By: Chuck Andary
Canadians who live in border cities know all too well the savings that can be had by shopping on the American side of the border. With the American and Canadian dollars near parity, however, one would expect that price gaps would be narrower. Sure, we have to consider that there are, generally, higher taxes on Canadian businesses, the French language labelling requirement, and a lower demand that factor into the price that consumers pay, but are these factors enough to justify a 20% price difference on many consumer goods?
Canadian Minister of Finance Jim Flaherty has asked the Senate Finance Committee to look into these price differences and find out why Canadians are paying more. This is a positive step by the government as it aims to provide information on several consumer and governmental concerns.
First, Canadians simply want to know why they are paying more than Americans for the same products, especially given the fact that the North American Free Trade Agreement (NAFTA) does not allow for tariffs on most goods that originate from the USA. The problem is that many of these goods do not originate in the USA as required by section 4 of NAFTA; thus, they are subject to tariffs. Currently, the price difference and the low likelihood that they will be forced to pay taxes at the border is enough incentive to compel many Canadians to shop in the US.
Canadian businesses should be interested in this study because they suffer when Canadians shop in the US. If the government can help reduce prices through measures on its end that don’t affect the bottom lines of businesses, many Canadians will simply stay in Canada to do their shopping.
Most importantly, this study can have an indirect effect on border security. Outside of commercial traffic, perhaps the most likely reason for crossing the border is to shop. The high volume of vehicles crossing the border force customs officers on both sides of the border to dedicate resources to enforcing tax requirements on returning citizens rather than monitoring for potential threats. Further, lower volume traffic will make it more likely that those vehicles being searched are threats rather than people carrying undeclared goods.
Decreased non-commercial traffic would improve border wait times and allow customs officers to focus on potential threats while lower domestic prices would encourage consumers to shop at local businesses. This study is a step in the right direction. Once the reasons for higher prices are outlined, the government can and should take action to correct the situation wherever it can. Of course, some factors such as supply and demand are beyond its control, but perhaps the government can assess factors such as tariffs on goods coming into Canada and taxes on local businesses.