Da Legal Stuff...

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Monday, October 22, 2007

Vive le Free Trade.

Vive le Canada!!!

What a wonderful country we live in. Today we can all see how Canada's wonderful free trade agreement works for everyone except the average consumer and hard working taxpayer.

The Canadian dollar is now worth almost $1.02 American yet:

A Cadillac Escalade in the U.S. goes for about $40,000, in Canada $80,000

Vive le Canada!

A GMC Yukon sells in the U.S. for about $50,000, in Canada $69,600

Vive le Canada!

You can get a Nissan Altima in the U.S. for about $24,430, but in Canada it will cost you $31,182

Vive le Canada!

But I'm sure there must be a bright side somewhere, there always is right?

What about gas prices? Surely Canada, as a major producer of oil and gas, must have better prices at the pumps than they do south of the border.

Sorry, gas prices in the eastern U.S. avg. 2.80 per gallon, in east coast Canada they’re closer to $4.00 per gallon. That's $4.00 Canadian not in American pesos.

Vive le Canada!

Are you into the latest technology? Well you can always buy an iPod Touch in the U.S. for $399, or in Canada for $449.

Vive le Canada!

Like to read? You can now get the latest Harry Potter book for U.S. $35 but in Canada it’ll cost you $45.

Vive le Canada!

Not to worry though. In defence of Canadians from coast to coast to coast the Federal Finance Minister, Jim Flaherty, plans to “speak with manufacturers and retailers” and ask them to try a little harder if they don't mind too much. I'm sure that'll shake them up and the photo op for the Minister should really get his point across.

Vive le Canada!

You’d think Flaherty would have a little more influence, what with free trade being such a feather in the cap of a former conservative government. Isn't there something in that agreement about "Free Trade"?

Can't Ottawa even exert some influence over the Auto sector in Ontario or Bombardier in Quebec. After pumping all those Canadian tax dollars into keeping them afloat for decades can't they at least pressure them to treat Canadian citizens fairly.

Sorry, but no.

Don't even consider going south of the border to buy a car or truck at a rock bottom price. The dealers there are being told not to sell to Canadians. If you decide to give it a try, beware. If you actually manage to find some desperate dealer willing to sell, you might come back with a nice new vehicle but your warranty won’t be worth the paper it’s written on.

Vive le Canada!

With winter coming on maybe you’re interested in a new snowmobile. Well Quebec based Bombardier makes, ships and sells a long line of summer and winter recreational equipment in the U.S. In fact if you want to purchase their Renegade X 800 snowmobile in the U.S. it will run you about $10,000. In Canada expect to pay at least $13,000 to $14,000 for the same machine.

Until the recent rise in the Canadian dollar Bombardier's standard policy was to impose a 7.5 per cent surcharge on sales to Canadian customers in the U.S. The same Canadian consumers/taxpayers who bailed them out countless times.

Just this month Bombardier expanded their policy to charge 7.5 per cent or $1,250 – whichever was higher. Later they raised the rate to $3,000 and now, taking a cue from the highly subsidised Canadian Auto industry, Bombardier is telling U.S. retailers not to sell to Canadians at all.

Vive le Canadian tax bailouts!

Welcome to Canadian free trade folks. You’re on your own.

Vive le Canada!!!


Stephen said...

I have to disagree with you this time Patriot. Those higher costs are the result of higher taxes and the social safety net we have in Canada.

Some of the things I prefer Canada to over the US might be universal health care and a batchelor's degree that doesn't cost $120 000 US (pretty standard south of the border).

Patriot said...

Sorry Stephen but you are wrong. This is not the result of taxes but of price gouging by manufacturers and suppliers (to a lessor degree by retailers as they have to pay up the food chain and pass along those costs).

Take Bombardier for example. They make products that they ship to the U.S. and sell for thousands less. Even before taxes the sticker price is higher if you were to buy the same thing at a dealer right outside the plant itself (with no shipping costs).

Even if you, as a Canadian, bought it in the U.S. you would be charged more because you are Canadian (if they were even willing to sell it to you).

A clear example of the fact that prices should come down are Walmart and Zellers who are lowering their prices by anywere from 5% to 25% on products from U.S. suppliers. The are also using their strength as major buyers to put downward pressure on prices. Taxes are not the culprit here. It's greed.

We all know taxes have to go on top of a purchase but the base (pre tax) price is far higher here than in the U.S. and our dollar is worth more. The math doesn't add up.

Also, to someone who asked me recently if I expected the federal government to meddle in free enterprise, the answer is yes and no.

No, I don't expect them to dictate the price someone can sell at, but I do expect them to enforce free trade. If consumers can't trade freely between the Countries involved then call the deal something else because it isn't free trade.

Why should a company tell me or anyone else that if I can't buy a car in the U.S. but instead have to buy it from a Canadian supplier?

Why should a company tell me that if I buy their product south of the border, as a canadian citizen, my warranty will be void while American citizens can use their warranty?

Is this free trade?

In some cases the fed already meddles in the marketplace.

They have bailed out Bombardier and propped up the auto manufacturers with billions of our tax dollars over the years.

Isn't that meddling in a free market system? If the companies aren't profitable why should tax dollars and government intervention of various kinds help them survive?

Ottawa should now tell these industries to treat the same taxpayers who supported them fairly on pricing and cross border purchases or they will be cut off the taxpayer's teat in future and be left to sink or swim on their own.

Stephen said...

I see what you're saying but it's not just sales taxes that mark the difference. While there is definitely gouging going on Canadian retailers higher income taxes, transport taxes, duties, and all of the payouts that Canadian employers pay towards our welfare state mean that their margins are generally lower.

I worked for a Canadian based restaurant chain that was expanding into the US and the owner of the company was telling me that restaurants in the US are 25-30% more profitable due to a much less cumbersome set of taxes, regulations, employee related payouts etc etc.

All I'm saying is that it's not that simple. You are right - in this case it's gouging for the most part - but Canadian prices will never be as low as American prices until Canadians are willing to let their standard of living slide to favour employer's pricing regimes.

Anonymous said...

Myles, Government should never, ever, have any say on how a private company operates in a competitive and open market. They should also not be in the business of subsidy for the sake of keeping jobs for political gain.
Consumers have a choice: put up with the gouging or buy elsewhere. There is nothing stopping any consumer from procuring free trade goods in the U.S. and bringing them across the border. I've lost count of how many people that I know that have purchased vehicles in the States saving thousands of dollars in the process. Manufacturers are free to dictate who their dealers can sell to but once the initial sale is made they lose all control. If you really want that new Cadillac, hire a U.S. based agent to purchase on your behalf and buy from them second hand. Yes, there are warranty issues etc. but you can buy a private warranty or purchase from a manufacturer that does not discriminate if that is of major concern. There are those that do. Support them and the other manufacturers will have to follow suit or lose market share. BTW, the dealers will sell to anyone as long as they do not violate their agency agreement. There are legal ways around everything.
This is not a governance issue, the responsibility lies squarely with consumer choice. Until we stop supporting their gouging practices, we are unlikely to see change. HBC (Zellers) blinked this week and started to drop prices to reflect the currency gain. Hopefully, the consumer will reward their action and punish those who continue to gouge.
If you are sincere in that you believe government should cease all subsidies for those that discriminate based on citizenship, be prepared to lose the high paying jobs to areas with lower labour costs. That's the free market economy. Talk to anyone displaced in Stephenville or, this week, in Corner Brook. They can tell you all about what happens when government ceases to bail out private industry. We can't have our cake and eat it too. The high dollar has purchasing advantages, but on the down side export opportunities are diminished.
The real story here is how NL’s economy will be affected over the long term. Tons of cash in government coffers is great, but the model is unsustainable once the oil runs out if we have no market for export.

Anonymous said...

Not to bore everybody with yet another example of gouging, but how about books, novels, magazines? I should be able to purchase reading material for the same price in Canada as if I were stateside.

Patriot said...

You've got an interesting take on the situation Anon 11:32.

What you are saying is that we don't really have free trade because we need to hire a broker or shill who is american to buy the car then sell it to us used then perhaps buy a seperate warrenty at additional cost. Does that sound like free trade to you?

And no, I don't believe government should completely walk away from helping certain industries in times of crisis. it's often the government that helps put them in a crisis. What I'm saying is that they should walk away from companies who take government (tax payer support) and then turn around and gouge those same tax payers.

Cornerbrook mill wasn't doing that. Neither do many companies but can you say the same for Bombardier or auto makers?

You are the one who said you can't have your cake and eat it to. In that you and I agree, which is why the companies who are more than happy to take from taxpayers and then turn around and screw them over for higher profits (sucking even more money out of their pockets) need to be dealt with by cutting them off.

Stephen said...

Myles, Government should never, ever, have any say on how a private company operates in a competitive and open market.

I love the irony in this being essentially what Harper said about fallow-field legislation but here we have today Flaherty trying to talk retailers into lowering their prices. This federal government is composed of nothing but hypocritical liars.

Anonymous said...

Sure he said it about fallow field, but will he refuse to help out Bombardier the next time they are in a bind? NOT!!!!

Anonymous said...

Myles, anon 11:32 again. I believe that you are confused as to what Free Trade is. The purpose of NAFTA was to encourage trade by eliminating tariffs on most goods originating in and traded between the countries. The goods we are discussing are not priced differently due to tariff – the price difference is at the discretion of the manufacturer. The reason that many dealerships will not supply Canadian customers is due to agency agreements set up by those manufacturers. That issue is between the consumer and seller. You cannot blame the Canadian government for the issue; consumers need to take direct action. If enough Canadians refuse to do business with companies that engage in the practice, the manufacturers will be forced to react. They could relocate Canadian manufacturing facilities to jurisdiction with lower costs (Mexico or the U.S.), reduce the price to the Canadian market, or simply allow themselves to lose market share.

If, in the interim, if we wish to avail of the savings, we can legally do so by taking the course that I mentioned earlier. Free trade allows us to do that. Before free trade, punitive tariffs existed that made this uneconomical. Those tariffs no longer exist. I stand by my statement that free trade is functioning as intended.

We agree that if government is contributing to a double subsidy (government support while the entity charges more in Canada), they should be cut off. – There will be consequences that will affect us all.

The Corner Brook Mill is enjoying considerable subsidy allowing them to remain competitive in the U.S. market. Without those supports, they could not continue operations profitably. To ensure a profit, the subsidy is required. The beneficiaries of that subsidy are the U.S. consumers, the employees, and the company. The NL taxpayer is paying for Kruger's profits, no different that the Canadian consumer paying profits for those that charge more here than the U.S.. In the case of consumer goods, we have a choice if we wish to avoid that additional cost. In the case of Kruger, our politicians (who we elect) made that decision for us. I’ll take personal choice over political decisions any day. If that means job losses in weakened manufacturing sectors, do it now rather than later. Those decisions are not made for political purposes, and as we have discovered in the equalization fuss, as long as Quebec and Ontario seats are involved, there's not a party on Parliment Hill that is willing to upset those vote rich jusidictions. The real beef is not free trade. It is government subsidy of the manufacturing industry. If you think that we're being gouged with NAFTA, imagine what things would be like without it. You don't need to look far - just observe how our seafood products are taxed by the European Union. In the meantime, use EBay and circumvate the agency agreements. Eventually the offending companies will get the message. Zellers and Walmart already have, and I suspect many more will in short order.

Xero said...

Been reading your articles for a while and I'm usually right behind your veiws. However, on the rising dollar, I'm confused. I had assumed for the longest time that the reason canadians were still dishing out more than our US counterparts was due to advanced pricing. And while I don't agree that we shouldn't have to pay prices set months ago, I can understand that constant updating of prices might be a bit much to expect.

But if what you're saying is true, does this mean that despite the current situation, advanced pricing policies haven't changed, or worse, work against us further? I thought that high dollar meant that importing was supposed to receive a boon, but the exporting would suffer. By your account, it sounds like both are still favoring international deals, and not the homeland.

I'm not trying to dispute with you, but are we still dealing with the problem of businesses setting their prices too far in advance, or are we dealing with greed, pure and simple, that by several economist's definition, is wrong?

As a side note, I've been pinching pennies to buy internationally via internet distribution. I'd be willing to risk E-Bay rather than deal with this whole situation.

Martin L. said...

there are arguements on both sides of this and I don't pretend to know much about the Canadian retail sector but a price difference of 20 or 30 percent is not just taxes or higher manufacturing costs.

Think about it, if a car is made in Canada (with all the costs involved EI, benefits, business taxes, payroll taxes, etc.) and it costs 50,000 canadian, how can it be sold in the U.S. for 35,000 after shipping?

Also, in some cases retailers may have bought their stock when your dollar was lower but it didn't jump from 80 to 1.00 overnight, it has been rising for a while. what about magazines (for example) that are published weekly or monthly? How can the difference in prices on those be attributed to old stock?

There is also a human rights issue here. Already there is at least one lawsuit against auto makers, brought I believe by a Newfoundland couple.

If I am in New York and want to buy a car (as a U.S. citizen) I can buy it for 30,000 but when you walk into the dealer and he finds out you are Canadian the price goes up to 40,000 or he refuses to sell to you.

That's discrimination. Would he get away with that if a black, hispanic or Jewish person tried to buy the same car? I doubt it.

If I come to Canada I don't expect to go to a store and be charged a higher price for the same product than someone living in the area.

What you guys are going through is crazy.