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In the Media

article imageOp-Ed: Canadian Senate reports on price differences in Canada and US

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By Ken Hanly
Feb 6, 2013 in Politics
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Ottawa - Canadians are often miffed to find out that they pay considerably more for the same items in Canada than in the United States, even when the Canadian dollar is at par with or above the value of the US dollar.
One of the causes of higher prices on goods sold in Canada compared to the US is higher tariffs in Canada on the goods as contrasted with lower or no tarriffs in the US. Graphs at the bottom of this CBC article show the differences between US and Canadian tariffs in different areas. While there are a few areas where Canadian tariffs are not higher, the vast majority of goods have higher tariffs in Canada than in the US. High cost items such as vehicles are an example. Another graph shows difference in prices for hockey equipment, an area in which for most items the US has no tarfiffs, while the Canadian tariffs are high. On most of these items, there is no long any Canadian company producing the goods to be protected.
The Canadian Senate Finance Committee issued a report on price differences between goods sold in Canada and the US after investigating the matter for months. One recommendation is that the government do a comprehensive review of tariffs on Canadian goods. In some cases, tariffs were protecting industries that no longer exist in Canada. The Finance Minister, Jim Flaherty, had already voiced concern over this issue before the reports was even issued.
The committee also recommended that there should be integration of safety standards between the US and Canada. The committee chair said: " If they’re different, they should be different for a reason. If they’re different, it’s going to cost more”. Often safety standards are different because one country or the other puts a different emphasis upon safety or one country has a stronger corporate lobby that may be able to convince governments to accept more relaxed safety requirements. Integration of standards could well lead to lowering standards in one country.
The senators also suggested that the 10% markup that Canadian distributors can add to the price of US books that they have the exclusive rights to distribute should be lowered. In the original provisions 10% was to be a maximum but instead it is now the norm for distributors. Over many periods the price differential has been blamed on the low dollar but during several periods lately, the Canadian dollar has been at par or above the value of the US dollar but the differentials have continued.
Senator Day said that the committee did not find any examples of price gouging. I would think that the 10% markup on prices of books beyond the US price is a clear example of price gouging except that it is facilitated by the government regulation! The Senator said: “Having studied this now for a year, I can tell you that we found no examples of gouging going on. We found a number of factors that we know influence price differences, and some things that the government could do that would help us improve or bring closer together the prices between Canada and the U.S.”
The committee found that many factors influenced pricing of products. As well as tarffis, there were transportation costs, and market size as well as many other factors. The senators thought that as consumers became more price conscious, compared prices that Canadian distributors would be forced to offer competitive prices. Last year, a survey by the Bank of Montreal on a basket of goods found that domestic retail prices were about 14 percent higher than US prices
Many retailers claim that the multinational suppliers with whom they deal charge them far higher prices than US retailers pay for the same with a difference between 10% to 50% for the same products. Some goods, such as eggs, poultry, and many dairy products are more expensive here because of a supply management system meant to protect the Canadian farmers and producers. Of course there are benefits to keeping jobs in those sectors in Canada among other factors.
Tariffs in Canada are a complicated matter. According to the report there are 8,192 categories and each category has 18 tariff treatments. One problem with reducing tariffs is that this will also reduce revenue at a time when the government needs revenue. In 2010-11 tariffs generated $3.6 billion in revenue for the government. The government however, wants to reduce tarffis. It would be a good idea to reduce the complexity as well.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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