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International Trade and the Common Market
Fennelly, John F.
5/3  (Spring 1963): 31-36

The introduction of labor-saving devices and other improvements in manufacturing techniques automatically increases the productivity of labor, reduces labor-unit costs and thus permits a rise in wages. This in turn attracts labor from the less efficient industries and finally forces the latter to bring their wage rates up to the level of the more efficient units. The inefficient industries suffer from not primarily the competition from cheap foreign labor but the competition for labor within their own country induced by progressive reductions in labor-unit costs on the part of most efficient industries. This is the dynamic factor in the picture and the pressure of foreign competition on less favored industries should be regarded as an aftereffect rather than as a primary cause. From the above there follows another important conclusion. The widening differential in labor-unit costs against our static industries tends over a period of years to make any given set of tariff rates inadequate for the protection of the latter. The result is that rates which would have provided ample protection for our less efficient units thirty years ago are likely to prove inadequate today.

 

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