Protectionism: A slippery slope in a downward economy

Anyone who takes a lesson in basic economics understands why imports exist. They exist because buying locally is too expensive or lacks the quality compared to the goods available
abroad.

Simply put, if buying locally was an efficient and cost-saving way compare to importing, companies would not import at all.

NAFTA was created in particular to allow the free flow of goods within North America. In general, the way it has worked has been that Canada shipped natural resources or initial production (steel plates for example) to the US and in return, imported finished goods. Think softwood lumber.

Now Barack Obama wants to force US companies to buy locally, effectively breaching NAFTA. This move will fail on quite a few fronts:

1. It will artificially prop up inefficient US goods without forcing them to improve their cost savings. The existence of free trade forces local producers to become more efficient so as to provide importers the incentive to buy locally instead.

2. It will trigger a protectionism on the other side. Canada will probably opt to mandate that some goods be bought locally as well that may otherwise have been imported from the United States.

The answer to America's economic ills is to force inefficient companies to become leaner in their bottom line in order to compete with imports. Those companies that cannot should go belly-up.

Protectionism is artificial and phony. It causes prices to be higher for basic goods and that is not a way to encourage increased consumer spending. My suspicion is that Obama is trying to protect unionized industry by forcing others to buy from them rather than addressing their problems head-on.

Laissez-faire will work in this downward economy. If only governments would adhere to that, everything will be fine.