Canadian shoppers have long paid higher prices for consumer goods. For many Canadians, the price differences are most noticeable when they shop in the United States.
In a bid to “remedy” the differences, the federal government has introduced the so-called Price Transparency Act that will force retailers to explain why Canadian prices are higher than American ones for the same products.
The act will allow the government-appointed commissioner of competition to force retailers to disclose “evidence” that might “expose discriminatory pricing practices.”
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 U.S. and 12 per cent in Canada. Any number of factors could explain the difference. Perhaps the middleman, between the wholesaler and the retailer, is subject to higher property taxes in Canada than his competitor south of the border.
To think a government is capable of collecting and properly collating this type of comparative information assumes a degree of specific knowledge governments don’t possess.
Why? Because millions of business decisions are made daily and are impossible to track.
All of this, however, ignores one significant reason some prices in Canada are higher than those in the U.S.: government policy.
For example, as economist Ross McKitrick found, for large industrial users, electricity rates in Chicago in 2012 were 6.12 cents per kilowatt-hour. Rates in Toronto were double that.
Much of Ontario’s rising electricity rates are due to ill-advised and expensive government-mandated feed-in tariffs for wind power and other expensive types of power. That matters to manufacturers in Toronto when they face American competitors, and has an obvious effect on price.
Former Liberal MP Martha Hall Findlay estimates Canadian consumers pay up to three times more for milk, cheese and other dairy and poultry products than they should because of federal supply management policy.
Supply management, which Americans don’t face, restricts the supply of milk, cheese, eggs, chickens and the like by limiting domestic production. Imports of these products are also discouraged through tariffs that range from 202 per cent (skim milk) to 298 per cent (butter). Findlay estimates the typical family pays $200 more than they should, annually.
As economist Chris Sarlo notes, low-income households spend almost one-quarter of their income on groceries. And government policy is to blame.
One last example: airline fares. Prices are kept high in Canada by a lack of competition, thanks to federal policy that prevents full cabotage. Cabotage is where foreign airlines can pick up and drop off passengers in the same country. Where it exists (Europe), increased competition and lower prices result from heightened competition.
The U.S. and Canada don’t allow full competition, but Americans benefit from a bigger market. A continental market in airline travel would serve passengers if an American airline could compete head-to-head with Canadian airlines on domestic routes. But the federal government won’t allow it. The result is higher fares in Canada.
Electricity prices in Ontario. Dairy and poultry products. Airline fares. In each case, governments keep the costs high.
It’s a safe bet politicians won’t be called before the commissioner of competition to explain their price-fixing schemes.
Mark Milke is a senior fellow at the Fraser Institute. He wrote Canada’s Food Cartels Versus Consumers.
