Bernie Sanders' Free Trade Mythology
More economic illiteracy from the Vermont socialist.
Bernie Sanders' upset victory in Michigan came just two days after he stood on the debate stage in the perennially beleaguered city of Flint, Michigan, and decried the economic condition of the surrounding area. He put the blame where he, like Donald Trump, often puts it: on free trade.
"Do you know that in 1960, Detroit, Michigan, was one of the wealthiest cities in America?" he demanded. "Flint, Michigan, was a prosperous city. But then what happened is corporate America said, 'Why do I want to pay somebody in Michigan a living wage when I could pay slave wages in Mexico or China?'"
A pre-debate tweet from Sanders featured bleak photos of abandoned buildings and said, "The people of Detroit know the real cost of Hillary Clinton's free trade policies."
Michigan has seen more than its share of economic trouble, but the senator from Vermont is not the guy to explain it. The decline he lamented and the causes he cited didn't come close to coinciding. Many vacant buildings in the Motor City were vacant when Clinton was practicing law in Little Rock.
Michael Moore's documentary film Roger & Me, about the calamitous shutdown of General Motors plants in Flint, came out in 1989—more than four years before the North American Free Trade Agreement took effect and long before China exported much of anything. Detroit lost more than a third of its population between 1960 and 1990.
A generation ago, the auto industry was competing not with companies in Mexico or China but with those in Japan. Toyota, Honda and other Japanese companies took sales away from the Big Three, particularly after the energy crisis of the 1970s, by offering cars that were more reliable and fuel-efficient.
They won over American consumers at a time when trade was far from free. President Ronald Reagan protected U.S. automakers by forcing "voluntary" limits on Japanese auto sales. Japanese trucks faced a 25 percent import duty—which is still in effect.
The other changes that hurt the Michigan auto industry were not the product of trade agreements. One was the migration of production to other states, particularly those with right-to-work laws that impeded the powerful United Auto Workers union. Today most U.S. factories operated by Ford and General Motors are located outside of Michigan—as is every plant operated by foreign automakers.
The other change came in the form of automation. Many of the jobs that have vanished in American car factories haven't moved abroad; they've gone to robots and other labor-saving machinery. Since 2000, when domestic auto employment peaked, the number of workers required to produce a given number of vehicles has fallen by more than one-third.
Breaking down trade barriers would actually help the American auto industry and those on the assembly lines. One major attraction of building cars in Mexico is that it has free trade agreements with 45 countries—while the U.S. has free trade deals with just 20. Exporting to most of the world is easier there than here.
Bernard Swiecki, an analyst at the Michigan-based Center for Automotive Research, told Business Alabama why Audi recently decided to put a factory in Mexico instead of the U.S.: "If they export it, they save $4,500 per vehicle in tariffs they don't have to pay."
Sanders said Sunday that American workers shouldn't have to compete with "people in Mexico making 25 cents an hour." He's greatly exaggerating. U.S. automakers there pay $8 to $10 an hour.
That's a lot less than American autoworkers earn, but the wage gap doesn't matter as much as you might think. U.S. plants still roll out three times as many cars and trucks as their Mexican counterparts.
Sanders falls in a long tradition of trying to wall our economy off from the world. The AFL-CIO opposed the 1987 free trade agreement with Canada. The Vermont socialist would deny American consumers the better products and lower prices that such accords provide.
Those benefits are especially important to people of limited means, who spend a disproportionate share of their income on necessities. Yet many of these people have cast their ballots for Sanders and Trump.
If Michiganders went to Wal-Mart or Home Depot tomorrow and found the shelves stripped of everything made abroad, they would quickly grasp the upside of free trade. If either of the people they chose for president gets to the White House, that realization may come, but too late.
