Mind the price gap
For generations, Canadian consumers have watched enviously as our southern neighbours waltz out of American stores with more stuff for less money. With two such highly integrated economies and close proximity, it’s hard not to notice how much more we pay for just about everything. The difference has been even more visible in recent years as the Canadian dollar has hovered around par with the greenback.
In early February, Canada’s Senate finance committee issued its report The Canada-USA Price Gap, enumerating some of the reasons behind this gap, and laying out a four-point plan for narrowing it. The report didn’t find any one reason for the price differences. Rather, it pointed to three main factors: taxes and tariffs, differing rules and regulations, and economic factors, such as shipping costs and economies of scale. So which factors exactly are responsible for the higher prices you pay on TVs, trucks, jeans and detergent? We looked up a few specific examples of price differences (not average prices by country) and explained the price difference for each to tease out the factors at play.
Rules and regulations
Altering products to comply with the rules of regulatory bodies such as the Canadian Standards Association or Health Canada can add to product costs. The Electro-Federation Canada, estimates compliance costs can add up to 10% to gadget prices.
Taxes and tariffs
Import tariffs are the most variable factors in the price gap: some products are free to enter the country, while others are subject to massive government taxes. Sometimes the tax is artificially high to protect domestic industry; many are just revenue-generators for government.
Sometimes the price difference really is pure economics: Canada is a sprawling country with a small population, which means higher costs for shipping, storage, distribution and economies of scale. And, of course, retailers can charge more simply because there’s less competition up here, so we have no choice but to pay up.
Graham F. Scott: Why do goods cost more in Canada?