But this point would only be valid if Wood had argued in favour of foreign workers being brought in to compete with Australian textile workers, which of course he did not. Mr Davis' error is painfully obvious and is the usual protectionist one of confusing labour services with labour products. Importing the products of so-called 'cheap' labour cannot lower real wages in the importing country. If this were so then poor countries could get rich by importing goods made by 'expensive' labour in rich countries. In other words, a country's wage rates are not determined by its trading partners wage rates.
Wage rates are really a domestic matter.
Real wages are determined by the size of the capital structure relative to the working population. Therefore wage rates are lower in most Asian countries because their peoples have fewer capital goods to work with, and this is why their productivity is lower. Economically speaking 'cheap labour' is a meaningless phrase by itself. Economic goods are only 'cheap' in relation to their costs. Hence, even though much Asian labour seems 'cheap' to us it is quite expensive in relation to the value of its output.