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Hey Barack: People start companies in order to profit

In an attempt to explain his position regarding trade, Democratic presidential front-runner Barack Obama said that he did not oppose free trade, despite making increasingly critical comments about multilateral deals such as NAFTA.

Asked how other countries should interpret his position, Obama responded that he supported free trade but wanted it to be fair.

"What the world should interpret is my consistent position, which is I believe in trade," he said after meeting with workers at a manufacturing plant in Ohio.

"I just want to make sure that the rules of the road apply to everybody and they are fair and that they reflect the interests of workers and not just corporate profits."

Well why, Senator Obama, do companies want to engage in trade? The answer is because both sides feel that they can gain from the deal. Corporations engage in trade to profit. Period. Entrepreneurs start companies because they think they can make a buck. On the other side, poorer countries want to trade to help create wealth.

Obama said he opposed NAFTA from the start and U.S. workers were not the only ones to suffer from its effects. "Wages and benefits in Mexico had not been improved by the treaty," he said.

Really? To judge NAFTA's success, just take a look at the economy of Mexico. Mexico has enjoyed strong growth over the last decade, their stock market has shot up, there has been an expansion of the middle class, and newly created wealth. In fact the iShares Mexico index (NYSE:EWW) has tripled over the last decade. What's wrong with that?

Corporations are providing jobs to citizens who otherwise would be unemployed. It's their choice to take a low paying job, but they choose to take it in order to better their lot in society. The " interest of workers" is to have a job, and try and provide for their families. Perhaps the reason that these jobs have been leaving America is because labor unions have created a situation where companies can't profit, and if they can't profit then they must look for an alternative.

Why is someone who never ran a business or ever had a job in the private for profit sector considered and expert on international trade? If politicians, not just Obama, really wanted to improve the economic lot of their constituents, they would get out of the way and let the market take care of itself.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no positions in any stock mentioned as of 2/25/08.

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Last updated: May 17, 2008: 09:26 AM

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