Why do U.S. retailers charge us more, Flaherty asks


After weeks of hearing Canadian consumers complain they pay higher prices in Canada for identical goods sold in the U.S., federal Finance Minister Jim Flaherty says he shares their “irritation” and wants a committee to look into it.

In a letter obtained by The Star, Flaherty says he wants the standing senate committee on national finance to study why some prices remain higher here five years after the Canadian dollar soared above parity with the U.S. greenback.

“Canadians are rightly irritated when they see large price discrepancies on the exact same products being sold on different sides of the border,” Flaherty says in the letter.

Canadian consumers began complaining about the price gap in 2007 after the Canadian dollar soared above parity with the U.S. greenback for the first time in 30 years.

At the time, Flaherty responded by urging retailers to lower their prices and be more open about their pricing practices. He also suggested consumers shop around to ensure they got the best deal.

Canadian retailers said they felt unfairly blamed. They also said prices in Canada are higher because they face higher costs here for rent, labour, duties, transportation and marketing. As well, some multinational suppliers charge Canadian retailers higher prices, they said.

However, no-one has provided a detailed explanation of how much these factors affect prices. And in some cases, retailers have acknowledged they are charging whatever the market will bear.

In his letter, Flaherty calls on the senate committee to examine how these factors might affect pricing.

The committee, which should consult widely with retailers, distributors, wholesalers, importers, economists, analysts and consumers, could begin meeting this fall, the letter says.

Many prices have fallen since he last met with Canadian retailers five years ago to discuss this issue, Flaherty says in the letter. But many Canadians still have concerns with a persistent gap between some goods, the letter also says.

“We all want Canadians to shop at and support local businesses, especially with the start of the Christmas shopping season only months away. But we live in a market economy and Canadians know the value and power of shopping around. If we want our consumers to shop here, we need competitive prices,” his letter says.

“A strong dollar should benefit Canadian consumers,” the letter says.

The price-gap problem resurfaced last month after popular U.S. fashion retailer J. Crew opened its first store in Canada and also its first Canadian web site.

Fans of the clothing retailer were quick to point out J. Crew had not only raised its prices for Canada but by adding duties and taxes to its online prices, the final bill was in some cases 40 to 50 per cent higher than on its U.S. website.

J. Crew quickly backed down, removing the added duty from its Canadian website, though its prices both in the Yorkdale store and online remain 15 per cent higher on average than in the U.S.

It’s not just consumers who have noticed the price difference.

Doug Porter, deputy chief economist at BMO Capital Markets, has made a habit of surveying the cross-border price gap in recent years. His latest survey, last April, found that prices in Canada were on average 20 per cent higher than in the U.S. on a broad range of goods, from DVDs to luxury cars to golf balls.

When Porter first began tracking prices, in 2007, the gap was 24 per cent. Retailers said they needed time to adapt as most merchandise had been ordered 12 to 18 months earlier when the dollar was at 80 cents U.S.

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