I don't know the specifics of why a leather factory in Mexico is cheaper than the same one in Maryland, however, I suspect you are correct that the cost of labor is a significant factor. Regulationary onus is probably another one.
Why it's more efficient in Mexico is not my argument. It's indisputed that it's more efficient (meaning less expensive) there by virtue of the leather factory being located there by those folks whose money and capital is being risked. My argument is simply that allowing this to take place through a laissez-faire free market is the best outcome and will result in a net gain of wealth for Americans. The cost of leather products to Americans is less, and they spend the surplus money to employ other Americans to meet their other demands -- including, in the end, those laid off by the Maryland leather factory. Mexicans also benefit from this. A Mexican will take a labor job at the factor in Mexico precisely because it is the best available option (to his knowledge) for employment. The wage may be miserly, and by American standards it is, but if he elects to take that wage, then it logically must be better than what his alternatives are.
Trade is win-win, that's why free people do it, and do so much of it.
The problem with your theory is that there is no such thing in reality. Never has been, never will be. Human beings will always maneuver for some advantage and render the "laissez-faire free market" a greedy farce. All human endeavors must be regulated because human beings are not incorruptible. The regulation, however, should be at a minimum and serve commerce and not government.
. A Mexican will take a labor job at the factor in Mexico precisely because it is the best available option (to his knowledge) for employment. The wage may be miserly, and by American standards it is,
By American standards the wage is at subsistence. Hand to mouth. America cannot compete with countries that are willing to keep its own citizens pay at poverty level in order to sell cheap to America. In the case of Mexico, this policy only produces more illegal immigration than it reduces.
FYI, the US has had a tariff on Mexican Cement because it was so cheap that it was putting the four American producers of Portland Cement into the ditch without the tariffs. Now, because of Hurricane Katrina, the US Gov. is considering lifting the tariff (temporarily) to increase supply and keep prices stable.
Free trade will only work when the rest of the world catches up, economically and socially to the United States. Not before.