To the Editor:
Canadian shoppers have long suffered from higher prices on some consumer goods relative to other countries. For many Canadians, the price differences are most noticeable when they shop in the United States.
In an attempt to “remedy” the differences, the federal government has just introduced legislation, the so-called “Price Transparency Act.” It will force retailers to explain why Canadian prices are sometimes higher than American ones for the same products.
Industry Minister James Moore, who announced the proposed law, used over-the-top language from historic civil rights struggles to describe the occasional U.S.-Canada price gap. He calls differences between U.S. and Canadian retail prices “geographic price discrimination.” Moore admits other factors lead to higher Canadian prices - what he calls “legitimate costs of doing business” in Canada. But he claims the entire gap between U.S. and Canadian price tags cannot be explained by “legitimate” input costs.
Step back for a moment and consider the legislative absurdity. What counts as “legitimate pricing?” How many twisted investigations will this Act produce?
Suppose a retailer’s margin on Widget X is 10 per cent in the United States and 12 per cent in Canada. Any number of factors could explain the difference.
For example, perhaps the middleman, between the wholesaler and the retailer, is subject to higher property taxes in one Canadian city vis-a-vis a competitor south of the border.
To think a government is remotely capable of collecting and properly collating this type of comparative information assumes a degree of specific knowledge that governments do not possess. Why? Because millions of business decisions are made daily and are impossible to track.
All of this, however, ignores one significant reason why some prices in Canada are higher than those in the United States: government policy.
For example, as economist Ross McKitrick found recently, for large industrial users, electricity rates in Chicago in 2012 were 6.12 cents per kilowatt hour. Rates in Toronto were about double that figure.
The United States and Canada do not allow for full competition, but Americans benefit from a bigger market given their much larger population. Electricity prices in Ontario. Dairy and poultry products. Airline fares. In each case, governments keep costs high for Canadian consumers. It’s a safe bet that politicians will not be called before the Commissioner of Competition to explain their price-fixing schemes.
Mark Milke is a Senior Fellow at the Fraser Institute and author of Canada’s Food Cartels Versus Consumers.
