The twelve Pacific rim nations reached agreement today on the Trans Pacific Partnership (TPP) trade deal. The TPP partners, comprising about 40% of the world’s economy, include the United States, Japan, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The U.S. Congress still must ratify the agreement, following an expedited procedure that requires an up-or-down vote without any amendments; the ratification vote is expected early next year.
Although there is sharp debate about the unclear contents of the agreement and the overall economic effects of the TPP, particularly in regards to the U.S. employment rate and the gains and losses of U.S. producers, there likely will be significant benefits to consumers. The removal of trade barriers to goods and services produced by other countries will increase competition, thereby lowering prices and increasing consumer choice in a many areas.
Consumers should not expect quick, large, or clearly visible changes, because many of the TPP provisions will be phased in over time and because there is already fairly free trade in America over many of the areas covered by the TPP. However, the TPP should exert downward pressure on prices over time, restraining inflation and even promoting price decreases in some consumer goods and services that can be readily provided from abroad.