No easy answer to consumer price gaps: Carney

OTTAWA – Canadian consumers are paying an average of 11 per cent more for goods than Americans, according to estimates Bank of Canada Governor Mark Carney presented to a Senate committee Wednesday.

Although the gap, calculated in the bank’s September survey, is nothing to turn a blind eye to, it has decreased over the course of the year.

In April, the differential was estimated at 18 per cent, Carney told the committee looking into potential reasons for price gaps on identical goods sold in Canada and United States.

The Senate national finance committee launched a study after Finance Minister Jim Flaherty sent a letter asking the members to investigate why the price disparity continues despite the fact the loonie has been trading roughly on par with the American greenback – and even surpassed it for several months this year.

Carney was the most recent witness in this study, but reiterated what others before him have said – there is a long list of reasons price gaps continue in spite of the strong loonie.

Different tax structures, market size, transportation and labour costs, and a weak U.S. economy that could encourage discounts there are just some, he said.

But on the other side of the coin, “consumer prices tend to be sticky,” Carney said about the relation between consumer prices and currency values. “This tends to be true on both sides of the border.”

Canadian consumers could benefit from a “more seamless” North American market, Carney said.

“Measures that make a North American market more seamless, so shipping across borders, will add a net benefit to Canadian consumers… and that runs the gamut from tariffs and exemptions,” he told the committee.

But even with those changes, there would still be issues with the vastness and dispersed population of the country, Carney said.

Throughout the study that began last month, the senators have offered examples of common price gaps.

Senator Pierette Ringuette, a Liberal from New Brunswick, has shown that 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.

Conservative Senator Doug Finley said he called a friend in the U.S. who paid $8.99 for a case of Labatt Blue. The same case at store in Ottawa cost $21.99, he said.

When Flaherty appeared before the committee, he told the members of an online retailer selling a particular DVD for $21 on its American site, but for $29 on its Canadian site.

Several witnesses who have come to the committee have suggested that lower tariffs on goods entering Canada and changes to personal exemptions – two areas the government controls — could bring down prices on goods sold in Canadian markets.

Carney was hesitant to offer the government advice on those areas, but explained that Canadian retailers might be encouraged to lower prices if Canadians were allowed to bring more goods purchased in the States back into Canada.

As it stands, personal exemption rules don’t allow Canadians to bring anything back if they’re in the U.S. for less than 24 hours.

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