“Slaves were illegal to import in America for decades.”
This was just a form of protectionism. It kept slave prices artificially high for the domestic slave traders. Prices for slaves skyrocketed after the import was discontinued. The price of slaves also had something to do with the invention of the cotton gin. Prior to the cotton gin, the great bottle neck for cotton was picking the seeds out of the cotton bolls.
“Only a small percentage of Southern whites even owned slaves.”
Slaves were expensive and most people in the South were poor. Just because they didn’t own slaves doesn’t mean they didn’t aspire to enough wealth to afford some.
“Slavery was becoming an uneconomic model due to industrialization, standardization and vast increases in productivity, especially in agriculture.”
Slavery kept costs lower for the plantation owners. It also served to keep working white’s poor because the slave owners didn’t have to pay for services from free people.
“Slavery was dying (even in the south) well before the Civil War.”
Slavery wasn’t dying outside the South because it had been outlawed in the North. The border states that remained in the Union during the war were Southern states below the Mason Dixon line. In the South there was a thriving business in the slave trade.
You have hit the nail with your head: slavery was foremost an economic model of production. It was used in both the North and South initially.
When the North determined it was not a good model for their best self-interest, they ended it there. The South would have ended it too if and when they determined it wasn't in their economic best self-interest.
The North, Great Britain, and other major manufacturing countries could have expedited the end of slavery in the South without war by refusing to buy slave-produced cotton. With no customers, the South would have stopped growing cotton they could not sell.
However, buying only cotton produced by free labor might have cost northern customers another two cents per garment - too high a cost.