>if local goods can't be produced at a price that is commensurately low, then the fledgingly country's wage earners have their purchasing power reduced
If the industry they work in can't compete their entire income is reduced to zero.
That can knock out related industries as well and ultimately leave the country exposed to currency collapse and hyperinflation as the exporting countries decide that this country has nothing it really wants any more while they still desperately need imports.
This happened to Venezuela (after local industrialists declared war on Chavez in 2002 he effectively set out to destroy them) and Zimbabwe (when Muagabe dispossessed farmers from their land, rendering it unproductive).
The US is also exposed to this risk. It's steadily but very slowly losing hi tech manufacturing capabilities - something that takes decades to get back once lost (due to the network effect and loss of skills).