The inequalities of being equal

The ongoing struggle for price parity

TOMMY BZURA

After nearly 30 years of inequality with the U.S. dollar, the Canadian dollar is finally managing to hover around parity Despite rejoices from the Canadian public, there has been a definite lag period in obtaining the equality that we have fought so hard for. According to many analysts, Canadians are still overpaying for many of the same goods when compared to our American counterparts.

In a recent report, BMO group deputy chief economist Douglas Porter said that despite considerable adjustments to the price of consumer goods, there still remains an uncontestable disparity between similar goods in Canada and the U.S.. “Canadian consumers are far from reaping the full rewards of the massive run-up in their currency in the past five years,” Porter argues, “This is keeping inflation higher than it otherwise should be, contributing to the upward pressure on interest rates. If Bob Barker was still on the job, he would likely say, ‘Canadian retail prices, come on down!’ and Canadian consumers should too.”

Canadian money seems to still be living in the past. The market has done its best to adjust for the run up of the Canadian dollar, but in essence Canadians are still being “taxed” for using our colourful currency. Here at home, everything from DVDs to shoes

The time has never been better for Canadian consumers with a sense of adventure to take advantage of dollar parity.

and even some cars cost more than they do in the U.S.. A simple comparison of major online stores illustrates these discrepancies. Currently the new season of Heroes made its debut on both Chapters.ca and Amazon.com. On Chapters.ca, the box set of DVDs is listed for CA$48.97, while on American Amazon.com and Amazon.ca they are listed for US$39.99 and CA$49.96 respectively. So, here we have an identical item and currencies that are equal in value, but a substantial difference in price.

Currency parity can only help Canadians achieve some equality with their American counterparts, as the rest of price difference is created by various other business issues. For example, one of the main causes of the price differential is simply the different demographics between the two markets. Large retailers in the U.S. often have access to lower costs from wholesalers based on the volume of products they purchase. These “wholesale deals” are often translated into better prices for American consumers. Another reason for the gap in prices between similar good on both sides of the border stems from the time-lag it takes to bring an item out to market. When manufacturing a book or DVD, prices are usually decided upon far in advance. The reality is that such prices simply cannot keep up with the volatility of the global currency market. To date, the Canadian dollar is up around 17 per cent this year. Finally, despite sharing much in common with the U.S., Canada is, in fact, a distinct market when compared to our neighbours. Consumer spending in Canada has been increasing steadily since the late 1990s. In the period between 1997 and 2002, Canada saw consumer spending increase 20 per cent , which was double the rate of inflation for the same time period. If these trends continue, then retailers may be willing to adjust their prices to reflect the equality in the two currencies. In this case, the market will ultimately be the judge.

The news only gets worse for Canadians as the value of one’s wants increase. Every night in my dreams, there she stands: a white Honda S2000, with a two-tone red and black leather interior. The six-speed, two-seater sports car is what dreams are made of (at least for me), but now with the Canadian dollar enjoying a sense of equality with its American counterpart, students and regular joes alike are making their dreams reality because the possibility of purchasing a car from the U.S. is more viable. The price of my dream car in Canada at the Honda dealership is CA$50,600, but the price for an identical car at the Vern Eide dealership 700 kilometres away in Sioux Falls, South Dakota, is about CA$31,000. Add in the 6.1 per cent duty and six per cent GST along the mandatory $216 RIV fee and a $100 air conditioner fee, the price of the rear-wheel drive marvel comes to C$35,067.

Although this may be news to most, some students at the U of M have already taken advantage of the strong dollar. Greg Kreml, a fourth-year commerce student, became the proud new owner of the 2003 Lexus GS last year as the loonie started it climb towards the one U.S. dollar mark. “The price I got for the car seemed unfair, I managed to pay thousands less than what people in Winnipeg, Toronto, and Calgary were demanding for similar cars. Not only was the car far less expensive than anything here, it also came with a unique 20-inch chrome rim package. I felt like I bought a stolen car from the mafia [because] the price was so good.”

So now what?

As economists wait patiently to see what action, if any, central banks on both sides of the border will take, the time has never been better for Canadian consumers with a sense of adventure to take advantage of dollar parity. Despite increased waiting times at the American-Canadian border, there has never been a better time to flock down to the States and take in some shopping. The increasing percentage of “Friendly Manitobans” that populate the Mall of America parking lot are a testament to this fact. Now that Canada Customs has increased their 48-hour duty free exemption limit to $400 from $200, this means that our dollar can go farther on whatever we choose to spend it on, whether it be a new sport jersey, a fabulous designer purse, or even that car that lives only in one’s dreams.

Tom Bzura is a fourth-year science student and an UMSU representative for St. Paul’s College at the U of M.





Volume 95 Issue 8	The Official University of Manitoba Students' Newspaper Website	October 03, 2007

Home About Us Advertising Rates Contact Staff Current Issue PDF Employment Letters to the Editor Meet the Staff Online Archives Volunteer Online Classifieds St. Vincent's Academy Diaries	Font Size Respond Email Print-Friendly The inequalities of being equal The ongoing struggle for price parity TOMMY BZURA After nearly 30 years of inequality with the U.S. dollar, the Canadian dollar is finally managing to hover around parity Despite rejoices from the Canadian public, there has been a definite lag period in obtaining the equality that we have fought so hard for. According to many analysts, Canadians are still overpaying for many of the same goods when compared to our American counterparts. In a recent report, BMO group deputy chief economist Douglas Porter said that despite considerable adjustments to the price of consumer goods, there still remains an uncontestable disparity between similar goods in Canada and the U.S.. “Canadian consumers are far from reaping the full rewards of the massive run-up in their currency in the past five years,” Porter argues, “This is keeping inflation higher than it otherwise should be, contributing to the upward pressure on interest rates. If Bob Barker was still on the job, he would likely say, ‘Canadian retail prices, come on down!’ and Canadian consumers should too.” Canadian money seems to still be living in the past. The market has done its best to adjust for the run up of the Canadian dollar, but in essence Canadians are still being “taxed” for using our colourful currency. Here at home, everything from DVDs to shoes The time has never been better for Canadian consumers with a sense of adventure to take advantage of dollar parity. and even some cars cost more than they do in the U.S.. A simple comparison of major online stores illustrates these discrepancies. Currently the new season of Heroes made its debut on both Chapters.ca and Amazon.com. On Chapters.ca, the box set of DVDs is listed for CA$48.97, while on American Amazon.com and Amazon.ca they are listed for US$39.99 and CA$49.96 respectively. So, here we have an identical item and currencies that are equal in value, but a substantial difference in price. Currency parity can only help Canadians achieve some equality with their American counterparts, as the rest of price difference is created by various other business issues. For example, one of the main causes of the price differential is simply the different demographics between the two markets. Large retailers in the U.S. often have access to lower costs from wholesalers based on the volume of products they purchase. These “wholesale deals” are often translated into better prices for American consumers. Another reason for the gap in prices between similar good on both sides of the border stems from the time-lag it takes to bring an item out to market. When manufacturing a book or DVD, prices are usually decided upon far in advance. The reality is that such prices simply cannot keep up with the volatility of the global currency market. To date, the Canadian dollar is up around 17 per cent this year. Finally, despite sharing much in common with the U.S., Canada is, in fact, a distinct market when compared to our neighbours. Consumer spending in Canada has been increasing steadily since the late 1990s. In the period between 1997 and 2002, Canada saw consumer spending increase 20 per cent , which was double the rate of inflation for the same time period. If these trends continue, then retailers may be willing to adjust their prices to reflect the equality in the two currencies. In this case, the market will ultimately be the judge. The news only gets worse for Canadians as the value of one’s wants increase. Every night in my dreams, there she stands: a white Honda S2000, with a two-tone red and black leather interior. The six-speed, two-seater sports car is what dreams are made of (at least for me), but now with the Canadian dollar enjoying a sense of equality with its American counterpart, students and regular joes alike are making their dreams reality because the possibility of purchasing a car from the U.S. is more viable. The price of my dream car in Canada at the Honda dealership is CA$50,600, but the price for an identical car at the Vern Eide dealership 700 kilometres away in Sioux Falls, South Dakota, is about CA$31,000. Add in the 6.1 per cent duty and six per cent GST along the mandatory $216 RIV fee and a $100 air conditioner fee, the price of the rear-wheel drive marvel comes to C$35,067. Although this may be news to most, some students at the U of M have already taken advantage of the strong dollar. Greg Kreml, a fourth-year commerce student, became the proud new owner of the 2003 Lexus GS last year as the loonie started it climb towards the one U.S. dollar mark. “The price I got for the car seemed unfair, I managed to pay thousands less than what people in Winnipeg, Toronto, and Calgary were demanding for similar cars. Not only was the car far less expensive than anything here, it also came with a unique 20-inch chrome rim package. I felt like I bought a stolen car from the mafia [because] the price was so good.” So now what? As economists wait patiently to see what action, if any, central banks on both sides of the border will take, the time has never been better for Canadian consumers with a sense of adventure to take advantage of dollar parity. Despite increased waiting times at the American-Canadian border, there has never been a better time to flock down to the States and take in some shopping. The increasing percentage of “Friendly Manitobans” that populate the Mall of America parking lot are a testament to this fact. Now that Canada Customs has increased their 48-hour duty free exemption limit to $400 from $200, this means that our dollar can go farther on whatever we choose to spend it on, whether it be a new sport jersey, a fabulous designer purse, or even that car that lives only in one’s dreams. Tom Bzura is a fourth-year science student and an UMSU representative for St. Paul’s College at the U of M.


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