Buoyed by the North American Free Trade Agreement (NAFTA), Mexico in the 1990s was the bustling factory floor of the Americas. But since 2000, as China rose to assume that role, more than 270,000 Mexicans have lost assembly jobs, hundreds of factories have closed their doors, and Mexico's trade deficit with China has grown to more than $5 billion. The ubiquitous "Made in China" stamp, found on everything from toys to textiles to statues of Our Lady of Guadalupe, has become the incarnation of the single greatest perceived threat to Mexico's economic prosperity—and a symbol of the pitfalls of globalization.

Mexico's fears are not unique. China's economic surge and its entry into the World Trade Organization have sparked alarm across the developing world. In middle-income countries such as Brazil, Poland, Portugal, and South Korea, a rising standard of living makes their position as low-wage producers and exporters increasingly tenuous.

Rather than fixating on jobs lost to China, these countries should remember a fact of economic life: no place can remain the world's low-cost producer forever—even China will lose that title one day. Instead of trying to defend low-wage assembly jobs, Mexico and other middle-income countries should focus on creating jobs...