By  on October 26, 2007

MONTREAL — Feeling heat from irate consumers, the Canadian government has stepped into the fray over why Canadians aren't getting a break at the checkout counter, even though the Canadian dollar is now worth more than its U.S. counterpart.

Federal Finance Minister Jim Flaherty on Tuesday met with major retailers and industry representatives, including the Retail Council of Canada, to discuss why prices are still higher north of the border despite a Canadian dollar worth $1.03 against the U.S. currency, its highest level in 33 years. The Canadian dollar has appreciated 20 percent since the beginning of the year. He said Canadian retailers will have to lower prices immediately if they want to keep Canadian shoppers from crossing the border to do their holiday shopping.

"We want to keep our consumers here supporting Canadian business, but we can only do that if our prices are competitive," said Flaherty.

In an effort to stem the flood of Canadians slipping across the border to shop — a record 3.5 million Canadians traveled to the U.S. in August — some major retailers, including Wal-Mart Canada and Zellers, have begun to lower prices.

But it's the suppliers that are to blame, said Diane Brisbois, president of the Retail Council of Canada. She said national or global brands charge Canadian retailers 20 to 50 percent more than they charge a U.S. retailer for the same item.

Diesel Canada said higher costs in Canada make it impossible to offer the same prices on both sides of the border. The company said freight charges alone are 10 to 15 percent higher in Canada, along with duties, taxes and employee benefits, which are also more. The company also sets its currency rates nine months before merchandise hits the stores, and as a result, prices are about 20 percent higher in Canada.

While suppliers hold power over some retailers, the bigger ones, such as Wal-Mart, Sears Canada and Hudson Bay, can negotiate better prices, according to Dale Orr, chief economist at Global Insight Canada.

Bob Silver, president of jeans maker Western Glove Works of Winnipeg, Manitoba, said the government may be able to police Canadian companies, but can't do the same for offshore manufacturers."Either way, it's the marketplace that determines the value of goods, not the government," Silver said.

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