Federal Industry Minister James Moore announced this past Tuesday measures to give the Competition Bureau new power to investigate cases of suspected price gouging in a bid to end unjustified price differences between Canada and the United States on the same items.
Moore said the legislation would ensure Canadians are not charged higher prices than Americans simply because of where they live. “The Harper government is standing up for Canadian consumers with legislation to help address price discrimination.”
Thanks to all my Blog and book readers that emailed me re the new government initiative to “look into” the retail price discrepancy between the U.S. and Canada. If you have attended one of my talks you will remember that I go out of my way to say that the blame is not to be put on the retailer but on our system.
Here are my thoughts… NEVER GOING TO HAPPEN!
Remember this NEWS Story? The Globe and Mail Published Tuesday, Oct. 15 2013, “The federal government will pledge action in the Throne Speech aimed at eliminating the gap between the sticker price of consumer goods sold in Canada and the U.S., sources say – The Conservatives are targeting public frustration at the persistent premium Canadian consumers must pay for a range of brand-name goods, such as clothing, appliances, toiletries or books, compared with what Americans are charged for the same products.
Here is why we will never see any change…
In Canada business pay between $0.75 to $1.00 to mail a letter, In the U.S. it costs $0.48. In Canada it cost $25.78 to send a package 10km across town by Priority Post, and they must supply their own box. In the U.S. it costs $12.75 to send the same package from California to New York in a “free” box. Postal rate increases are tied to the inflation rate. In Canada, Canada Post does what it wants, henceforth our recent 50% increase.UPS and FedEx have equally higher costs in each country.
In Canada an average smartphone plan from one of the major wireless providers will cost a person between $70.00 – $80.00 per month, this is with talk, text and date limits. An unlimited talk, text and data plan from a major U.S. wireless provider is $45.00 per month.
In Canada we have Government backed Marketing Boards for a number of products like milk, eggs, chicken, pork and even asparagus. A marketing board is an organization created by many producers to try to market their product and increase consumption and thus prices. Marketing boards also sometimes act as a pool, controlling the price of farm products by forming a legal cartel. In the U.S. the “market price” is established via supply and demand. This is why you pay $4.75 for a gallon of milk in Canada and $1.29 for a gallon of milk in the U.S.
In 2012 a Conference Board of Canada report stated that if the federal government were to change its policies, including reducing or eliminating many of the fees and taxes it levies on the airline industry it could potentially bring two million passengers back to Canadian airports. In 2013 Pearson Airport ws still reported to have the highest landing fees in North America. On December 11th, 2014 – YYC) Calgary International Airport – Runway charges up 2.8%, Passenger fees up 2.7%. Lets look at the difference in a one-week trip, non-stop to Orlando for a family of four this coming January 3rd. Cost per person is $498.00 out of Toronto on Air Canada “Tango” compared to $316.00 out of Buffalo on Jet Blue. This is a $135.00 difference per person after dollar conversion. Both flights are early morning and, given the time of year, we will stay at a hotel close to the airport. A 3 Star Hotel on the Buffalo airport strip, with free shuttle to the airport and 1 week free parking is $101.00 CDN, a similar hotel and location in Toronto $198.00 including parking. Savings for a family of 4 = $637.00
The number of Canadian-made vehicles with higher Canadian MSRPs in 2012% – 18. The difference in Canadian MSRP for a Brampton-built Dodge Charger sedan in 2012 compared to the U.S. 22.4% – MSRP was $24,495 in U.S. compared to $29,995 in Canada. The difference in Canadian MSRP for a Windsor-built Chrysler Town and Country minivan in 2012 5.5%. The U.S. MSRP was $29,995 compared to $31,645 in Canada. Before the Canadian Government jumped on the “lets bail out the auto industry” band wagon why did they not forbid Dodge/Chrysler from charging Canadians consumers more than U.S. consumers? Maybe it is the extra $715.00 in HST?
Canadians pay little attention to tariffs and unlike taxes they are invisible at the retailer. Canada has 8,192 tariffs categories. Canadians can only blame themselves for the Canada-U.S. price gap if they don’t take the government to task. After an internal study on a sample of 15,700 products, Canadian Tire Corp. Ltd. found out that four out of five of the goods subject to duty that it imports face a higher tariff in Canada than in the United States. This difference translated into $8.4-million in extra costs in 2011 – costs that are amplified with sales taxes once the retailer passes them on to consumers. According to a Globe and Mail article of Feb. 8, 2013, the government is looking into increasing tariffs for products coming from 72 different countries.
Canada imports $486,487.4 million dollars worth of goods per year. $247,793.0 million in goods comes from the U.S. We pay for ALL these imports in U.S. dollars. That means, as our dollar looses value compared to the U.S. dollar our costs to buy these goods increases. Our cost of imported goods has increased approximately 13% in the last six months. This increase in “landed cost” then increases again proportionately to the number of times a product is handled before it gets to the consumer. As a product moves through the supply chain in addition to individual profit sHST is added. Each passing on of the product results in more taxes and fees. A number of major companies have stated that they are forced to increase their prices due to a lower Canadian Dollar.
$100.00 U.S. Tariff Nat. Dist. Reg. Dist. Retailer Consumer Dollar @.85 8% $130.41 20% $156.49 20% $187.79 10% $233.43 inc HST
Note: The Consumer has paid an additional $9.91 in HST as product moved through channels or approximately 21% in HST based on landed cost.
And this my friends is why neither Minister James Moore nor anyone else in government can or will do anything about the U.S. – Canada price disparity.
P.S. Notice I never mentioned anything about Canadian beer, liquor or wine!