Policy of protection is recommended to protect domestic workers from low-wage foreign competition. A high-wage (or high-cost) country competes with a low-wage (or low-cost) country in international trade.

Thus, the rich countries where higher wages are paid will be at disadvantage when they import cheaper goods from, and export costlier goods to, the low-wage poor countries.

By adopting the policy of protection, these rich countries are able to protect the higher living standard of their workers and to compete with the low-wage countries in the international trade. Maintaining high wage argument is defective on the following grounds:

(i) Labour is not the only factor of production and the prices of the commodities are not determined by wage rates alone. Production of goods is the joint result of various factors, such as, Land, labour, capital etc.


(ii) High wage does not necessarily mean high cost of production. Higher wages may be paid due to higher productivity of labour and higher productivity of labour tends to lower the unit cost of production.