Import competition from low-wage countries

Unemployment caused by foreign competition

Nature

Import competition from low-wage countries refers to the economic challenge faced by domestic industries when they compete with goods produced in countries where labor costs are significantly lower. This competition can lead to job losses, wage stagnation, and reduced market share for local businesses, as consumers may prefer cheaper imported products. While it can benefit consumers through lower prices, it poses risks to domestic manufacturing and can exacerbate income inequality. Policymakers often grapple with balancing free trade benefits against the need to protect local industries and maintain employment levels in the face of global competition.

Claim

The threats to Europe come not from countries with cheap unskilled labour, These, after all, need to buy capital goods that they mostly do not produce. The real threat is from newly industrialized nations, such as South Korea, getting out of cheap labour products into sophisticated goods that undercut the exports of self-indulgent Europeans in third markets. In the years ahead, the really tough competitors in this field may be countries of the former Soviet empire if they can harness their combination of high technical skills and low wages once the transition from communism to the free market is complete.

Counter-claim

Import competition from low-wage countries is often overstated as a problem. In reality, it drives innovation, lowers consumer prices, and enhances product variety. Instead of fearing competition, we should embrace it as a catalyst for efficiency and growth. The focus should be on improving domestic industries through adaptation and skill development, not on protectionist measures that stifle progress. Ultimately, the benefits of global trade far outweigh the perceived threats of low-wage imports.