Parity or not, Canadians pay more

But not necessarily because we’re being gouged

Brent Lewin/Bloomberg via Getty Images

Brent Lewin/Bloomberg via Getty Images

Canadians have a fixation with the value of the loonie—a topic my colleague Jason Kirby recently tackled in his column. When it’s up, we fret about the plight of manufacturers. When its down, we worry that our U.S. vacations are going to cost more. And regardless of which way it moves, we think retailers are using it as an excuse to screw us.

Back in 2011, when the Canadian dollar was approaching parity, there was a flurry of stories demanding to know why retailers weren’t dropping their prices in lockstep with their increased purchasing power. Booksellers, in particular, were singled out because they had the misfortune of peddling products with the U.S. and (significantly higher) Canadian prices printed directly on them.

Now that the loonie is falling again, some like CBC’s Neil MacDonald want to know what happened to all of that “stickiness” that supposedly made it difficult for retailers to adjust prices downward three years ago. As evidence of corporate greed, he cites Air Canada Vacations’ decision to quickly slap a $35 surcharge onto its holiday packages south of the border. It’s a fair question, but the example isn’t terribly compelling. Air Canada is set to post only its second annual profit in six years, suggesting it has a lot to learn about the art of gouging. But you get the idea.

Canadians have long paid more than Americans for a variety of goods and services, and for reasons that have little do with the relative value of the loonie or malevolent shopkeepers. They include the higher cost of operating in a big, sparse, bilingual country, as well as generally high taxes and tariffs. But mostly it’s due to a lack of competition, and the consumer-friendly impulses it creates. Indeed, that’s what a Senate report on the Canadian-U.S. price gap found last year. It shouldn’t have come as a surprise, mind you. The U.S. is the biggest, most competitive consumer market on the planet. Retailers have to be sharp if they want to succeed. In Canada, by contrast, there’s simply not enough upside in a country of 35 million to justify the extra effort. Instead, most big retailers are content to charge what the market will bear— about 10 per cent to 15 per cent more than in the U.S.—and call it a day. It’s among the reasons Canadian companies are criticized for being slower to innovate and boost productivity.

What troubling here isn’t only that Canadian companies charge more than their American counterparts, regardless of what the loonie is worth, it’s that they have so little incentive to improve the way they do business in the first place.


Parity or not, Canadians pay more

  1. I love us Canadians.

    We know that each retailer keeps up the prices in Canada because ‘that is what the market can bear’, and oddly enough most Canadian retailers tend to have similar or equal prices for equivalent goods (Same-brand TVs, books, over-the-counter drugs, toys, etc) at their stores.

    ‘What the market can bear’ is simply weasel-words for ‘unrepentent gouging’. In this context, ‘the market’ is consumers and we have just been blithely told to suck it up for the benefit of retailers because, essentially, “Don’t you know how hard it is to be a business in Canada?” Then, they congratulate themselves on their ‘keen’ business acumen of ‘gouge to make up the loss’ instead of doing anything truly competitive to make money.

    It’s the little truths here (sparsity, taxes, extra packaging) that make the lie here palatteable – that lie being that consumer gouging is the sole solution to these problems, despite the advances in workforce/place technologies over the last decade alone.

    We can’t force them to innovate, so the question becomes how do we stop them from this blatant, widely known practice of ‘just charging more’ because ‘the market says so’?

    • Why don’t you spend a little more time looking at the actual numbers before you pronounce the explanation “little truths that make the lie palateable”? You could start by looking at CBSA’s list of tariffs and duties on imports. Next, you could think about the cost of special packaging to meet Canadian requirements. There’s as much overhead in setting up & maintaining those standards for a population of 35,000,000 consumers as there is for the 300,000,000 to our south. Averaging it over a smaller base is going to make things cost more. It’s the same problem for a supply chain. Similar overheads required despite a smaller base. I think your problem is that you simply don’t like the answer that the facts are supplying.

      • Few people realize that we collectively have $40 billion in hidden taxes, now over $45 billion in hidden taxes as money has been devalued. We even tax food to prop up Canadian prices in protectionism. 283% tariffs on Mozzarella cheese for example. Another is 234% on raw beef, and why we pay over twice as much for a Alberta cow that spent life looking at a Montana cow. $11/kg ($5/lb) in Montana for a rib-eye, $21/kg in Alberta.

        As the $45 billion CBSA/Ottawa collects, does not include the costs of protectionism, and GST/HST extra.

        Part of why I say we are a tax inflated economy of debt. Even dentists charge you more as we are all taxed so aggressively. Even if you are like me living in retirement on a average income, tax me more, give me devalued money, I have less to spend on someone else’s job.

        We are being deceived to preserve a far, bloated, excessively wasteful governments that can’t seem to control their insatiable greed of our grands kids debt.

    • It isn’t gouging. It is our taxes and regulations. The data show this clearly.

      • Agreed. And for those denying it, order from say Lands End, you taxes and tariffs will be itemized.

        • Yes, THAT is a real eyeopener. However, still like Lands End products, fit and quality – overall even with the taxes and tariffs, it is still cheaper that trying to find anything like it where I live (mid-size city on the prairies).

  2. Finally a media article spewing the politically unwanted truths. The truth is Ottawa/BoC devalued us, devalued incomes, devalued pensions, devalued us all.

    (1.00 / 0.90 ) = 11.11% inflation, instant inflation as the next jar of peanut butter or otilet for a home, copper, iron, steal, machinery and all goods, even autos just went up 11.11% as you have devalued money. Food, home appliances and fast moving goods already are reflecting new prices. It isn’t your imagination that the fridge you were looking at for $1999 in December is now $2199, GST/HST inflation included.

    But StatsCan lies about real inflation, to appease and deceive the public. And its intentional, baffle the public with BS and lies…. Want to buy a home? Most of the materials are now 11.11% more expensive, GST/HST extra.

    So what causes this? Simple, governments, federal and provincial no longer borrow real money as lenders do not lend below inflation+taxes to lose value. No one lends money to lose value to fraud low interest rates. So government quite literally electronic counterfeits no value inflation money to buy its own debt no one else buys.

    Government refusal to live inside its means is an hidden cumulative inflation tax to you and I. But hey, Ottawa likes naive people, makes them easier to deceive but the reality is this is governemtn bloat fraud on the people as government bloat, baliouts, inflated contracts and waste is more important than the people who support it.

  3. Now you know why CPP and Carney went offshore.

    My investments outside of Canada get capital gains inflation taxed, but I didn’t get hit like workers, disabled, retirees…. My foreign dividends just increased 11.11% in terms of CAD.

    But hey, we are raised not to question big government knows best. And StatsCan will lie. Some will lose jobs as materials, machinery, just went up 11.11% and customers are not going to accept it, like Heinz. Sugar, tomatoes, machinery went up in terms of CAD, and their major customers went elsewhere, plant closes. Ditto Bombardier, contracts in CAD, yet 11.11% more for aluminum/alloys, tires, engines, et al, 1700 go home to cut costs as 11.11 reduction in profit is bankruptcy if they don’t stop the losses.

    Hey, give me more taxes, give me less value currency, I have less to spend on your job. Get used to it as Canada, as Ottawa just signed up for tough times. More for Ottawa, less for the people.

  4. Once again I price a seadoo cover which is made Canada at 600 US$ in America and it is 950$ Canadian here. Why does a product that is made in Canada have to travel back and forth between two country’s and be sold for so much more where it’s made GO FIGURE! Price fixing BS

    • fish caught in say, Tofino, is sent to Vancouver, tested and the sent back. your fresh caught halibut is actually 8 days old

  5. Canada’s population is the same as the state of California yet without the distances involved – that alone explains a whole lot of the price difference. Canadians are generally ignorant of most things that have to do with running a business, such as overhead or taxes (corporate taxes may be lower than the US, but other taxes are NOT).
    And as the article notes, without competition, businesses become lazy and consumers become accepting. Look at what happened when WalMart entered the grocery side of the business – Superstore, Sobeys, Safeway all started to pay attention and their prices started to come down.

  6. it costs more to do business in Canada for all sorts of reasons. lower dollar now will result in even higher prices. California drought means higher food prices. we may get higher inflation for increased prices and possible recession as people spend less. there will be a shakeout in retail which reduces deep discounts. middle retail department stores like Sears may go. possible reduced house prices but not collapse. changes in the wind!