Buss: Trade isn’t Detroit’s boogeyman
Donald Trump and Bernie Sanders’ successes have been fueled by growing national anti-free-trade sentiment. Perhaps nowhere has their protectionist messages resonated as strongly as in Metro Detroit.
To union workers and others in manufacturing who’ve watched their jobs disappear, the promise to tear up free trade agreements, impose taxes and tariffs and bring outsourced jobs back home resonates.
But the anger these candidates are stirring misses the mark.
Free trade is just the scapegoat for bigger forces that have pushed manufacturing out of the country. And, despite the resentment understandably felt by those who’ve lost jobs, more trade has been good for this state – and for the automotive industry.
Trade, mostly in exports of Michigan-manufactured goods, was the second largest contributor to the state’s real GDP growth in 2014. One of every five Michigan jobs is tied to trade, and that employment grew 17 percent from 2004 to 2014. More than 25 percent of U.S. trade with Canada – America’s largest trading partner – goes over the Ambassador Bridge.
Free trade boosted and broadened Michigan’s economy even when it appeared hopeless during the Great Recession. And to the extent the North American Free Trade Agreement and other pacts may have sucked jobs from Michigan, it has created new opportunities here, and positioned the state to play big in the global economy.
Most important, free trade deals have helped Detroit’s Big Three recover from the lost decade with a stronger push in the global auto market.
Goods exported from Michigan to rest of the world have grown nearly three and a half times faster than state GDP for the past 12 years. And Michigan ranks among the top five state exporters in 21 industries, including first in motor vehicles, parts, bodies and trailers, and glass products.
But the United Auto Workers union argues expanding trade doesn’t bring back automotive jobs. UAW President Dennis Williams denounced Ford Motor’s Co.’s decision to invest $1.6 billion and create 2,800 jobs in a plant in Mexico, and the labor chief blamed NAFTA for making the move possible.
But NAFTA didn’t ruin union job prospects; the UAW did that itself by essentially cutting a deal with the auto companies last year to allow the Detroit Three to end small-car production or relocate it south of the border. The union chose larger wage gains and fatter profit-sharing checks in the short term.
If anything, NAFTA may have helped keep jobs in Detroit. The deal enabled the auto industry – and many other manufacturing industries – to operate in a boundary-less region with increased access to economic resources, reduced costs and easier routes to foreign markets with which Mexico has free trade agreements.
It’s not that the union doesn’t know these things, it’s that it has prioritized instant gratification and the interest of its veteran members over long-term growth, sustainability and competitiveness. The UAW dug in when it should have adjusted how it does business in a highly competitive global economy.
Free trade is just one of the forces pushing jobs out of Michigan and the U.S. NAFTA took effect at the same time advancements in technology brought robots into factories and the Internet streamlined international communications. Global industries were rising, influencing C-Suite decisions in a variety of new ways.
And as the auto and manufacturing industries globalize, the U.S. maintains one of the highest corporate tax rates and is one of only two countries that hits its own companies with a huge penalty for bringing overseas earnings home.
Restricting free trade in the way Sanders and Trump propose will shut off American auto companies from the global market, making it harder for them to rebound and grow.
Kaitlyn Buss is a senior editorial writer.