Sanders is correct: NAFTA, China trade cost thousands of jobs in Michigan

Having lost his early lead in the delegate count to Joe Biden, Sen. Bernie Sanders, I-Vt., has a lot riding on his appeal to blue-collar workers.

Speaking days ahead of the Michigan primary on NBC’s "Meet the Press," Sanders said his opposition to major trade deals marked a sharp difference between him and Biden, the former Delaware senator and vice president.

"Trade agreements like NAFTA and permanent normal trade relations with China, which forced American workers to compete against people making pennies an hour, have resulted in the loss of 160,000 jobs here in Michigan," Sanders said from Grand Rapids on March 8. "I helped lead the effort, as you may recall, against these disastrous trade agreements. I worked with the unions, not with the CEOs of large corporations. On the other hand, Joe Biden strongly supported these agreements."

While he voiced some reservations at the time, Biden voted for both bills — the North American Free Trade Agreement in 1993, and normalization of trade with China in 2000. 

In this fact-check, we look at whether the two agreements cost Michigan 160,000 jobs.

Teasing out the impact of trade deals can be difficult. There’s lots going on in the economy regardless of tariff agreements, including the 2008-09 financial crisis that plunged two of Detroit’s hometown auto companies into bankruptcy. But overall, studies back up Sanders’ claim.

Sanders’ point hinges on trade with two countries, Mexico and China. But of the two, U.S. trade with China was much larger, and with that came a bigger impact.

The studies Sanders relied on estimated Michigan’s job losses at nearly 44,000 (as of 2010) due to NAFTA, and about 112,000 due to China (as of 2018). We’ll get to those estimates in just a bit, but add them together and you get 156,000, which is essentially Sanders’ number.

But first, focusing just on China, the latest research by a group of economists from four universities offers a broad picture of what took place after 2000 when the United States gave it permanent normal trade status. 

The group’s study doesn’t put a number to Michigan’s losses, but it does highlight its struggles.

Interestingly, the study found that the ultimate effect on jobs nationwide was neutral, neither a gain nor a loss. 

But among regions of the country, the upheaval was substantial. Both the type of jobs and the location of jobs shifted.

"Chinese competition reallocated employment from manufacturing to services, and from the U.S. heartland to the coasts," the report said.

A Midwest state like Michigan was on the losing end of the deal.

This research dug down to the level of individual companies and found that large multinational companies offshored manufacturing jobs and expanded service jobs, in areas such as research and management, in the U.S.

The study also found that the China effect disappeared after 2007.

"We find strong employment impacts from 2000 to 2007, but nothing since from 2008 to 2015," the authors wrote.

Sanders is correct that both NAFTA and permanent normal trade relations with China exposed Michigan to competition from factories that paid their workers much less and spent less on worker safety and environmental protection. 

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But the manufacturing employment numbers reveal one of the challenges to drawing quick conclusions on the impact of the two trade deals. The job numbers show different paths after passage of each trade agreement. (Passage of trade bills is marked in red.)

After NAFTA, the number of manufacturing jobs rose to 888,000. After the China deal, the number fell to 638,000 (as of 2006 and before the Great Recession), a decline of 250,000 jobs.

The raw numbers support the idea that the China impact was great. For NAFTA, the analysis is more complicated.

Economist Susan Houseman at the Upjohn Institute for Employment Research in Kalamazoo, Mich., said those rising manufacturing job numbers after NAFTA passed don’t tell the whole story. She said the studies Sanders used are valid.

"The country was experiencing record job growth in the 1990s, so you wouldn’t necessarily expect the number of manufacturing jobs to fall," Houseman said. "Rather you might expect for them to grow more slowly."

The fraction of all jobs that were in manufacturing did fall by one percentage point between 1993 and 2000, suggesting that NAFTA did more for sectors other than manufacturing.

Houseman also said that the NAFTA impacts would play out over time, as companies built new plants in Mexico, something that could not happen overnight.

The analysis Sanders relied on came from economist Robert Scott at the Economic Policy Institute, a left-leaning think tank.

For NAFTA, Scott took the rising U.S.-Mexico trade deficit and teased out how that translated into job effects at the state level. Between 1993 and 2010, and accounting for the Great Recession, Scott found a loss of 43,600 jobs in Michigan.

Houseman said that is a conservative figure.

"The types of calculations in this, if anything, may understate job losses," she said. "I don’t believe there is any basis for calling the Sanders claim of job losses for Michigan wrong."

The primary caveat for Scott’s estimate is that it’s for 2010, which is a decade ago. Michigan’s manufacturing sector has recovered a bit since then. However, for workers who lost their jobs during the first decade of the 2000s, the disruption was real. And even after rebounding, manufacturing remains well short of where it stood before NAFTA.

Multiple studies also lend weight to Scott’s overall findings of the impact on the Midwest from trade with China. Research by economists Justin Pierce at the Federal Reserve and Peter Schott at Yale University, suggests over 1 million jobs nationwide have been lost due to trade with China.

Some economists argue that productivity gains played a major role in displacing manufacturing jobs, but recent work casts doubt on how productivity has been calculated. Studies of the impact of automation find that it has been significant, but much less than competition from China.

The latest studies go to great lengths to filter out the various factors that have shaped jobs in states like Michigan, and the trade deals emerge as a potent force.

Sanders said that NAFTA and normalized trade with China cost Michigan 160,000 jobs.

The studies he cited produced nearly that result. While precision is challenging, one economist said if anything, those studies underestimate the job loss due to trade.

We found four studies that concluded that both trade agreements hurt the manufacturing sector in Midwest states like Michigan.

We rate this claim Mostly True.