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Newly manufactured Honda cars await export at port in Yokohama, Japan. Under the TPP pact, the elimination of a 6.1 per cent tariff on passenger vehicles could reduce prices for Japanese cars by $1,000 or more. (Toru Hanai/REUTERS)
Newly manufactured Honda cars await export at port in Yokohama, Japan. Under the TPP pact, the elimination of a 6.1 per cent tariff on passenger vehicles could reduce prices for Japanese cars by $1,000 or more. (Toru Hanai/REUTERS)

Consumer savings from TPP deal to take effect slowly Add to ...

The impact on Canadian consumer prices of the Trans-Pacific Partnership will likely be small and uneven.

There are exceptions, but a host of products from cheese to wine to prescription drugs are likely to cost roughly as much in the next few years as they do now, economists suggest. That’s partly because Canada already has low tariffs with many Pacific countries and partly because the Canadian government fought to keep some import protections in place.

Any savings for consumers – and there will be some – are expected to come in gradually, as the TPP’s members ratify the deal.

“I don’t think people should expect massive price drops overnight when they go to the grocery store or the mall,” said Trevor Tombe, an assistant professor of economics at the University of Calgary who has written extensively on trade.

Prof. Tombe added that the subtler but more important change in prices will come from companies passing on lower production costs to consumers.

“It’ll be hard to notice in your day-to-day life but the gains will be there,” he said. “Who among us walks around the mall going that low price is because of NAFTA?”

One exception is the auto sector. The elimination of a 6.1 per cent tariff on passenger vehicles, albeit over five years, could reduce prices for Japanese cars by $1,000 or more, said Mike Moffatt, an economics professor at the University of Western Ontario’s Ivey Business School.

The proportion of a vehicle that must be made in a TPP country to be imported tariff-free will now be 45 per cent; under NAFTA, the equivalent number was 62.5 per cent. Prof. Moffatt said that more international competition would likely make the industry more competitive and lower prices for consumers.

On the other side of the spectrum, Canada’s dairy and poultry industries emerged from the negotiations more or less unscathed, ensuring that Canadian milk and egg prices will remain relatively high. The country’s dairy supply is governed by a system of fixed prices, quotas and high tariffs collectively known as supply management. Farmers lobbied hard throughout the talks to prevent breeches in the system and appear to have succeeded.

Under the tentative deal, Canada will allow 3.25 per cent more duty-free market access to foreign dairy producers. The figure for eggs will be 2.3 per cent and for poultry 2.1 per cent. Critics say this will hardly put a dent in real prices, though Ottawa is already promising a $4.3-billion compensation package for affected farmers.

“We had hoped to be able to say that some poultry and dairy products would be more reasonably priced, but from my read of the agreement that’s likely not going to be the case,” said Joyce Reynolds, executive vice-president for government affairs at Restaurants Canada, a persistent foe of supply management.

One of the restaurant industry’s main concerns is expensive foreign mozzarella cheese, used on pizza and other Italian food. Ms. Reynolds said tariffs have made the product prohibitively expensive for some of her members.

Other agricultural products like beef and wine should benefit from the deal but likely won’t see their domestic prices fluctuate much: Canada is a net exporter of beef and it already has low import duties on wines from popular grape-growing countries like Chile and Australia.

The cost of drugs in Canada, meanwhile, is likely to remain stable despite some anxiety on that score in the lead-up to the agreement. One point of contention during negotiations was how long drug makers would be able to keep the rights to data on the manufacture of complex “biologic” drugs. Big firms were worried that smaller generic drug-makers would use the information, submitted during trials, to hatch cheap knockoffs.

In the United States, these data were protected for 12 years, while in Australia – its main antagonist on this point – protections only lasted five years. The deal sets out a compromise that will provide so-called “data exclusivity” for between five and eight years. Since Canadian rules already afford an eight-year window, there is “zero” chance that Canadian drug prices will be affected, said Prof. Tombe.

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