"If the agreement with Mexico receives congressional approval, Michigan's auto industry will eventually vanish."

—U. S. Representative David E. Bonior, D-Mich., Detroit Free Press, September 3, 1992.

"Contrary to fears expressed by NAFTA opponents, employment in the auto industry increased by 110,000 between 1993 and 1996 . . . ."

—G. Mustafa Mohatarem, chief economist for General Motors, testifying before the Committee on Ways & Means, U. S. House of Representatives, September 11, 1997.

It has been nearly six years since the North American Free Trade Agreement (NAFTA) turned the entire continent of North America into a free-trade zone. Has the treaty benefited the economy of the state of Michigan? Or has it destroyed jobs and hampered Michigan's prosperity, as predicted by many who participated in the national debate that raged for two years prior to its ratification?

This study analyzes NAFTA's five-year economic impact on the state of Michigan to discover whether trade liberalization under NAFTA has helped or harmed Michigan economically. Because trade data are notoriously difficult to pin down, it is easy to find data that support various points of view or ignore one source in favor of another. Consequently, it should be understood up front that the two most widely accepted sources of information measuring exports—the U. S. Department of Commerce and the University of Massachusetts Institute for Social and Economic Research (MISER)—each count exports differently, yielding widely divergent results. The Commerce Department counts the location of the exporter (its home headquarters) as the source of the export, while MISER counts the origin of actual movement of each product—the point of the product's manufacturing—as the export source. This makes it more difficult to make the kinds of sweeping claims that have become typical on the subject of free trade in general and NAFTA in particular.

The first section of this report provides background on NAFTA, while the second and third sections provide a brief analysis of the five-year effect of NAFTA on the U. S. and Michigan economies. The fourth section provides a more in-depth examination of Michigan export data. It does this by employing two primary methods of measurement. First, it examines, statistically and anecdotally, NAFTA's positive and negative effects on companies and workers. Second, it uses export data showing which industries have experienced rises or falls in their exports to Canada and Mexico since NAFTA's implementation, as well as the overall export numbers for Michigan as a whole. This state-level export data is non-anecdotal and comprehensive.