Edmonton Journal

Fake help for consumers

Ottawa’s ‘price transparen­cy’ act is absurd

- MARK MILKE

Canadian shoppers have long suffered from higher prices on some consumer goods relative to other countries. For many Canadians, the price difference­s are most noticeable when they shop in the United States.

In an attempt to “remedy” the difference­s, the federal government has introduced legislatio­n, the so-called “Price Transparen­cy Act.” It will force retailers to explain why Canadian prices are sometimes higher than American ones for the same products.

Industry Minister James Moore, who announced the proposed law, used over-thetop language from historic civil rights struggles to describe the occasional U.S.-Canada price gap. He calls difference­s between U.S. and Canadian retail prices “geographic price discrimina­tion.” Moore admits other factors lead to higher Canadian prices — what he calls “legitimate costs of doing business” in Canada. But he claims the entire gap between U.S. and Canadian price tags cannot be explained by “legitimate” input costs.

The act, if it becomes law, will allow the government­appointed Commission­er of Competitio­n to force retailers to disclose “evidence,” which might “expose discrimina­tory pricing practices.”

Step back for a moment and 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 United States and 12 per cent in Canada. Any number of factors could explain the difference.

For example, perhaps the middleman between the wholesaler and the retailer is subject to higher property taxes in one Canadian city vis-a-vis a competitor south of the border.

To think a government is remotely capable of collecting and properly collating this type of comparativ­e informatio­n assumes a degree of specific knowledge that government­s do not possess. Why? Because millions of business decisions are made daily and are impossible to track.

All of this, however, ignores one significan­t reason why some prices in Canada are higher than those in the U.S.: government policy.

For example, as economist Ross McKitrick found recently, for large industrial users, electricit­y rates in Chicago in 2012 were 6.12 cents per kilowatt hour. Rates in Toronto were about 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 the Greater Toronto Area when they face American competitor­s, and has an obvious effect on price.

Or consider another issue: dairy and poultry products. Former Liberal MP Martha Hall Findlay estimates that Canadian consumers pay one and a half 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 do not face, restricts the supply of milk, cheese, eggs, chickens and the like, by limiting domestic production. Imports of these products are also discourage­d with tariffs that range from 202 per cent (skim milk) to 298 per cent (butter). Findlay estimates that each year, the average family pays $200 more than they should.

Maybe that doesn’t matter to some, but as economist Chris Sarlo has noted, wealthier households spend between five and 10 per cent of their income every year on food; low-income households spend almost one quarter of their income on groceries. So $1,000 in extra food costs over five years means a lot to poorer Canadian families. 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 government policy that prevents full cabotage. (Cabotage is where foreign airlines can pick up and drop off passengers in the same country.) Where it exists, in places like Europe, increased competitio­n and lower prices result from heightened price competitio­n, something the European Union has repeatedly noted.

The U.S. and Canada do not allow for full competitio­n, but Americans benefit from a bigger market given their much larger population. Thus, a continenta­l market in airline travel would serve passengers if an American airliner could compete head-tohead with Canadian airlines on our domestic routes. But the federal government, by policy, won’t allow it. The result: higher airline fares in Canada.

Electricit­y prices in Ontario. Dairy and poultry products. Airline fares. In each case, government­s keep costs high for Canadian consumers. It’s a safe bet that politician­s will not be called before the Commission­er of Competitio­n to explain their price-fixing schemes. Mark Milke is a senior fellow at the Fraser Institute and author of Canada’s Food Cartels Versus Consumers.

 ?? COLIN PERKEL/ CANADIAN PRESS ?? Industry Minister James Moore calls difference­s between U.S. and Canadian prices “discrimina­tion.”
COLIN PERKEL/ CANADIAN PRESS Industry Minister James Moore calls difference­s between U.S. and Canadian prices “discrimina­tion.”
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