. visa.

As news of the visa delays has spread around the globe, foreign competitors are stepping in, Dresser-Rand executives say.

“In our business, you’ve got to be nimble,” Fairbanks said. “The expertise we have here, they’ve started working on in China. They can make Chinese knock-off controls in less than a year.”

Dresser still has more experience, but that, too, has been threatened by the security measures.

For months after the Sept. 11 attacks, Mussarat Dost, a 53-year-old Pakistani engineer who has worked for Dresser for several years, was afraid to leave his home in Brentwood, N.Y., because of reports of violence against Muslims. He advised his children, ages 13 and 14, to tell people they were Mexican.

Dost, who holds Canadian and Pakistani citizenship, said he had been pulled aside and questioned for hours nearly every time he had returned to the U.S. He has considered looking for a job in another country, he said, where he and his family would feel more welcome.

“The main thing in this job is mobility and flexibility,” he said. “If that is gone, I’m no use to the company.”

Angered by U.S. security rules, the Brazilian government retaliated by scrutinizing U.S. visitors more closely. After running into lengthy delays getting visas for its U.S.-based engineers to visit Brazil, Dresser-Rand executives hired eight local engineers for its rapidly expanding business with Petrobras, the Brazilian government-backed oil company. They are also considering hiring someone in Asia to service their Malaysian clients.

“Our customers are asking us: ‘Can we do this elsewhere?’ ” said Fairbanks. “ ‘Do you have a facility outside the U.S. where we don’t have a visa problem?’ ”