SPECIAL REPORT

SOUTHERN BARGAINS

CANADIANS CASH IN ON U.S. PRICES

ANN WALMSLEY December 18 1989
SPECIAL REPORT

SOUTHERN BARGAINS

CANADIANS CASH IN ON U.S. PRICES

ANN WALMSLEY December 18 1989

SOUTHERN BARGAINS

CANADIANS CASH IN ON U.S. PRICES

Several times a year, Dennis and Margot Egan of Richmond Hill, Ont., load their two young children into the family minivan and drive 160 km to Niagara Falls, N.Y., to go shopping. They stay for 48 hours—long enough to allow each family member to bring back $100 worth of goods through Canada Customs duty free. Then, the 35-year-old hospital administrator and his family head home with the trunk full of bargainpriced U.S. purchases—OshKosh overalls that would cost $35 in Canada for only $11.60, $40 OshKosh children’s shoes for $23 and items ranging from bed sheets to a food cooler. “We save about $800 a year on those trips,” said Margot Egan. “And since free trade has not reduced the prices of U.S. goods here, there is a great incentive to go.”

Shopping: The Egans are among thousands of Canadian families forging their own brand of free trade and taking advantage of a strengthening Canadian dollar by shopping in the United States. On most weekends, lineups of cars returning to Canada at 37 border points, including Niagara Falls and Windsor, Ont., and British Columbia’s Pacific Highway, stretch up to five kilometres. And customs officers often wave through people who declare only small purchases.

And according to the Torontobased accounting and consulting firm Ernst & Young, border shoppers are legally bringing back $1 billion worth of goods a year, more than double the amount four years ago.

During and after last year’s federal election campaign, members of Prime Minister Brian Mulroney’s government said that the Canada-U.S. Free Trade Agreement would eventually reduce or eliminate most tariffs, substantially cutting the price tags on most U.S. imports. But evidence of lower prices is still hard to find, and the Mulroney government has not set up a program to monitor whether merchants are passing on savings to consumers. Added John Winter, a Toronto-based retail analyst who has written a study of the 133-percent increase in border shopping by Thunder Bay, Ont., residents this year: “Practically nothing has changed for the shopper in the street.”

Even though most price breaks will not appear for several years, immediate benefits from the FTA for Canadian consumers were expected for those U.S. goods that became tariff-free last Jan. 1. Among the now-duty-free products: furs, leather, skis, whisky, motorcycles and computers. And sellers of some of those goods did lower their prices. Indeed, Toronto furrier Paul Magder says that his customers have saved as much as $1,000 in

some cases on U.S. furs that he sells, including mink capes and dyed opossum jackets, following the elimination of a 10-per-cent import duty. And an American-made Harley Davidson Soft Tail Custom motorcycle now sells for nearly $2,000 less than its former $16,000 price because of the elimination of an eightper-cent Canadian tariff.

But even after the tariff reductions, prices of

other products have held steady or even increased over the past year. The agreement called for lowering provincial markups on U.S.made whiskies to the same levels as those on Canadian whisky. But in Ontario and Alberta, the price of a bottle of Jack Daniels bourbon— which was over $20 in both provinces—fell by only by about five cents. One top-end model of K-2-brand skis, which were subject to a tariff of 11.4 per cent prior to Jan. 1., have actually risen in price at retail stores to $419, from $399 a year ago. “We took the price down, but K-2 skis are so hot that it drove the price up,” said Gregory Cook, president of Head/Tyrolia Sports Canada Inc., which distributes the U.S.made K-2 skis.

Reap: Last year, however, the Mulroney government said that businesses would not reap windfall benefits from the tariff reductions. In November, 1988, then-acting consumer and corporate affairs minister Harvie Andre said that “if [reductions] do not show up, then you can be sure that our competition cops will be there checking it out.” Officials in his department also estimated that, by 1999, the average Canadian family would save $800 a year, once all the tariff cuts were in place, and about $8,000 on the construction materials for a new home and its furnishings.

So far, the growing flood of Canadians crossing the border is the clearest indication of consumers’ dissatisfaction with persistently high prices at home. But analysts predict that the cross-border shopping sprees will continue even after the tariffs are

removed because many goods are still cheaper in the United States. Volume distribution, lower labor costs and the absence of federal sales taxes make U.S. goods cheaper. And merchants at

American border towns continue to encourage the traffic. Malls in upstate Washington provide parking for the recreational vehicles in which many B.C. shoppers sleep on their 48-hour stays. Indeed, even as the tariff reductions continue under the agreement, it is clear that many Canadian shoppers near the U.S. border prefer their own brand of free trade.

ANN WALMSLEY

HAL QUINN

Vancouver

AGATHA MOIR

Winnipeg

REG WATSON

Niagara Falls

DAVID TODD

Toronto