Michigan Exports Are the Bright Spot in the Dark Economy

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"Protectionism" has long been a diversion used by Michigan politicians to shift blame for their own economically damaging policy decisions. At various times Japan, Mexico and China have all been blamed for Michigan's dismal economic performance.

Yet despite all of the disingenuous talk, Michigan residents have greatly benefited from free trade and globalization. While politicians have belittled our trading partners, Michigan's exports have steadily grown, hitting a record level in 2008.

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Even with a recession-induced slowdown in the rate of growth, Michigan still sold $316 million more in goods to foreign purchasers in 2008 than in 2007. In total, we exported $44.9 billion worth of Michigan-made goods to trading partners all over the world. That's represents a 44 percent gain since 1999.

Michigan's two largest trading partners are Canada and Mexico. Our annual sales to Mexico grew by 169 percent over 10 years, standing now at $1.2 billion. The growth was led by a $449 million increase in vehicle and transportation equipment shipments, and a $317 million increase in chemicals. Only two states — California and Texas — export more to Mexico than Michigan.

That's not all: Since 1999, Mexicans have purchased 408 percent more Michigan-made appliances, 194 percent more plastics and 160 percent more paper. The value of forestry and logging products exported to Mexico in the last decade grew from $233,000 to more than $4.4 million. So much for Michigan manufacturing dying due to NAFTA.

On the other hand, we've not done so well with Canada. Total exports are down 8 percent over the decade with the decline being led by the value of cars and transportation equipment falling by $2.8 billion. However, Michigan still exports more goods to Canada than any other state.

How could Michigan become a more effective exporter? One way would be to pass a right-to-work law. Exports from RTW states grew by 17 percent last year, while those from non-RTW ones rose by just 8 percent. Foreign sales by RTW states Utah, Louisiana, Mississippi and North Dakota all grew by more than 30 percent.

This divergence is part of a long term trend. Since 1999, exports from RTW states have more than doubled, growing by 129 percent. Exports from non-RTW states had strong growth, too, but with a 79 percent increase, non-RTW states did not boom as much.

Right-to-work is not a silver bullet — Arizona, North Carolina, Oklahoma and Virginia exports grew at less than the U.S. average. But overall, RTW states outperform non-RTW state in nearly every economic growth statistic.

So why have Michigan politicians been so eager blame the state's overall economic decline on free trade? Making this state more competitive economically is hard work. It would require the Legislature to enact policies that anger a host of special interests — unions, government employees, anti-growth environmentalists and old-line utility monopolies. It's much easier to avoid that heavy lifting and instead raise taxes, re-monopolize utilities, grant discriminatory subsidies to politically well-connected industries and impose new groundwater use permitting mandates. Since those things actually hurt the state economy rather than help it, scapegoats must be found.

Now Gov. Jennifer Granholm is leading the state's political class in a new round of protectionism by proposing state contracting and targeted tax break preferences for firms that only hire Michigan residents. That sounds nice, but by raising the cost of government contracts and purchases it would only make it harder to adopt real reforms like tax cuts. In addition, other states may retaliate, hurting Michigan-based contractors and vendors.

Here's the bottom line: Michigan has benefited from free trade, and the Legislature should stop trying to shift blame for its own failures onto foreigners.


James M. Hohman is a fiscal policy analyst at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.

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