Watch the video above: Government promises lower cross border prices. Sean O’Shea reports.
Are Canadians seeing lower prices on baby clothing? How about golf clubs? That’s what Finance Minister Jim Flaherty promised a year ago.
But as of Tuesday’s budget announcement, neither he nor the government is sure whether their much-ballyhooed tariff cuts on a range of household goods are actually amounting to lower prices for consumers.
Those savings may just be lining the pockets of domestic retailers, though: There doesn’t appear to be anything to force them to flow the lower prices on to shoppers.
But Ottawa says it’s watching.
“The government expects to have a full assessment of the impact of these tariff reductions by the end of 2014, which will guide future decisions on tariff reductions.”
Ottawa is paying Nielsen, a third-party researcher to monitor the flow-through, it said in August.
In all, Flaherty has said the tariff cuts passed in last year’s budget amount to $79 million in savings for Canadian families annually — assuming they’re passed on, of course.
Tackling U.S. ‘price gap’
The tariff cuts are part of Ottawa’s attempt to bring Canadian retail prices more in line with those of the U.S., which remain in some cases significantly cheaper despite the loonie reaching parity with the greenback in recent years.
The gap has led to a record number of Canadians heading across the border to shop over the last decade.
READ MORE: Gap in Canada-U.S. retail prices still ‘substantial’
Now that the loonie has lost significant ground against the U.S. dollar and is expected to remain at lower levels for some time, Ottawa will have a more difficult go of it. But the 2014 budget will seek to close the difference as much as it can via some legislative measures.
In the new budget, Flaherty is targeting so-called “country pricing strategies.”
“That is, when companies use their market power to charge higher prices in Canada that are not reflective of legitimate higher costs,” Ottawa says.
Relying on a 2007 study, the budget cites a 15 per cent price gap between the same goods sold in the United States and through retailers operating with 200 kilometres of the border.
“Evidence suggests that some companies charge higher prices in Canada than in the U.S. for the same goods, beyond what could be justified by higher operating costs. Higher prices brought on by excessive market power hurt Canadian consumers.”
Flaherty said Tuesday the Conservatives will introduce legislation to address this “price discrimination” while empowering competition regulators with powers to enforce a new framework.
“Details will be announced in the coming months.”
From the 2014 budget, various estimates on difference in retail pricing over the last several years:
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