Presidential Candidates Talk Trade; Mackinac Center Work Comes to Forefront

When the candidates for the Republican and Democratic presidential nominations came to Michigan for the primary, the Mackinac Center was called in to arbitrate some of their claims on trade. National Public Radio called us to judge the veracity of Bernie Sanders’ assertions that Detroit’s decline was the direct result of the North American Free Trade Agreement. It also gave us the chance to bring some rarely inspected evidence about trade to Michigan residents.

As Americans buy more products from the developing world, trade is often viewed as a threat to the middle class. Yet Michigan’s exporters have been thriving. Even during Michigan’s terrible 2000s, exports grew from $33.8 billion to $44.9 billion per year. And since then, exports have grown to $53.2 billion. It is simply not true that we don’t make anything anymore, especially when you look at what others around the world are buying from us.

The growing world economy means that there are more customers for products made in Michigan. Purchases from Mexico and China were responsible for more than half of the growth in exports. Those countries are now the second- and third-largest markets for Michigan goods.

The growth of purchases from China has been especially notable, increasing from $212 million in 2000 to $3.2 billion last year, a 15-fold increase.

Unsurprisingly, transportation equipment — both vehicles and parts — represent roughly half the state’s exports. But other products may escape the public’s attention just because they are not consumer goods. Chemicals and electronics constitute 14 percent of the state’s exports. Michigan also makes a lot of the machines that make other things — exports of machinery are 9 percent of our exports. 

Here’s another little-known fact: While you see agriculture all around the state, food and other agricultural products made in Michigan constitute just 3 percent of the state’s exports. (And purchases from Canadians make up 62 percent of those exports.)

Too often a discussion of how or whether to raise or lower barriers to trade ignores our experience with the expansion of global trade. Instead, fears over competition and job loss take center stage.

These numbers on exports show that Michigan can, in fact, compete on the worldwide stage. The prosperity of the state does not depend on government-levied trade protections.

This is not to deny that trade has costs as well as benefits. As Ford’s recent decision to start a new plant in Mexico indicates, there is a global competition for investment; this fact influences the in-state job picture. Still, looking at total state auto employment shows that there are much larger factors at work. 

Michigan’s auto jobs continued to increase in the 90s but dropped substantially in the 2000s. At the worst part of the recession, the state’s employment in transportation equipment manufacturing dropped to roughly a third of what it had been at its peak in 2000. It has climbed back since then, adding 70,500 jobs to the state. These drastic changes in employment cannot be fully or even largely explained by the persistent increase in global trade. 

When candidates try to tap into fears of economic hardship caused by trade policies, the actual experience with trade is obscured. It is not all good news, but it is much better news than usually portrayed.