A strong Canadian dollar has left shoppers wondering: with our currency so close to par with the U.S., why do north-of-the-border retailers continue to charge more for the same products? It has Canadian consumers downright fed up -- and rightly asking for answers.
According to the Bank of Canada, Canadians pay on average 11% more than Americans for the same goods. In 2002, when the loonie hit an all-time low of 61.79 cents U.S., it was accepted that a weaker dollar meant paying more; these days though, with with the loonie near parity, Canadians continue to bridge the price gap. Although we don’t yet have a clear answer, a report prepared by a senate committee titled “The Canada-USA Price Gap” looks at possible reasons for the price difference.
Higher tariffs and taxes in Canada were listed as two of the main culprits of the price gap. We all know what taxes are, but what about tariffs?
A tariff is a tax or duty paid on imports in and out of a country. Not only are our tariffs more complicated in Canada – we have over 8,192 tariff categories, each with 18 tariff treatments – they’re a lot higher. For example, the tariff on vehicles imported into Canada is 6.1%, while in America it’s only 2.5%.
Labour costs are often higher in Canada due to a higher minimum wage and health care costs. Transportation costs are also a lot steeper – Canada is a vast country with major cities found on the west coast, the east coast, and in between.
While U.S. cities are often located in close proximity to each other, major Canadian cities like Toronto and Vancouver spread thousands of miles apart. Other factors include productivity gaps, labelling requirements, and the smaller size of the Canadian market.
Although there are more obvious reasons why Canadians pay more, there are less tangible forces at work. Canadians are paying as much as 50% more for major brands due to something called country pricing. In a nutshell, major retailers in Canada sell products for more because they are not provided with preferential pricing similar to the U.S.
A report by CBC Marketplace found that large manufacturers often have two sets of price lists for Canadians and Americans. Can you guess who almost always pays more? That’s right, Canadians.
With the Canadian dollar remaining at par with the U.S. for the foreseeable future, will Canadians continue to pay more? Not if the federal government has anything to say about it! It has listened to the complaints of thousands Canadians and is ready to take action. Finance Minister Jim Flaherty expressed an interest in lowering and eventually eliminating tariffs.
Recommendations to reduce the price difference in “The Canada-USA Price Gap” report include a comprehensive review of Canadian tariffs with the goal of reducing the price gap on select products, increasing the value of duty-free products shipped into the country (the limit is only $20 for Canada, while it’s $200 for the U.S.) and adopting similar safety standards.
Keep in mind, though, that Canadians don’t pay more for everything; for example, we pay less for some models of cars like the Honda Civic.
It’s a positive sign and a step in the right direction for Canadians. Maybe one day we can shop in our own country for the best deals instead of being forced to travel south of the border for savings.