Duties, drugs and dairy: how the changes affect consumers
Canadians will pay less in duties and taxes on some goods shipped to them from U.S. retailers under the new trade deal announced Sunday — but only if they don’t use Canada’s national mail carrier to deliver them.
The tweak to the online shopping rules, though not as far-reaching as some had hoped, would have among the most significant impacts on consumers in a proposed trade deal that could see some paying more for drugs, but leave the price of much-discussed dairy products largely unchanged.
Under the agreement, Canadians ordering packages shipped from the U.S. and Mexico by private couriers could get up to $40 worth of goods without paying duties or taxes, an increase from the previous and long-standing threshold of $20. Goods worth up to $150 would be duty-free, but not tax-free.
With the new rules, based on an average 2 per cent duty and the 13 per cent sales tax in Ontario, someone could save roughly $6 in surcharges by shipping a $40 product from the U.S. with a private courier.
Still, the proposal had some industry players calling the deal a lost opportunity for online shoppers.
“If I put myself in the shoes of Canadian consumers who are reading some really nice headlines right now, I would be sorely disappointed,” said Andrea Stairs, general manager of eBay Canada, whose company wants more goods imported without duties and taxes.
“This was a threshold that was set ... before the onset or creation of e-commerce,” she said. “I would certainly cast this as largely status quo.”
A spokesperson for Finance Minister Bill Morneau said the proposal under the United States-Mexico-Canada Agreement to let consumers avoid more taxes and duties will only apply to parcels delivered by private couriers such as FedEx and UPS — not those by Canada Post, which Pierre-Olivier Herbert said represent a minority of shipments.
With average duties on such purchases ringing up at less than 2 per cent, any savings to Canadian consumers will be relatively small, said Retail Council of Canada spokesperson Karl Littler.
But Littler was relieved that Canada didn’t cave to the American target of an $800 (U.S.) threshold before triggering taxes and duties, which the retail council predicted would have a significant impact on Canadian retailers.
Another impact of the agreement involves drug prices. The USMCA would extend the rights of pharmaceutical companies to protect data behind “biologic” drugs for 10 years, up from the current eight years. That would delay the arrival of cheaper generic versions of drugs for arthritis and other ailments that are currently sold by companies with monopolies, thus forcing Canadians to pay higher prices for a longer period, said Marc-André Gagnon, a health policy professor at Carleton University.
“For me, it’s unacceptable that we agreed (to) something like this,” Gagnon said.
Meanwhile, it’s not yet clear how other facets of the deal — such as more U.S. dairy products to be sold in Canada and changes to auto content and labour rules — will affect prices.
Martha Hall Findlay, president of the Canada West Foundation, said milk and cheese shoppers shouldn’t expect lower prices at their local grocery stores. At less than 4 per cent, the opening of the dairy market to American goods won’t likely be enough to shift prices, she said, noting that the Liberal government in Ottawa is also promising to compensate Canadian farmers for their lost market share under the new deal.
“The real answer for consumers would be to dismantle supply management,” she said, arguing this would lower prices and also allow Canadian farmers to ramp up production and sell their goods in markets around the world.
“It is such a lost opportunity,” she said.
Ken Whitehurst, executive director of the Consumers Council of Canada, agreed most people won’t notice an immediate change in the prices of the things they buy.
Instead, the biggest impact of the USMCA might be an end to some of the economic uncertainty that has swirled since Donald Trump ascended to the U.S. presidency. Even though this proposed deal doesn’t dispel the tariffs on cross-border trade in steel, aluminum and other goods imposed by Canada and the U.S. this year, Whitehurst said it might be better than the alternative: no deal at all.
“We will be glad to see that we don’t have major unpredictable disruptions for consumers,” he said. “Maybe consumers have dodged a bullet.”