Canadian Finance Minister Jim Flaherty has asked the Senate's finance committee to study the issue of the price gap between the United States and Canada. Consumers are perplexed by the gap, despite a strong Canadian dollar.
The Canadian dollar has gained over the past number of years. The currency also gained the most in three weeks than the United States dollar on news of a higher growth rate during the second half of 2011.
Canada’s loonie garnered 0.7 percent to 98.33 cents per U.S. dollar Wednesday.
In a letter issued to the Canadian Senate Committee on National Finance, Jim Flaherty, Minister of Finance, stated that he was upset over the price gap between Canada and the U.S. and that he is suggesting public pressure on retailers to lower their prices – an initiative similar to a 2007 public campaign.
Flaherty also asked the senate committee’s Liberal Senator Joseph Day and Conservative Senator Irving Gerstein to produce a study on the issue where they gather testimony from experts, including economists, consumer and retail organizations and small businesses.
“Canadians are rightly irritated when they see large price discrepancies on the exact same products being sold on different sides of the border,” wrote Flaherty in a letter that was obtained by Reuters Wednesday. “I share their irritation.”
He explained that Canadians deserve a price that reflects the “strength of the Canadian economy.”
Although consumer spending in Canada has remained steady, experts are projecting that it will wane as consumer confidence erodes. Flaherty is also attempting to stop Canadian consumers from heading south of the border.
“We all want Canadians to shop at and support local businesses, especially with the start of the Christmas shopping season only months away,” added Flaherty. “If we want consumers to shop here, we need competitive prices.”
But what is the motivating factor to higher prices in Canada than their counterpart? One expert told the Toronto Sun that there are many reasons, including a higher minimum wage, higher gas prices, higher retail taxes and bank currency exchange fees.
There is no official data comparing the price gap, but Bank of Montreal economist Douglas Porter studied the numbers and said that Canadians pay 20 percent more on most items. He added in an interview with CTV News that the gap increase occurred mostly when the loonie rose above $1USD last year and has remained that way throughout 2011.
Currently, there is no autumn agenda for the senate.