OTTAWA – The Conservative government’s crackdown on price disparity between the U.S. and Canada comes at an odd time, when the falling Canadian loonie is significantly easing the problem, says an economist.
“I’ve been watching closely for a long time, and prices don’t look that out of line at the moment,” Doug Porter, deputy chief economist at BMO Nesbitt Burns, said shortly after the federal budget was tabled Tuesday.
“If the currency were to sink a bit further, I can foresee prices in Canada actually being cheaper.”
Other observers, however, gave the government full marks for dealing with a problem that is vexing consumers and retailers alike north of the border.
Joy Nott, president of the Canadian Association of Importers and Exporters, called the price disparity a “serious problem for Canadian retailers and for Canadian importers” who have to compete with themselves from the other side of the border.
“Prices are never going to be on par for obvious reasons — we’re two different countries, our currencies are different, the cost of doing business in the two countries is different. But what many Canadians question is the extent of the gap,” she said.
Canadian retailers are now dealing with would-be customers that see lower U.S. prices on American websites and then refuse to pay the higher Canadian price, Nott said.
“Some customers use the Canadian storefront almost as a demonstration place. They look at the product, then they go online and see if they can find it cheaper elsewhere in the States, and order it from there. That’s not good for the Canadian retail industry that employs Canadians.”
The Conservatives have promised legislation that would prevent multinational companies from charging Canadian customers more than Americans on everything from books to clothing and appliances — so-called “country pricing” — unless there is economic justification.
The proposed legislation would empower the country’s competition commissioner to enforce the new rules.
The initiatives are part of the government’s effort to respond to consumer complaints about higher costs, price-gouging and price discrimination.
Finance Minister Jim Flaherty had hinted for months — including in last fall’s throne speech — that a crackdown on companies taking advantage of the Canada-U.S. price gap was in the works. But he provided scant details Tuesday on how the proposed legislation would work.
Porter suggested apparent price-gouging is an easy bogeyman for the feds.
“They’re trying to build a ‘consumers first’ agenda, it doesn’t really cost them anything, so it’s no skin off their noses,” he said.
“But I do find the timing a little strange given the currency has pulled back and it’s no longer really an issue.”
He added that Canadians are living next to the world’s most competitive retail market, with prices on myriad goods far lower in the U.S. than in many other industrialized nations. That proximity can cause Canadians to feel they’re being fleeced.
“We see it and feel it more because we live right next store, and our consumers have the ability to take advantage of it,” he said.
A Senate finance committee report last year, however, suggested complex factors were to blame for price differences between Canada and the U.S., including higher transportation costs in Canada, more onerous packaging requirements, disparate provincial regulatory requirements, a smaller Canadian consumer market — and tariffs.
Even though the Conservatives lauded the elimination of some tariffs in last year’s budget, the same government also hiked duties on imported goods from more than 70 nations, including China, to help bring down the deficit.
That move was estimated to have cost Canadians $330 million a year in higher retail prices.