Progressive Platform: Price Parity Program

Think of any product that you buy in Canada:

• Books
• Cars
• Most food items
• Clothing & Shoes
• Gas
• Basic inputs (eg. wood materials or drywall)
• Etc

How many of you have gone to the US and found that your dollar goes much further there now, particularly now that the Canadian dollar is nearly at par with the US dollar?

How many of you have wondered if the price difference is because we believe we have a different tax structure (eg. higher ‘sin’ taxes on things like booze, smokes and gas) compared to the US?

I know I have for some time.

However, I’m beginning to question these prices more and more every day and I’m beginning to convince myself that Canadians are being taken for a ride.

We’ve experienced a state of ‘currency stability’ with the US for more than two years where the value of the dollar has been in lock-step with the US dollar.

Prior to rise in the value of the Canadian dollar, most prices in Canada reflected a reasonable difference.  Think of a book you may have bought 6-8 years ago when the Canadian dollar was in the $0.75-$0.85 range compared to the American buck.

You can picture it now:  $12.99 US / $16.99 CDN (or something similar).

Today, you don’t even see the US price.  In fact, I think it was more profitable for publishers to do a run of Canadian editions than continue to show how much they were gouging us as we bought the latest and greatest from Nick Hornby or Marci McDonald.

And don’t even think of getting me started on car prices.  They’re all made in North America and they all (within certain ranges) follow the same safety requirements, so the prices shouldn’t be that different.  The result:  many cars in Canada usually have anywhere from a 20-50% premium placed on the final sticker price.

The numbers on this category are outrageous.  Think of the volume of cars that are bought in 2009 (New Motor Vehicle Sales, Canada, 2009, StatsCan) was nearly 1.5 million.  If the prices were actually reduced in 2007 and 2008 as the value of the Canadian dollar rose, we may not have seen the drastic drop in sales that we did in 2009.  As a result, we may not have needed to bail out GM and Chrysler.

While this is speculation (on the scale of 100%), the numbers are eerie in their similarity.  If car manufacturers were charging $10,000 more in Canada than the US (on average), that would amount to $15 billion in value.  We loaned them $20 billion (ignoring for the moment that the US loaned GM and Chrysler substantially more and that and that we’re only talking about two companies).

If we had pressured those companies to reduce prices, the reduction in sales may not have been quite as profound, at least in Canada.

Summary: despite our dollar appreciating more than 20% in recent years, we have not seen a similar decline in prices or what economists call ‘buying power’.

When you add in what should be happening with price decreases in Canada to the fact that the Conservatives have brought in unprecedented levels of corporate tax cuts, we should seriously question the economic policy of our current government, particularly with respect to what ‘Joe and Jane Average’ can buy in this country.

Currency issues present a double-edged sword, particularly for a country like Canada that relies very heavily on exports. As the value increases, the cost of our goods to foreign buyers is higher as well.  This is why we lose jobs and business to countries that habitually depreciate their currency (eg. the US).  Manufacturing jobs evaporate because we lose the competitive advantage that’s embedded in cheaper exchange rates.

The trade-off is that there should be a balance achieved with demand-driven consumption fueled by a sharp decrease in the cost of imported goods, including imported materials.  Since this hasn’t happened, we lose both jobs and buying power.

Something smells.

Canadian politicians need to latch on to the grass-roots opportunity that this policy represents.

By pursuing price parity, they will be able to promise lower prices for anything from books to corn seed to new cars.  They will be able to push for price breaks and not tax cuts, giving them the opportunity to increase what should be increased:  Canada’s consumption tax (now commonly referred to as the HST).

There are many ways to approach this situation.

• You could promise a basic investigation.  The mere threat of a review of prices will likely result in an instantaneous drop in prices.
• Expand the scope and mandate of Statistics Canada to include price comparisons for common goods converted to local dollars.  Start with a basic list of items that might change in price immediately and continue to add to the list and monitor the differences.
• Create an information campaign that focuses on the value of excise taxes, the common point of blame by industry when it comes to purchasing disparity.

What are your ideas for expanding the scope of such a project?

Do you have specific examples of price differences that should be addressed immediately and showcased in campaign slogans?