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Free Trade Fact of the Day

Posted By Conn Carroll On August 7, 2008 @ 12:24 pm In International | Comments Disabled

Debunking myths about the supposed harm free trade inflicts on U.S. manufacturing, Cato Institute’s Daniel Ikenson notes [1]:

While the rest of U.S. manufacturing has recovered, Michigan’s manufacturing economy remains stagnant. Real GDP growth between 2005 and 2006 in Michigan ranked dead last among the 50 states. Meager manufacturing value-added growth contributed only 0.05 percentage points to what was a net, contraction of the state’s economy to the tune of -0.5 percent. Nationwide, the contribution of manufacturing was .41 percentage points to an overall GDP growth rate of 3.4 percent. Had Michigan’s manufacturing sector been able to contribute as much as neighboring Indiana’s manufacturing sector did to its overall economy, Michigan’s economy would have actually grown—by 0.3 percent.

The strength of manufacturing outside of Michigan is strong evidence that unfair trade and the administration’s allegedly lax attitude toward it are not to blame for Michigan’s problems. Manufacturing’s woes in that state likely have more to do with the relatively high level of labor force unionization, restrictive work rules, and state laws and regulations that deter investment and business formation there.


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[1] notes: http://www.freetrade.org/files/pubs/pas/tpa-035.pdf

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