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The issue: Canadian merchants in communities close to the US/Canada border are suffering from significant business losses as customers engage in cross border shopping in the United States
What it’s about: Large numbers of Canadians cross the US border to shop, negatively impacting the sales of local Canadian retailers and reducing tax revenues of border communities, and in a broader scope, the whole economy because of internet shopping. It does not seem that this activity will abate anytime soon. Canadian consumers
are attracted to American stores by:
a) a significant difference in the price of gas, groceries, clothing and many consumer products;
b) a much larger product selection to choose from;
c) a relative parity of the currency.
When approached on the Canadian Chamber of Commerce advocacy position of 2012 to enforce limits on purchases, one local Conservative MP and a senior cabinet minister indicated they held a greater concern over potential backlash from those involved in cross border shopping in the trade-off between enforcing the laws and expediting border lineups.
The government, in its last budget, announced a trial of removing the tariffs on baby clothes and sporting goods (except bicycles). Unfortunately, tariffs on other products will increase when 1,290 product classes from 72 countries lose their preferential tariff status, and it seems that the problem is getting worse. It is critical that the government do what it can to create an environment, which will allow Canadian suppliers and merchants to become more competitive with their American counterparts. Currently there appears to be little significant action being taken to stem the tide of shoppers heading to American stores. In 2009, there were 21 million same-day trips to the US. The latest figures for 2012 show the numbers have increased to 33 million, with Canadian spending totaling $12.6 billion.
In 2012, in keeping with the Beyond the Borders Accord between the United States and Canada, the government increased the dollar amounts of purchases allowable for persons returning to Canada. In light of this, Douglas Porter, Deputy Chief Economist with BMO said that the increased purchase allowances, combined with lagging American tourist figures would account for a $20 billion drain on the Canadian economy.
An information campaign (including government mail inserts, internet and website messaging, radio and television public service announcements) conducted by the Canadian Government is called for. There should be one message in all parts of the country, explaining how shopping locally benefits businesses, creates jobs and generates taxes and other economic means, which are necessary to build and maintain healthy communities.
The cost of the campaign could be recovered through increased economic activity resulting from increased local shopping. It’s certainly not going to eliminate cross border shopping, however it is critical that Canadians be made aware of the economic gains which will benefit them directly through even a small modification of their cross border shopping habits.
What the Surrey Board of Trade did: The Surrey Board of Trade created a resolution for the Canadian Chamber of Commerce to ask the Canadian Government to create and implement a multi-media campaign to educate Canadians on how dollars spent in their communities support their community, region, province and country.
The result Ongoing advocacy.
The issue: Free Trade Agreements.
What it’s about: A more strategic approach is needed for Canada’s international trade agenda. By their very nature, Free Trade Agreements (FTAs) focus predominantly on the removal of tariffs and duties. The government should focus on FTA opportunities where there is the real potential for Return on Investment (ROI) for both (or all
participating) countries and, where the process is both consultative and available for public review. While it is generally understood that FTAs offer a competitive advantage or at the very least a level economic playing field, Canada should not enter them uncritically. Entering into such agreements requires significant due diligence and a rigorous process that can and should include increased consultation with Canada’s business community.
Free trade agreements are meant to decrease or remove costly and time-consuming trade barriers in order to accelerate the trading of goods and services thereby generating more profits for those engaged in the agreement. In other words by opening up to new foreign markets, you allow for increases to sales and profits for domestic companies. It has been argued that this, in turn, creates a domestic middle class with higher wage jobs over the longer term. Developing countries on the other hand gain access to cheaper goods and services which provides for a wider market for Canada’s own domestically produced goods and services. The Canadian government has increased its focus on expanding Canada’s trade agenda. In the past number of years FTAs have been launched with key markets such as India, the European Union and the Trans-Pacific-Partnership. While Canadian businesses are generally in favour of market liberalization, some are concerned about the transparency and potential benefits of these FTAs.
Furthermore, there is growing concern that Canada’s international trade agenda lacks sufficient strategy and that time is being spent on securing agreements with jurisdictions that will bring only minimal gains to the Canadian economy.
The Surrey Board of Trade supports free trade and the following recommendations are designed to keep us focused on more strategic free trade agreements with specific countries such as the European Union and India.
They are also designed to improve FTA utilization through increased FTA information and to create better links between existing FTAs. We acknowledge that the primary purpose of any FTA is for the betterment of the Canadian economy and its peoples. However, FTAs should not be entered into solely for special interest and not for political bi-lateral relationships.
What the Surrey Board of Trade did: The Surrey Board of Trade developed a position paper on the variable aspects of the Free Trade Agreements
asking that the Federal Government work with the private sector, to improve the development of FTA’s by:
- Undertaking continued/expanded consultation with business that will help to establish the goals and objectives of any Free Trade Agreement.
- Creating a clearly designed and defined repository of tangible benefits that will accrue to Canada’s domestic suppliers of goods and services with an overall benefit to Canada’s economy (new jobs, export capacity, lower cost imported inputs, stability and transparency of trade environments).
- Seeking to improve the availability of access and information on current Canadian FTAs. This includes those already in force, which ones are predicted to come on line in the future, and the rationale that was or will be used for the development of these FTAs.
- Ensuring greater transparency in the process and the inclusion of a full cost-benefit analysis prior to drafting and conclusion of FTAs. These findings should be developed and shared in consultation with relevant stakeholders.
The result: Ongoing advocacy.
The issue: Assisting skilled immigrants to integrate in to the workforce and have foreign qualifications and credentials assessed and upgraded as necessary.
The result: The Immigrant Employment Council of BC (IEC-BC) announced that the Surrey Board of Trade is one of 11 organizations to be awarded funding from the $1.4 million Employer Innovation Fund (EIF) to help develop initiatives and resources to attract and integrate skilled immigrants into BC workplaces.
The Surrey Board of Trade will pilot a 12-month employer-focused program to assist small and medium-sized businesses to integrate immigrants into their labour pool. The project involves workshops, resources navigation, and immigrant human resources support for members, with a one-on-one, hands-on approach by a roving human resources specialist.
Other EIF projects that received funding include the creation of resources to assist employers in assessing foreign qualifications, a program that helps employers integrate skilled immigrants into the workplace and outreach campaigns to recruit and retain skilled new immigrants to a community and an industry.
The issue: Addressing shortages of educated and skilled workers.
What the Surrey Board of Trade did: The Surrey Board of Trade and the Applied Science Technologists and Technicians of BC (ASTTBC) signed a Memorandum of Understanding to promote economic cooperation and international marketing opportunities, and to work together on technology education, career issues and skills
The Surrey Board of Trade was the only Board of Trade/Chamber of Commerce in the Lower Mainland to have received funding from the Employer Innovation Fund managed by the Immigrant Employment Council of BC and the Province of BC. This is funding for a 12-month program that we’ve established designed to help businesses address skills shortages/immigrant integration. Skills Shortages – as our Canadian Chamber of Commerce also indicates – is the number one economic impediment to Canada – and we need to focus now at the grassroots level help our businesses find the skills they need to make their products.
The Applied Science Technologists and Technicians of BC – also known as ASTTBC, formed in 1958. ASTTBC are technologists, technicians and technical specialists that achieve professional recognition through this association. Their members work in applied science technology fields such as architecture, bio-medical engineering, building, civil, electrical, electronics, environmental, fire protection, house inspection, information, mechanical, onsite wastewater and other related disciplines tied to the built and natural environment. These Technology Professionals design, construct, inspect, test, maintain and manage most of the world around us including buildings, computers, electrical power, all manner of equipment, roads, environment, and water and wastewater systems. They work in private enterprise, for consulting engineering and technology companies, in all levels of government, and as private consultants.
The issue: Cross Border Shopping.
What it’s about: The retail sector plays a key role in bridging production and consumption, and as a result has significant direct and indirect effects on the Canadian economy. While directly contributing $74.2 billion to Canada’s gross domestic product (GDP) in 2009, the retail sector affects other industries as well through its
pioneering of innovative practices. In 2009, the retail sector invested:
Retailers anticipated a continuation of slow demand growth over the course of 2012. The Retail Council of Canada reports that a substantial majority of their members (61%) expected sales growth in 2012 between one and five per cent. Most expected growth in the two to three per cent range. Inflation was anticipated to be in the two per cent range making the growth in actual volume of sales minimal.
Parity with the US currency has encouraged consumers to compare prices across the border and to shop in the US. The number of Canadian’s crossing the border to shop in the US continues to increase. Jurisdictions across the United States have benefited from Canadian shoppers heading south of the border. Same-day car trips are a commonly used metric to gauge cross-border shopping. In December, Canadians took 2.5 million same-day car trips to the US, according to Statistics Canada, a 4.2 per cent increase from November and the highest monthly total since May 1998. By comparison, 599,000 Americans made same-day trips into Canada in December, according to Statistics Canada.
Canadian shoppers are being credited for helping boost tax revenues in popular cross-border destinations across the United States. In Erie County, New York sales tax revenues reached $400 million in 2011 for the first time. New York State has a sales tax of four per cent, and Erie County levies an additional tax of 4.75 per cent on all retail purchases, which Canadian shoppers are also required to pay.
Two other large cross-border shopping destinations are Bellingham, Washington which is a popular area for cross-border shoppers coming from Vancouver and Grand Forks, North Dakota which draws shoppers from Winnipeg.
Canadian shoppers cross into the United States in large part because of price discrepancies. This was acknowledged by the Government of Canada when at the request of Minister Flaherty, the Senate Committee on National Finance commenced a study into the reasons for price discrepancies between Canada and the United States.
Comparison of Pricing: Some examples of every-day consumer items are shown below with their average cost in Canada and the United States.
|Item Description||US Cost||Canadian Cost||Difference|
|Soap – 16 Pack||$6.99||%8.98||28%|
|46 inch LED TV||$888.75||$1,001.00||13%|
|Orange Juice (7.56L)||$10.01||$12.66||26%|
|Aspirin 81mg low dose – 350 count||$10.16||$21.78||114%|
In Canada, often it is retailers who are blamed for charging higher prices than their American counterparts. Many multinational vendors and suppliers who sell to Canadian retailers do so by way of contracts negotiated specifically for the Canadian market. Retailers who have stores in both the U.S. and Canada have indicated they are charged anywhere between 10% and 50% more for identical products by some suppliers. Making it impossible for them to compete. On most items imported to Canada, retailers pay significantly more by way of import taxes to bring goods to market.
Duty Remission on Imported Consumer Goods
As recently as this year, the Federal Government has taken steps to eliminate the duties on manufacturing inputs. They have stopped short of reducing or eliminating duties on finished good entering into Canada. Retailers cannot compete when they have to pay considerably greater import duties than their American counterparts for products imported from around the world.
|Products||Duty applied into Canada||Duty applied into US|
|Ice Hockey Pants||18.0%||2.9%|
|Hockey Helmet TH||5.0%||0.0%|
|Hockey Helmet CN||8.5%||0.0%|
|Helmet Facial Protection TH||5.0%||0.0%|
|Helmet Facial Protection CN||7.5%||0.0%|
Duty relief on certain or most finished goods would not be detrimental to Canadian production as the proposed elimination of duty on finished goods would only relate to those goods that are not available or are in short supply from domestic manufacturers.
In the 2012 Federal Budget, the government moved to increase personal exemption limits. This will increase pressure on retailers across Canada to match US prices. Something they cannot do under the current tariff structure.
There is a large difference in pricing between Canada and the United States for Canada’s supply managed products. The complex system of marketing boards in Canada was put in place at a time when our understanding of markets was much less sophisticated. Price fixing and quotas produce negative consequences. Production quotas have left Canadian industry with a large number of smaller high-cost producers. In order to control prices, marketing boards restrict imports. In retaliation, foreign governments often restrict exports from Canada. Abandoning these failed methods through an equitable transition program is the best way to ensure a vibrant and sustainable farm economy.
|Product||Average Canada Retail Price||US Price|
|Eggs (per dozen)||$3.22||$1.79|
|Chicken (Kg) (boneless breast)||$6.92||$3.00|
What the Surrey Board of Trade did Submitted a resolution to Federal Government receiving significant media exposure on this issue:
That The Government of Canada:
- Call on suppliers to explain pricing practices which result in an over inflation of prices for Canadians.
- Reduce import duties on finished goods that retailers must source outside Canada because they are unavailable from domestic productions. The Government must expedite its review of the tariff system in Canada in order to minimize the impact of the June 1st, 2012 limit changes.
- Thoroughly review of Canada’s supply management system and its down-stream impacts with measures put in place to protect retailers should the government choose not to change the existing system. Exempting or limiting supply managed products from personal exemption limits at the border and more strict enforcement of those limits at the border.
The result: Ongoing advocacy
The issue: Foreign Credentials.
What it’s about: We have been continuously advocating for fast tracking the process of verifying and adjudicating credentials before immigrants come to Canada. The International Trade Team has suggested that we build a credential model locally before we can nationally. I met with the Federal Minister of Immigration and Citizenship.
They may take remedial training to meet our standards.
What the Surrey Board of Trade did: We met with the Federal Ministers of Immigration.
The result: Some improvement but more needs to be done. Ongoing observation and advocacy.
The issue: International Education – VISA issue.
What it’s about: International Education is declining in Canada due to the level of difficulty to get a Visa. It costs less to study in Canada than China with a promise of a good job upon graduation. Kwantlen Polytechnic University and Simon Fraser University have established a joint promotional plan to promote Chinese student exchanges
and the Surrey Board of Trade can become involved. Foreign students are an important part of our economy. Other items to be considered are: marketing in foreign markets, and Canadian credibility. We continue to lobby for an upgrade to the current VISA system.
What the Surrey Board of Trade did: Working towards a federal resolution which argues that the Federal Government should give more power to Provincial Governments and then in turn to educational institutions when participating in educational fairs to give international students VISA’s – similar to the Australian educational model.
The result: Ongoing observation and advocacy.