Trans-Pacific Partnership unlikely to lower grocery or car costs much

Canada and 11 other countries signed onto the new Trans-Pacific Partnership on Monday after marathon negotiations that lasted days longer than scheduled.

The historic agreement lowers tariffs nearly across the board for a trading bloc representing roughly 40 per cent of the world's gross domestic product. Each country still needs to ratify the deal before it takes effect, and Canada's Parliament will vote on it after the federal election

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The deal is "in the best interests of the Canadian economy," Conservative Leader Stephen Harper said after it was announced.

Don't expect to see huge changes or a huge drop in prices.- Ambarish Chandra, professor of management

But the agreement has been hotly contested by some Canadian industries, including dairy farmers and auto workers, who claim increased competition will cost them profits and jobs.

One of the benefits to Canadians, it was implied, was that savings would be passed down straight to consumers and their wallets. But, experts say, it's unlikely the deal will make a big dent in Canadians' grocery bills or car purchases.​

"Don't expect to see huge changes or a huge drop in prices," said Ambarish Chandra, a pricing expert who teaches at the University of Toronto's management school. "Really, there's very little evidence that's going to happen."

The definitive text of the Trans-Pacific Partnership, or TPP, has not been released, but is expected soon. (Though it's unclear if it will be public ahead of the Oct. 19 federal election.)

So analysts must piece together details from information released thus far by the 12 signatories, including Canada.

Dairy

Canadians outside of Quebec could find themselves paying a little less for milk, cheese, yogurt, butter and other dairy products.

The Canadian government made a hotly contested concession to its supply-managed agricultural sector. Imports representing roughly 3.25 per cent of Canada's current annual dairy production will be allowed into the country.

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If dairy processors decide to pass along savings from lower imported milk costs to consumers, retail prices could drop, Sylvain Charlebois, a professor who studies food distribution and policy at the University of Guelph, told The Canadian Press.

"There are no guarantees," he said, but lower prices at the farm gate increase the possibility of consumer savings.

"For consumers, it looks like a pretty good deal," said Keith Head, a professor at the University of British Columbia's business school. 

Dairy will likely be "a little bit cheaper" at grocery stores, he said.

It will be tougher in Quebec, where minimum retail prices for dairy are higher than in other provinces and territories.

Chandra predicted any price decreases will amount to no more than one or two per cent over the next decade, and said the situation overall is "not a win" for consumers.

That's because the government has pledged to compensate farmers for losses under a $4.3-billion program that would see them paid up-front annually for a decade to maintain 100 per cent income protection before tapering off over five years.

So, while consumers may pay a quarter less for milk at the grocery store, Chandra said, it won't mean much if they're paying 25 cents or more in taxes to cover the subsidies to farmers.

Poultry and other groceries

Slightly lower prices could also be seen for a host of other grocery items.

TPP member countries will be allowed imports into Canada representing roughly 2.3 per cent of the country's annual egg production, as well as 2.1 per cent for chicken, two per cent for turkey and 1.5 per cent for hatching eggs.

But, at smaller percentages than the dairy import levels, the prices of eggs, chicken and turkey are likely to go down even less than dairy, Chandra said.

It's more likely prices for these products will be impacted by exchange rate changes, the price of oil, or global and domestic inflation rather than the TPP, he said.

"My sense," Chandra said of the parts of the agreement that have been made public so far, "is that the TPP is not that much of a game changer."

Cars

Car prices won't see "a huge change," Head said, but vehicles made abroad will likely be sold in Canada for slightly less.

Canada's 6.1 per cent tariff on imported vehicles will be phased out over the next five years under the TPP.

The TPP also lowers how much of a vehicle or auto part must be made within the signatory countries to be sold tariff-free.

The North American Free Trade Agreement mandated roughly 60 per cent of a car or car part's content had to be manufactured within North America to qualify for duty-free status. TPP lowers this to between 40 and 45 per cent, within any of the 12 signatory countries. Japan reportedly originally sought a reduction down to 30 per cent.

These changes could add up to several hundred dollars of savings per new car purchase for Canadians.