Price-gap law is weak policy, good politics
Here’s the message blaring from between the lines of the newly introduced Price Transparency Act, which will draw bleats of outrage from libertarians and quite a few experts, but become the law of the land anyway: The Conservatives do not intend to quietly lie down and die, just because their government is getting old.
They will go toe- to-populist-toe with Justin Trudeau’s Liberals — and the free market, if necessary, can be damned.
This means the middle class, which is to say you, dear reader, are in for an entire year of flagrant economic seduction, from all sides in the House of Commons, assuming there’s no early election call. From now until October of 2015, Prime Minister Stephen Harper, Liberal Leader Justin Trudeau and New Democrat Leader Tom Mulcair will jostle for the right to stuff money back into your piggy bank. The battle lines between them will concern variations in method, not ultimate aim.
Can the measures unveiled in Toronto on Tuesday by Industry Minister James Moore actually narrow the hated price differential between some Canadian and U.S. consumer goods? Will this law, for example, result in thousands of dollars being knocked off the price of a Honda Civic on a lot in Markham, Ont., relative to the price of the same vehicle in Syracuse, New York? Will groceries, clothing and booze get cheaper in Montreal compared with their equivalents in, say, Fort Myers, Florida, so that you’ll notice the salubrious effect on your bank account during your next jaunt south?
One has to doubt it. There are no price controls envisioned here; there are no guaranteed price drops at all, even assuming the office of the Commissioner of Competition (which is, as Canadian Chamber of Commerce head Perrin Beatty put it in the Toronto Star in August, a “small, overworked agency”) is given the resources it would need to properly field, investigate and report on even a few major cross-border price-gap cases.
Rather, the lever is to be moral suasion — a dunce cap perched on the figurative noggin of any wholesaler found to have jacked up prices simply because the destination market is Canada, whose cosy, comfortable denizens just don’t complain much when they’re kicked. There will be a test case, likely something highprofile; the ensuing negative media coverage, it may be envisaged, will shame other corporate carpetbaggers into changing their ways.
It’s just as likely, though — perhaps likelier given the Canadian dollar’s long, slow slump versus the greenback since 2011, to where it stands now at 87 cents — that the opposite will occur. That’s because cross-border price differentials are influenced by multiple moving factors, including the cost of labour, fuel, tariffs, safety and environmental standards, and the like. Of the thousands of companies offering consumer goods to Canadians a few will be targeted, and possibly some examples will be made. But the vast majority of pricing structures will be unaffected, if only because no government bureaucracy can possibly monitor all the relevant data inputs, and because there are too many perfectly legitimate reasons why a wholesaler might feel the need to raise prices.
Moreover, it’s difficult to imagine, as Beatty also pointed out in his Star oped in late August, that the government’s suddenly treating U.S. products differently from those of other trading partners won’t run afoul of trade agreements. The very notion of the Price Transparency Act, therefore, is fraught with difficulty, even if we somehow squeeze past the principle that government has no business telling a privately owned company what it should charge for its goods or services.
But here’s the kicker: Politically, it is clever indeed. Even if only one or two big corporations are hauled into the stocks to be pelted with rotten yams, the Conservatives will be recognized as having done something, anything, to stick up for “ordinary” Canadians. It’s the goad, the annoyance that comes from seeing that hoodie on the rack in Buffalo, so much cheaper than it would be at home, that is the target here. And in that respect, similar to the previously announced family tax cut, it will be potent retail politics. Every Canadian who has ever driven south has a story about a product that was cheaper in the States than it is at home, and nobody likes it.
Philosophically, then, this legislation is not unlike the GST cut and child fitness tax credit of the 2006 campaign, which helped the Harper Conservatives get elected in the first place. It’s a naked vote-getter. The Liberals and New Democrats will talk a great game about helping consumers and the middle class, is the implicit message: But we, that is to say the Tories, are the only ones to whom you can say, “show me the money,” and they show you some.
Moore’s overture will be dismissed by credible experts, and by the opposition, as a great deal of spectacle, and those criticisms will be entirely fair. But theatre, not policy rectitude, wins elections. For evidence Google Stephane Dion and Green Shift.