virginexcess, following your logic to its ultimate conclusion is that all standards of living would equilibrate to the lowest common denominator. However, wages & conditions of the average workers in those LCD countries are supressed via authoritarian regimes. You are right, we can't compete with the Chinese worker as in all likelihood his ability to bargain is much lower. Without authoritarian rule would wages be as low as they are in China & the middle east? What is the legality of a strike in the Middle East? It is not a free true market, but one operating under severe wage control.
Globalization is as much about exposing western labour to a wages market that is artificially suppressed. In effect, transmitting this authoritarian wage control system back to the west through the market mechanism. In return we get a few cheap trinkets.