Canada’s 2014 Federal budget, part one: Addressing the Canada-U.S. price gap

Candace Sider, Director Regulatory Affairs, CanadaCandace Sider, Director Regulatory Affairs, Canada Canada’s Minister of Finance, Jim Flaherty, recently announced the Federal budget, and I watched with great interest – both from a personal and professional point of view.Many of the themes Mr. Flaherty has alluded to in the past were present in this budget; chief among them, bridging the Canada-U.S. price gap and bringing those savings to everyday Canadians.Some say that this should be an easy task, while others argue that the price gap exists because of tariffs and taxes (which bring in much needed revenue), and that’s why those goods are more expensive. I certainly find it frustrating when I see our dollar near par, but then end up still paying more for simple everyday things like books and magazines – and don’t even get me started on cars!That same gap continues to make cross-border and online shopping attractive. Taxes and GST/HST still apply to casual imports of course, but the difference is often worth it, especially considering the recently-increased personal exemption levels.

The challenge this government faces is to find a way to actually minimize the gap and allow Canadian businesses to provide the most competitive prices to Canadian consumers. I see a couple of ways this can happen…

First – and these are just assumptions on my part – eliminating dutiable tariffs may be entertained, which would lower the prices of some goods. It’s hard to imagine we’ll see a decrease in the current HST level, and I don’t think we’ll see another rise in the personal exemption levels anytime soon, so this would be the fastest and easiest way to deliver lower prices to Canadians.

A second option would be for the government to introduce legislation addressing price discrimination that’s not justified by higher operating costs in Canada. This legislation could also empower the Commissioner of Competition to enforce the new framework, giving consumers and businesses a guidepost to help understand effective and competitive pricing.

For now these are pie-in-the-sky ideas and they’ll certainly require much more thought and input from the federal government – after all, the devil is in the details! I expect, given its importance to the budget, we’ll see more announcements from Ottawa regarding the Canada-U.S. price gap in the coming months.

The 2014 Federal budget also included some directives aimed at the food industry, many lead by the Canadian Food Inspection Agency’s modernization agenda. Next week I’ll take a look at some of these directives in more detail.