A key but often unspoken assumption in arguments for free trade is that 100% of the labor cost savings associated with moving production overseas are passed on to consumers. The argument goes like this: Sending jobs overseas is okay and actually good for the U.S. because it increases the standard of living for Americans because the goods are cheaper. In reality, however, companies make products in countries with lower labor costs to make more profits, not to offer American consumers lower priced goods. It is naïve to assume that 100% of the labor savings are passed on to consumers.
Global Trade Reality # 7: Not all labor savings are passed on to consumers