OTTAWA – A committee of senators is trying to get to the bottom of why Canadian consumers, instead of benefiting from a strong loonie, continue to face price discrepancies between products sold in the United States and Canada.
“There is no doubt we have to better understand why these differences persist,” said Finance Minister Jim Flaherty, who was the committee’s first witness as it launched the study Tuesday night.
Flaherty last month sent a letter asking the senate committee to investigate why the price disparity continues despite the fact the loonie has been trading on par with the greenback for some time – and spent several months earlier this year above parity.
“Canadians are rightly irritated when they see large price discrepancies on the exact same product that’s being sold on different sides of the border,” Flaherty wrote in the letter.
On Tuesday, Senator Pierette Ringuette, a Liberal from New Brunswick, presented data that showed a Canadian who buys a Canadian-made Chevrolet Camaro will pay nearly $4,000 more than their U.S. counterparts; a Canadian-made Dodge Charger would cost $4,600 more than that car would cost an American.
Flaherty also offered an example of a price gap, telling the committee of an online retailer that was seen selling a particular DVD for $21 on its American site, but for $29 on its Canadian site.
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“With price discrepancies ranging from 20 to 30 per cent often… I hope we can get to the facts,” he said.
The Retail Council of Canada, when asked about price gaps, has pointed to the relatively small size of the Canadian market and to import taxes as factors that play a role in determining consumer prices.
Flaherty encouraged the senators to invite small business owners, importers, analysts and retailers, among other interest groups, to help determine how the size of the Canadian economy affects consumer prices and whether transportation costs, real estate and other overhead costs play a role.
Industry representatives and analysts have argued those costs – often paid for in Canadian dollars – don’t fluctuate along with the dollar, meaning the cost of production and marketing remain higher in Canada relative to the U.S.
In terms of what government is willing to do with this study, Flaherty told the committee that, as finance minister, he has control over tariffs and can look at options in that vein should the senators find that price gaps are a consequence of Canadian tariffs.
“I quite frankly don’t know if they’re affecting consumer prices or not in terms of Canadian dollar-U.S. dollar virtual parity,” he said.
His ministry also has some jurisdiction over credit card issuers in Canada and authority through the Consumer Agency of Canada, he said.
“And we have some informal, persuasive powers and ways of always encouraging good behaviour through the tax system.”
A BMO report issued in April 2011 performed a cost comparison of some items, using a $0.98 exchange rate:
Magazines (sample of three)
We pay $6.64 CDN
They pay $5.66 USD
20 per cent difference
12 Crate & Barrel appetizer plates
We pay $24.95 CDN
They pay $22.95 USD
11 per cent difference
Gap cargo shorts
We pay $44.50 CDN
They pay $39.50 USD
15 per cent difference
Running shoes (sample of five)
We pay $147.99 CDN
They pay $101.99 USD
48 per cent difference
Titleist ProV1 golf balls
We pay $49.99 CDN
They pay $45.99 USD
11 per cent difference
iPod Touch 8GB
We pay $249.99 CDN
They pay $204.99 USD
24 per cent difference
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