Price gap help could be cancelled out with higher tariffs

Industry Minister James Moore introduced legislation yesterday to try to fight prices that are higher in Canada than in the U.S. The move comes just ahead of Conservative-introduced tariff increases that will affect the cost of hundreds of household goods.

Conservative-planned tariff increases take effect Jan. 1 on goods ranging from toothbrushes to bikes

The federal government introduced legislation yesterday to try to fight prices that are higher in Canada than in the U.S. The move comes just ahead of Conservative tariff increases that will affect the cost of hundreds of household goods. (Chris Young/Canadian Press)

Canadians could soon be paying more for a range of products, despite a move Tuesday by the Conservative government to lessen the gap between the prices paid by Canadians and Americans for the same goods.

A 2013 federal budget decision to raise tariffs on items from 72 countries takes effect Jan. 1, 2015, and is expected to net $300 to $350 million for the federal government.

That change is to take place just weeks after the Conservatives introduced a bill that would give the Competition Bureau the power to investigate price differences and compel companies to provide documents to back up their pricing.

The list of countries that will see their tariffs rise includes major exporters like Brazil, China, Indonesia, Mexico, Singapore and South Korea. Those countries had been on a list of less developed countries that were subject to lower tariffs since 1974.

It's likely the cost of those tariffs will be covered by consumers rather than manufacturers and retailers.

Economist Mike Moffatt, an assistant professor at Western University's Ivey ​Business School in London, Ont., says there are a number of reasons Canadians pay more than Americans. Aside from the practice of country pricing, Moffatt listed:

  • Tariffs.
  • Energy costs.
  • Taxes.
  • Payroll taxes.
  • Minimum wages.

There's a lot the federal government can do to lower prices aside from having the Competition Bureau probe them, Moffatt said. The first would be to reverse the tariff increases planned for Jan. 1, which will hit "a thousand different product categories," ranging from toothbrushes to bicycles, he said.

High tariffs remain — and could increase

 "[The government] could go further and reduce tariffs all around. There are still very high tariffs on running shoes  it's close to a 20 per cent tariff. Lots of tariffs on clothes [too]," Moffatt said.

"I think one of the reasons why it doesn't is because all of those things would cost the federal government money."

Industry Minister James Moore said the government wants to lower tariffs, but has to react to world markets and world pressures.

"Of course we believe in lower taxes, lower tariffs, and more markets for Canadian goods internationally, and we're working to lower tariffs as best we can," Moore said in an interview with CBC News.

"But at the same time, why not empower the competition commissioner with the same tools that his equivalents have in other parts of the world, with the ability to do substantive investigations and to expose price gouging against Canadian consumers?"

Country pricing tackled in bill

Moore's newly introduced bill is designed to tackle country pricing — the act of attaching different prices to goods depending on where they'll be sold.

Country pricing is a problem, said consumer expert John Lawford, but it's hard to sort out what is the biggest driver of higher prices in Canada.

"Everything's jammed up in this gigantic ball" of complicated reasons behind the prices Canadians pay, he said.

"There's a pricing difference, we all know, but nobody knows why. So as soon as you start talking about tariffs, somebody starts talking about exchange rates. As soon as you start talking about that, somebody switches it to country pricing.​"

Lawford says the new bill, the price transparency act, is "extremely elegant" and that Canadians can now start talking about the exchange rate, monetary policy and tariffs since country pricing will be off the table.

More about fundraising

Moore referred in his announcement to a 2013 report by the Senate national finance committee that examined the Canada-U.S. price gap. The Senate committee heard from a number of experts about why the gap exists, including then-Bank of Canada governor Mark Carney, and made four recommendations. 

At the time, the Canadian dollar was close to or above par with the U.S. dollar. It's now closer to 87 cents U.S.

Three of those recommendations seem to have been ignored by the government:

  • A comprehensive review of Canadian tariffs.
  • Analyze the costs and benefits of increasing the de minimis threshold for low-value shipments in Canada (which would let Canadians spend more on online orders before having to pay some tariffs).
  • Have the heritage minister study the costs and benefits of reducing the 10 per cent markup that Canadian exclusive distributors can add to the U.S. list price of American books imported into Canada.

Moore was heritage minister at the time the committee studied the issue and released its report.

Shoppers wait for a store to open at an Ottawa Mall on Dec. 26, 2013. Prices on many goods are expected to rise in the new year. (Justin Tang/Canadian Press)
The fourth recommendation, to continue to integrate the safety standards between Canada and the United States through the Regulatory Co-operation Council, is moving slowly along with the Beyond the Border trade and security agreement.

Liberal industry critic Judy Sgro sees another reason behind the price transparency act after a Conservative Party website that reproduces part of Moore's speech sprang up to ask for donations.

"I think today's announcement was more about fundraising for the Conservative Party and trying to make consumers think, as they're out there very actively spending their money at Christmas, that the Conservatives are doing something for them when it's really more about fundraising than it is about anything else," Sgro said in an interview with CBC News.

NDP industry critic Peggy Nash said she's concerned about whether the Competition Bureau will have the resources to investigate the price gap. Moore said Tuesday that the bureau wouldn't get any additional funding for its expanded role.

"The reality is they've had a 10 per cent staff cut over the last few years. They're down about 69 positions in the Competition Bureau," Nash said.


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