Executive Summary

"This agreement will destroy the sugar-beet industry. It will destroy the flat glass industry. And of course, it will destroy the auto industry."

—U. S. Representative David E. Bonior, D-Mich., NAFTA briefing, Washington D. C., March 25, 1993.

The North American Free Trade Agreement (NAFTA) is now five years old. Has it benefited Michigan's economy? 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?

Finally, the verdict is in, and the available data clearly show that none of the dire predictions of NAFTA opponents have come true, and that free trade is proving to be a significant boon to Michigan's economy. This study analyzes five years of trade and export data and contains the following key findings:

  • Michigan exports to Mexico and Canada have hit record levels under NAFTA. The U. S. Department of Commerce, which counts a company's home headquarters as the source of an export, shows a 40-percent increase in exports to Mexico since NAFTA took effect.

  • The University of Massachusetts Institute for Social and Economic Research (MISER), which counts the point of manufacture as the source of an export, shows a 148-percent rise in Michigan's exports to Mexico under NAFTA. Michigan is Mexico's third-largest trading partner.

  • The Commerce Department shows an impressive 72-percent gain in Michigan exports to Canada—Michigan's largest trading partner—since NAFTA took effect. The MISER data, due to the different way they are collected, register a much more modest 9-percent rise.

  • In the five years prior to NAFTA, the MISER data show a 25-percent drop in Michigan's exports to Mexico—from $1.7 billion in 1989 to $1.3 billion in 1993. Exports not only increased under NAFTA, but the increases reversed a negative trend that might have continued were it not for NAFTA.

  • In 1995, at the height of the Mexican recession, Michigan exports to Mexico increased by an incredible 104 percent over the previous year, according to MISER data. In 1997, Michigan exports to Mexico reached an all-time high of $3.2 billion.

  • Ford Motor Company products accounted for less than one percent of the Mexican auto market before NAFTA. In 1996, that figure climbed to 11 percent. General Motors' vehicle exports to Mexico were close to zero prior to NAFTA, but achieved a 1997 level of over 60,000 autos. DaimlerChrysler exports to Canada and Mexico increased from 49 percent of its total exports to 66 percent since NAFTA became law.

  • Michigan-based Dow Chemical Company is saving $25 million yearly from NAFTA tariff cuts on its products.

Overall, NAFTA has had a positive impact on Michigan's economy. The increase in Michigan exports to Mexico and Canada vindicates NAFTA supporters' predictions in championing free trade during the debate, especially in light of the fact that almost three-fourths (70 percent) of all Michigan exports are bought by Mexicans and Canadians.

Has every industry benefited from NAFTA? No; in fact, some companies have been harmed. However, the claims of injury by NAFTA on the part of companies are not always supported by evidence. This was found to be true even for some of those companies that were certified by the government as officially "injured" either by NAFTA or by foreign competition.

The NAFTA "winners" (people and companies benefiting from greater trade) in Michigan do, in fact, appear to be outweighing the NAFTA "losers" (people and businesses who have suffered as a result of greater trade). As demonstrated by the data, most Michigan industries have witnessed increases in their exports to Canada and Mexico since NAFTA was implemented. Some of these increases have been slight, while others have been dramatic.

Michigan's exports to Mexico and Canada have become much stronger since NAFTA was passed, and many Michigan businesses have grown due to the lower tariffs under NAFTA. At the very least, it is difficult to statistically argue that NAFTA has harmed Michigan's economy, its workers, or its consumers. On balance, lifting trade restrictions and lowering tariffs have been positive steps toward increasing the prosperity and standards of living for Michigan citizens—and citizens throughout America, Canada, and Mexico.