As a result, domestic economies are increasingly exposed to the rigors of international competition and comparative advantage. In the process, lower prices for some goods and services produced by our trading partners have competitively suppressed domestic price pressures. Production of traded goods has expanded rapidly in economies with large, low-wage labor forces.
Most prominent are China and India, which over the past decade have partly opened up to market capitalism, and the economies of central and eastern Europe that were freed from central planning by the fall of the Soviet empire. The consequent significant additions to world production and trade have clearly put downward pressure on domestic prices, though somewhat less so over the past year.