Labor arbitrage is efficient production. If you can outsource a job for less than it costs domestically, it means labor is underutilized in the foreign country and can be employed for higher-value uses.

Pretty much any arbitrage is an economic inefficiency being exploited, whether it's financial (information inefficiences), shipping/merchants (geographic & local preference inefficiencies), storage (time preference inefficiencies), outsourcing (labor), etc. And in the course of exploiting it, it makes the inefficiency go away.

> Labor arbitrage is efficient production. If you can outsource a job for less than it costs domestically, it means labor is underutilized in the foreign country and can be employed for higher-value uses.

I think the key points are 1) that's not the kind of thing the word "efficiency" typically brings to mind, and 2) there are quite valid political reasons to want to discourage that kind of "efficiency."

In a lot of cases a better alternative to subsidies is just to have the government be a buyer for locally-made products. That way you're not just handing people money, the government is actually getting something. That seems like it should be more politically viable. That's assuming the government has some use for the things being subsidized.