Price parity: It's up to you
As loonie tops $1.03 U.S., Flaherty can only advise
Oct 24, 2007 04:30 AM
Les Whittington
Ottawa Bureau
OTTAWA–Canadians facing an "excessive" price disadvantage now that the loonie is riding high can only shop around and hope for lower price tags, Finance Minister Jim Flaherty said after a meeting with retail executives.
"It is important for consumers to shop around and look for discounts and so on. It's important for people to realize that there is power to shopping around."
But, after getting an earful from retailers who say they are being unfairly demonized in the dollar-price uproar, Flaherty said "it does take time" for an economy to adjust to rapid currency shifts.
"Prices cannot be lowered overnight," he told reporters following a chat in his Ottawa office with representatives of the Retail Council of Canada and company executives.
Flaherty has been trying to stay out in front of surging consumer anger over Canadian prices, which are still significantly higher than those south of the border despite the loonie's meteoric rise against the U.S. dollar. He spoke in front of a sign that said: "Standing Up for Consumers."
The loonie surged as high as 103.9 cents (U.S.) yesterday, but finished trading at 103.51 cents, up 1.51 cents for the day.
Flaherty said one economic study comparing the cost of cars, electronics and other items in Canada and the U.S. found that prices remain 24 per cent higher here even though the Canadian dollar has surpassed the greenback in value. "A gap like that does seem excessive."
He pulled out a copy of the latest Harry Potter book, saying it cost $7.74 more in Canada than in the U.S.
"There should not be large discrepancies between similar products just because they are sold on different sides of the border," he asserted.
While dismissing the use of government regulation to force down prices, Flaherty said he hopes consumers in Canada will get some relief in the coming weeks and months.
"Canadians work hard to support themselves and their families. When they purchase goods, they deserve to pay a price that reflects the strength of the dollar."
Clearly impressed by the retailers who argued that their prices reflect higher costs in Canada than the U.S. for freight, import duties, language translation and other items, Flaherty said it won't happen immediately. "Canadian and U.S. prices may never be identical because of some of those unique differences."
Diane Brisebois, president of the Retail Council of Canada, said she didn't hold back in her complaint to Flaherty about his singling out of retail outlets in his campaign for lower prices in Canada.
"I certainly was quite outspoken about the fact that this is an issue that needs to be addressed with all the partners in the supply chain," she told the media.
In the case of retailers, they have to contend with international brand owners and large manufacturers, many of them located in the U.S., who have not reduced what they charge Canadian wholesale buyers to reflect the huge change in currency values in the past year.
She said some retailers in Canada have already reduced prices and she hopes that trend will continue as the holiday shopping season, a make-or-break time for most stores, approaches.
The Retail Council asked the finance minister to reduce the tariffs retailers pay to import goods so they will be equal to lower U.S. import tariffs – a move that Brisebois said would help end price disparities faced by Canadian consumers.
Asked if Flaherty was merely pushing the price issue for political purposes, she said, "I think the minister is concerned, as we are, with consumers shopping in the U.S. and with price disparity. I think, however, the meeting today allowed him to better understand how complex it is."
Liberal finance critic John McCallum suggested it is no coincidence that Flaherty has chosen to push retailers for price relief at a time when his Conservative party is trying to goad the opposition into triggering an election. Flaherty, he added, used a similar tactic with major banks earlier this year when election speculation was rife.
"It is pure and blatant political posturing," said McCallum. "He tells the banks to lower their charges and they tell him to get lost. He tells the retailers to lower their prices and I'm sure they'll tell him to get lost – politely. But they won't do what he says because he doesn't have any powers in this area."
This spring, Flaherty very publicly squared off with the country's biggest banks over automated teller machine fees, only to later back down on the issue. Some banks later made some adjustments for students and seniors.
Joseph D'Cruz, a professor at University of Toronto's Rotman School of Management, said Flaherty does not have "a strong leg to stand on" regarding price reductions.
"The way our competition laws are framed, you have to prove that the competitors are colluding with each other," D'Cruz said.
