Wondering why stuff still costs more in Canada compared to the U.S., despite a dollar that now routinely hovers around par? A federal report out today tries to provide some answers.
But 53 witnesses, 75 pages and two years later, the senate finance committee that authored the report concedes it still doesn’t quite understand. Titled “The Canada-USA Price Gap,” the report says the committee “cannot offer an explanation as definitive as it would have liked for the price discrepancies for products between Canada and the United States.”
What the committee did conclude is that the price differentials Canadians see are a result of several factors that can arise at any point along the supply chain. Although a wide variety of industries are represented, in particular it looked at the automobile and book industries. All can be affected by factors as disparate as product safety standards, customs tariffs and market segmentation to name a few of the nine that were identified.
In the case of cars, for example, it appears that differences in tariffs and safety standards may be the culprits. According to the report, “While vehicles manufactured in a North American Free Trade Agreement (NAFTA) country can be shipped duty-free to other NAFTA countries, the tariff on vehicles imported from non-NAFTA countries is 6.1% in Canada compared to 2.5% in the United States.” (For what it’s worth, the report also found that there are several models of car that are actually cheaper in Canada than in the U.S.)
Nevertheless, the question is what are we going to do about this problem? The report makes four recommendations.
1. Have the Minister of Finance conduct a comprehensive review of Canadian tariffs, with the objective of reducing price discrepancies.
2. Have the Canada-United States Regulatory Cooperation Council continue to integrate safety standards between Canada and the United States.
3. Have the federal government analyze the costs and benefits of increasing the de minimis threshold for low-value shipments in Canada. The threshold refers to the value of postal shipments that can be imported tax- and duty-free into the country. It’s currently $20 in Canada vs. $200 in the States.
4. Have the Minister of Canadian Heritage investigate a reduction in the 10% mark-up that Canadian exclusive distributors can add to the U.S. list price of American books imported into Canada.
Where this goes from here is anyone’s guess, but with any luck it doesn’t involve more reports and another two years. Because as Senator Larry Smith, the deputy chair said, “Canadian consumers are feeling ripped off.”