Proceedings of the Standing Senate Committee on
Issue 22 - Evidence - June 13, 2012 (evening meeting)
OTTAWA, Wednesday, June 13, 2012
The Standing Senate Committee on National Finance met this day at 6:45
p.m. to study the subject-matter of all of Bill C-38, an Act to implement
certain provisions of the budget tabled in Parliament on March 29, 2012 and
other measures, introduced in the House of Commons on April 26, 2012.
Senator Joseph A. Day (Chair) in the chair.
The Chair: Honourable senators, this evening, we are continuing
our study on the subject-matter of all of Bill C-38, an Act to implement
certain provisions of the budget tabled in Parliament on March 29, 2012 and
other measures, introduced in the House of Commons on April 26, 2012.
Honourable senators, this is our seventeenth meeting on the subject
matter of Bill C-38. This evening we will be looking at Division 44 of Part
4, amendments to the Customs Tariff. This can be found at page 379 of this
We welcome Karen Proud, Vice President of Federal Government Relations
with the Retail Council of Canada. Welcome back. We will have a special seat
We also welcome, via video conference from Calgary, Mr. Ben Brunnen,
Director of Policy and Government Affairs and Chief Economist with the
Calgary Chamber of Commerce.
Mr. Brunnen, welcome, sir. We do not often have the Calgary Chamber of
Commerce helping us out with legislation here at the Senate, and we are
pleased you are able to do so this evening.
I will start with Ms. Proud, who will have a few introductory remarks;
and then I will go to you, Mr. Brunnen, if that is satisfactory.
Ms. Proud, please proceed.
Karen Proud, Vice President, Federal Government Relations, Retail
Council of Canada: It is a pleasure to be back here again. I would like
to thank the chair and the members of the committee for inviting the Retail
Council of Canada to speak on the changes to the personal exemption limits
as set out in Bill C-38. Our members are very concerned that these changes
will result in further increases in cross-border shopping, which could have
significant negative effects on the retail sector, and ultimately on the
Canadian economy. As such, we are hoping that the committee will support the
retail industry's call for the speedy elimination of outdated import duties
on finished goods to begin to establish a level playing field in Canada for
For those of you who were present, you may recall that our president,
Diane Brisebois, and I appeared before this committee on April 24 on your
ongoing study into the reasons for price discrepancies between Canada and
the United States. At that time, we also submitted a detailed brief, which I
believe will be redistributed to you, as I will refer to a number of issues
within it. It outlines key factors contributing to the retail price
differences and key factors that contribute to our members' concerns that
the changes to Bill C-38 will make.
In light of the fact that we have already been here and have spoken about
many of these issues, I will try to be brief. I will not revisit our
previous testimony. I will try to get to the point immediately, with the
hope that you have already reviewed our submission, which contains a lot of
It is important for this committee and for the government to know that
where Canadian retailers are able to compete, they do so, and they do so
very well. However, retailers can only compete where there is a level
As presented back in April, and based on the weight of the evidence that
I believe this committee has heard, the root causes for price differences in
Canada and the U.S. do not lie with the retailers but are due to other
inequities between the two countries, which we have already discussed.
We specifically raised four factors on April 24 that we believe are of
most significance: vendor country pricing, import duties and tariffs, supply
management as it relates to some food products and a lack of regulatory
This bill could have addressed two of those factors and could have gone a
long way in helping retailers compete and in keeping Canadian dollars in
Canada. The two factors I am talking about are the outdated tariffs, some as
high as 18 per cent, exempting or restricting supply-managed products such
as dairy and poultry from personal exemption limits, as is already done for
alcohol and tobacco; and enforcing those limits at the border.
I have with me over a thousand letters from retailers across Canada
seeking these changes from the federal government. These letters come from
retailers of all sizes and all regions of the country who, combined, employ
hundreds of thousands of Canadians.
I will not go into all of the reasons behind the tariffs and what we have
already requested on supply management, as we have done that already on
April 24, but in closing I want to let the committee know that it is
important to understand that we are not interested in telling Canadians
where to spend their hard-earned dollars. Our members just want the
opportunity to compete for those dollars on a level playing field so that
they can bring the best products and the best value to Canadian consumers.
We believe that benefits everyone, as every Canadian dollar spent in the
U.S. represents a dollar not going into the Canadian economy. Ensuring that
provincial and federal sales tax revenue stays in Canada is for the benefit
of the retail sector and the economy as a whole.
I would like to thank the committee for providing this opportunity for
retailers to bring forward their views and comments, and I am happy to
answer any questions you might have.
The Chair: Thank you very much. We do have your earlier report of
April. That has been recirculated, since we were dealing with that on
another issue that is still ongoing.
For your information, we hope to have a report in the fall on the price
discrepancy issue. However, in the meantime, we are expected to deal with
Bill C-38, and it just so happens that a lot of the same issues have come
Mr. Brunnen, please proceed.
Ben Brunnen, Director of Policy and Government Affairs and Chief
Economist, Calgary Chamber of Commerce: Thank you very much. This is the
first time I have had the opportunity to present to you. I welcome the
opportunity to address the Senate Finance Committee on this important issue
confronting Canadians and Canadian business.
On June 1, I was pleased to participate in the Government of Canada's
announcement regarding the coming into effect of the new traveller exemption
limits announced in Budget 2012. For more than 120 years, the Calgary
Chamber of Commerce has been the city's main connector of people, ideas and
solutions. However, the Canadian economy continues to be somewhat lacklustre
into 2012 and consumers are burdened with high debt levels.
One of the places some Canadians have turned to find savings is our
southern neighbour, the United States. Canadians shop in the U.S. for a
number of reasons, including increased selection, larger and more varied
retail experiences and, increasingly, price. The high value of the Canadian
dollar has made American goods relatively cheaper for Canadian shoppers. We
support the proposed amendments, which are consistent with the government's
recent focus on regulatory streamlining, particularly in relation to energy
environmental areas. However, the proposed changes, we feel, will result in
reduced costs and increased efficiency at border services.
Another benefit of these changes will be the increased competition among
retailers. Indeed, we are seeing a strengthening in that market now and a
strong interest in Canada's retail sector from world-class companies such as
Target, Brooks Brothers and Victoria's Secret. However, we cannot be
complacent. The amendments proposed here should be viewed as a first step.
The next step should focus on strengthening the Canadian business climate
through the reduction of cross-border trade costs, including custom tariffs.
According to a recent BMO study, the prices of various consumer goods can
be as low as 14 per cent in the United States compared to Canadian prices.
This gap is particularly high for some of the bigger ticket items such as
sporting goods, airline flights, groceries and automobiles. The gap is the
largest for some of these products that are generally homogeneous in nature
with no apparent cost differential, such as running shoes, iPods and
backpacks. Different regulatory structures, import tariffs, lower
consumption taxes, higher labour and real estate costs and a less efficient
Canadian supply chain mean that retailers often find themselves unable to
compete with their U.S. counterparts. This means that we need to concentrate
on creating a more competitive climate for business while reducing or
eliminating tariffs, improving regulatory harmonization and working towards
more comparable tax regimes. The proposed changes in this bill, along with
future changes I have outlined, will help position Canada for continued
In conclusion, the changes proposed by the government in this act are
timely and will aid Canadians in making smarter purchasing decisions. The
next step must be a concerted effort to streamline the regulatory and tax
burden facing Canadian business to enhance our competitiveness. I would like
to thank the committee for inviting me to speak today on this issue and I
would be pleased to elaborate on the issue of competitiveness between Canada
and U.S. retailers, as well as Canadian fiscal policy and the economic
outlook for the country.
The Chair: Mr. Brunnen, when you said "the changes proposed in
this legislation,'' are you talking about the proposed exemptions and
tariffs and the tariff on fuel brought in for the purposes of producing
electricity? Are they the changes, or were you talking about other changes
Mr. Brunnen: A number of changes. We are supportive of the changes
for consumer exemptions. We see it as a first step towards regulatory
harmonization of border services. For that matter, we see higher
efficiencies achieved through this streamlining. Our approach and advocacy
efforts speak towards viewing this as a first step towards greater
opportunities for streamlining our regulations and enhancing our
competitiveness. We see this as the beginning and would very much encourage
the federal government to focus on greater changes that will have a more
meaningful impact focused on Canadian competitiveness.
The Chair: In this particular division, I think a 5 per cent
tariff on oil coming into the country is used by manufacturers or producers.
Are you supportive of that one as well?
Mr. Brunnen: Absolutely. We are supportive of the reduction in
The Chair: Are there any portions of this 400-page bill that you
do not support?
Mr. Brunnen: Generally speaking, it is very favourable, from a
broad perspective. We are quite supportive of the overall budget bill. There
are a number of parameters in it that we feel are timely and will enhance
our competitiveness. The specific tariff you mention is something we
support, as well as the enhanced integration at the border for consumers.
The Chair: Those latter two points are what we are focusing on
this evening. I just wanted to determine how broad the comment you made
during your presentation was, and I think we understand it now. Thank you.
Ms. Proud, can you expand on your statement that exempting or restricting
supply-managed products, such as dairy and poultry, from personal exemption
limits is what is already done for alcohol and tobacco, as well as enforcing
those limits? How does that help? Can you explain that to us?
Ms. Proud: We know these products are probably some of the most
cross-border shopped. People are going over filling their trunks with
groceries. We believe that, as they have already done with alcohol and
tobacco, they could restrict the amount of this product that Canadians could
go over to the U.S., buy and bring back to Canada.
The changes that were put forward in the bill do not change the exemption
limits for alcohol and tobacco. I think they recognize that those are
already products that are cross-border shopped a lot, and they are not part
of these new changes to the bill.
What we have asked for is that they include the supply-managed products
in that basket because those products, because of the system in place — we
are not suggesting they change the supply-managed system, but just make sure
Canadians now, because of the difference in pricing, are not flocking across
the border to fill up even more on these products.
The Chair: You would have to check off what you have, how much
alcohol and tobacco, and how much —
Ms. Proud: — eggs, poultry and milk.
The Chair: Exactly. I understand that.
Senator Buth: Mr. Brunnen, I would like to follow up on your
comment about faster border efficiencies. Can you elaborate on what you mean
Mr. Brunnen: Our position is that with higher exemption levels
consistent with those set in the United States, there is greater ability for
Canada Border Services agents to not necessarily focus on specific lower
limits in a nickel and dime sense but to have that broader parameter in
which to view the declarations of Canadian citizens going over the border.
That bigger exemption level means there is less time spent viewing the
specific minutia of the border exchange and more time spent on the broader
issues at hand of border security, for example, and getting people through
Senator Buth: You also made a comment about Canadians making
better purchasing decisions and competitiveness. Are you talking about
Canadians going across the border in terms of better purchasing decisions?
Mr. Brunnen: Yes. When we talk about Canadians making better
purchasing decisions, this does enable some competition and choice for
Canadians, not so much in Calgary directly; we sit a little bit higher on
the border, so that marginal cost is higher, but certainly for the border
Our contention is, without a doubt, that Canadians will be looking for
the best price possible. There is a reasonably strong retail market here in
Canada, particularly in Alberta, and that will encourage stronger
competition among the retailers as a first step for Canadian business. We do
see that as positive.
That said, without some subsequent change to the legislation to enable a
little bit more equity and competitiveness from a tariff and regulatory
harmonization perspective, we feel that over the long term these changes are
Senator Buth: Your comments are fairly consistent with Ms. Proud's
in terms of the points that the Retail Council of Canada is making on
country pricing and reduction in tariffs.
Mr. Brunnen: I definitely see some consistency between my comments
and our position at the Calgary Chamber of Commerce and that of the Retail
Council of Canada today.
Senator Ringuette: When Minister Flaherty was before this
committee to propose the budget bill, I specifically asked him with regard
to the increased duty-free exemption proposed in Bill C-38 if he had at any
time consulted with his provincial counterparts, because not only is there a
reduction in federal revenue of $17 million per year, but that also entails
a reduction in provincial sales tax revenue of $23 million. That is $40
million less revenue for federal and provincial governments to provide
services to Canadians.
Ms. Proud, as per the estimates supplied by the Department of Finance,
this measure will cost the federal government $17 million in annual revenue
by 2013-14. At a 5 per cent GST rate, we are looking at $340 million in
extra estimated shopping. That is a lot of lost sales for the retail
community, I would say particularly for the communities along the U.S.
border, which will mostly be affected. Looking at that amount of sales, I
estimate — this is a guesstimate — that that will cost roughly 11,000
full-time jobs in the Canadian retail sector.
Has the Retail Council of Canada looked at the full impact of this
measure on its retail members?
Ms. Proud: We have not studied this to the full extent of what
changes will occur. Our members are almost unanimously concerned about the
changes. They do believe that the raising of the personal exemption limits
will affect their businesses, in particular those at border towns. I think
there is no question there will be more lost sales; it just follows logic.
No, we have not studied it directly. Even some of the figures that have
been bandied about, I know that BMO has said it will be $20 billion worth of
losses. Even if it is a fraction of that right now, it is pretty shocking
for the retail sector.
Senator Ringuette: Yes. I have here some quotes from a small
business owner in Langley, B.C., which is a pretty near border community. He
I don't understand it. The government is supposed to be in our
corner, not encouraging people to go south to spend their money. And
they're hurting themselves too, losing tax revenue. This doesn't help us
as Canadians at all. I can't figure out the logic.
Another comment by the Cornwall & Area Chamber of Commerce says:
"By encouraging people to shop across the border, it literally takes
money out of the pockets of business owners, their employees and their
families,'' said Shaver. "We are not sure how Mr. Lauzon came up with
this idea or if he considered the impact it would have on our
The Niagara Falls Chamber of Commerce president, Carolyn Bones, says:
This proposal will allow Canadians to spend even more money in the
States, which means fewer dollars, more bankrupt shops and more lost
jobs for Canadian citizens.
The list goes on and on.
As a former director of a Chamber of Commerce, I am somewhat surprised.
However, Mr. Brunnen, I do understand that Alberta does not collect
provincial sales tax, so there is no lost revenue for your provincial
government. However, we also have to look at and take into consideration —
and I do not know if you have done that — that Calgary is 250 kilometres
from the U.S. border, never mind a U.S. retail centre.
I can understand maybe for Calgary that you do not see a major loss of
jobs with this measure, and you certainly have no loss in provincial sales
tax revenue. Have you consulted with your retail members?
Mr. Brunnen: It is a good question. From a tax perspective, while
we do not necessarily have a sales tax, we would certainly see losses from a
corporate income tax perspective, to the extent that it is manifested
through the increased exemptions. From our membership's perspective, while
we will see some short-term challenges in this regard, we do see some
positive attributes. There are costs and benefits, so there could be costs
associated with reduced times at the Border Services Agency. That is a
significant one that we hear about here in Alberta.
I also think that the biggest opportunity, without a doubt, is to start
focusing on finding ways to harmonize regulations for cross-border trade.
This is the first step. It is small and talks about streamlined and
harmonized regulation for consumers. Taking it a step further and
harmonizing regulations, whether they are safety or energy-related, those
types of things are really where we need to be going to enhance our
competitiveness with our largest trading partner here in North America.
The reality is that there is an entire cost structure disadvantage over a
number of factors that need to be brought into play, in addition to consumer
exemptions at the border, for retailers to be competitive. These include
real estate costs, labour costs and technological challenge. There happens
to be less competitiveness in the supply chain here in Canada, largely as a
result of the need for stronger investment in ICT. There are a number of
components that can counterbalance what we are seeing here today. While we
feel that they might, at the margin, be perceived to be negative — we will
wait for the numbers to play out — we need to take a step further to
streamline the regulations and encourage that level of investment. We have
seen the federal government undertaking efforts to liberalize and negotiate
trade agreements globally. That is a critical strategy — it is opening your
markets — particularly during challenging economic times. This is a step
that we see as initial, one that we would very much encourage the federal
government to explore further, particularly with the business focus.
Senator Ringuette: I asked you a specific question, and I have yet
to get the answer. Have you consulted with your retail members?
Mr. Brunnen: We consult with our membership on a number of
initiatives on an ongoing basis.
Senator Ringuette: Have you on this one?
Mr. Brunnen: Generally speaking, we survey our members on a
regular basis. The top issue confronting our membership is economic
competitiveness. We feel that this measure is a step towards enhancing
Senator Ringuette: I have another quote here from the Mayor of
Killarney, Manitoba. He says:
The only incentive for any Canadians in the last federal budget was,
"Hey, shop American.'' To me, there's no rationale behind that
Nancy Whip, the Chief Executive Officer of the Greater Moncton Chamber of
Commerce, said that the policy change will have a very simple effect. She
said that allowing people to bring back more tax-exempt goods from the
United States will mean fewer shoppers in Moncton.
Mr. Bruce McCormick, the General Manager of Downtown Fredericton, said
that he has already fielded calls from business owners who are upset by the
change and how it will hurt their business.
When you are communities near the border — not 250 kilometres from the
U.S. border — you certainly have a different perspective because you are
directly affected by these measures in a negative way.
Senator Eaton: Looking at the bill, when we talk about border
communities, I would think that — and perhaps you two have a much better
handle on it — if I live in a border community, I will just go across, do my
shopping and come back again within eight hours. I would imagine it would be
the same in Alberta and B.C. You go across for a day of shopping and come
Nothing has changed in the budget if you just go across. If you are in a
border community and go across on a daily basis to buy eggs and milk,
nothing changes. To take advantage of what is in the budget, you will have
to go across the border and get a hotel room. I wonder — and I guess there
are no statistics on this — how much was brought back undeclared. We seem to
have heard a lot of doom and gloom, but, if we could study this a year from
now and really see the overall affects on retailers and not what they think
will happen, it might be quite interesting. Do you have numbers on how many
people go across the border daily to shop and how many people actually go
across the border on a 24-hour or four-day basis to shop?
Ms. Proud: We have statistics from, I believe, Statistics Canada
that speak to the fact that about 50 per cent of cross-border shopping is
less than 24-hour shopping. We acknowledge and are grateful that the
government did not impose a personal exemption limit for the 24 hours, not
that that would necessarily have made any difference because, as you
mentioned, I think many people are not declaring what they buy across the
border, which is one reason we have said that we would like to see
enforcement of the personal exemption limit, especially on less than 24
hours. Especially for perishable foods, people are doing exactly as you say;
they are driving across the border, shopping at the local grocery stores,
filling up their trunks with the supply-managed products and going back
We have heard — and our retailers are concerned — that the new exemption
limits will encourage people to make larger journeys to the United States,
spend the night, go out for dinner, go shopping the next day and come back
with a trunk full of perfectly legal products under the personal exemption
limits. However, we would also be very interested if the Senate undertook a
study in a year to see if that was the effect. We would have been happier to
see the government wait for this committee to finish its ongoing study into
price differences and look at the recommendations of the committee before
they changed the personal exemption limits, but, since they are in place
now, we are asking for, as I mentioned, changes of tariffs and supply
management. It would be very interesting to see the government look at what
the actual affect was. I think that then we could have a real, good
conversation about whether this was a good idea.
Senator Callbeck: About the travellers' exemption increases, Ms.
Proud, you said that you had not had time to study the new ones, but you
mentioned BMO. I believe you said that their study showed that the CMR will
lose $20 billion a year. Am I right on that?
Ms. Proud: On May 17 BMO came out with a Canada-U.S. price gap and
cross-border shopping study. Following that, Deputy Chief Economist Douglas
Porter stated that he believed the cost to the Canadian economy, right now,
of cross-border shopping is up to $20 billion a year. We have not studied
those numbers. We are a not-for-profit industry association, and we do not
have the power that BMO does to do studies. However, we think that even a
fraction of those numbers are pretty shocking.
I also recently received an email from one of our members who mentioned
to us that there was a recent study released on behalf of the U.S. Niagara
tourism corporation. It says that Canadian shoppers currently spend nearly
$933 million per year just while visiting the Buffalo/Niagara region. Again,
I do not have the study, and we are looking for numbers. However, they are
large numbers, and our concern is that they will just increase.
Senator Callbeck: In the past, there have been increases in these
exemptions. Are you aware of studies that show how these increases affected
businesses in Canada?
Ms. Proud: I am not aware of any. I can endeavour to check with my
colleagues, but I suspect that if we had that knowledge I would have brought
that information here today.
Senator Runciman: Does the United States provide a 24-hour
exemption? I believe that they do.
Ms. Proud: I understand that our exemptions are now aligned with
those of the U.S.
Senator Runciman: Is there not a quid pro quo here in terms of the
Americans coming over to access Canadian retailers? I do not know what the
amounts of spending would be, but from a tourism perspective, looking at the
Niagara Falls region, I think that the Canadian side is the significant
attraction in that area, not the U.S. side. That should be taken into
consideration as well.
Ms. Proud: We recently held a town hall meeting in Niagara Falls
with the Niagara Falls Chamber of Commerce, and we learned there that
American tourism coming up to the Niagara region has dropped off
significantly. I have a study with me today from Statistics Canada that was
done in 2007. It basically says that the greatest effect of the rising
loonie on cross-border trips has been discouraging Americans from visiting
Canada. The report includes a number of statistics, and I am happy to
provide the chair with that study. I believe that it is still relevant
today. American shopping has dropped off, and I believe the BMO report
speaks to that as well.
Senator Runciman: What about Niagara-on-the-Lake theatres,
Stratford and other such thing? Are they not taken into consideration?
Ms. Proud: We do not see that those contribute to the retail
sector, but likely tourism and other areas would benefit, you are right.
Senator Callbeck: Ms. Proud, what are the main products bought in
Canada by Americans?
Ms. Proud: That is a very good question. I could not tell you
that. I could try to find out from our members. We have looked at the
opposite; what are Canadians going down to the U.S. to buy.
Senator Callbeck: I want to quote from an article in The
Guardian of Prince Edward Island, a major newspaper on the Island. It is
entitled "What were the feds thinking?'' and the last paragraph talks about
these exemptions. It says:
What is the federal government thinking? In tough economic times, the
feds may not have a lot of leeway to help businesses here at home, but
at the very least, they shouldn't make life more difficult for them.
I agree. That is exactly what this is doing.
The Chair: There seems to be a difference of understanding of how
long an American coming to Canada has to be here before they can have an
exemption versus the other way around. With this legislation we are
harmonizing at 48 hours, but at 24 hours it has been suggested that there is
nothing either way. Is it your understanding that you have to be away for at
least two days in order to have any exemption either way?
Ms. Proud: That was my understanding, but I could be wrong. I do
not know that for sure.
The Chair: My researchers are indicating that in the U.S. there is
a $200 exemption after 24 hours.
Ms. Proud: I would certainly defer to your researchers.
The Chair: I can recall a number of articles in which people said
they were glad we did not introduce that here in Canada because that would
have compounded the problem. We did not have it before and it would have
made it even easier for people to get involved in cross-border shopping.
Ms. Proud: Yes. As I mentioned, we are grateful that the
government did not go there, that they did not put a personal exemption
limit within the 24 hours, but that said, I think there is a lot of
cross-border shopping happening anyway and people are just not declaring it.
The Chair: Yes, that is another issue.
Mr. Brunnen was talking about efficiencies at the border. Mr. Brunnen,
you said that this initiative will improve retail competitiveness.
Presumably that is saying that because it is easier to go across the border
to get product, Canadian stores will drop their prices to try to keep that
business in Canada. Is that the economic logic of what you said?
Mr. Brunnen: It is more than just price dropping. When we look at
the equalization of the exemptions, people are going down there for a varied
retail experience and greater choice. We recognize that many U.S. retailers
are already coming up here and starting to tap into this market.
It effectively gives Canadians retailers, if they are doing their surveys
of consumers, and often they will, an understanding of the types of goods
that Canadians are demanding when they go to the United States. In that way
they will be able to think about mixing up the product offering, providing
more choice here in Canada, so they can be more competitive with what we are
seeing in the United States.
The other piece is absolutely a stronger focus on cost competitiveness.
Without a doubt, this will ensure that retailers focus on the bottom line
and try to find ways to deliver consumer goods at the best, most competitive
When we look at that bigger picture side of things, it is technically a
first step toward streamlining the regulation between Canada and the U.S. I
would very much encourage the committee to investigate the opportunity to
further streamline regulations, specifically safety regulations,
standardizations for products that need to come through the border so that
we can be even more competitive and provide that level of choice. That is
where I sit on this issue.
The Chair: I am trying to use your logic to say, why would we not
increase the exemption even more and that will increase our price
competitiveness even more. Where is the law of diminishing returns?
Mr. Brunnen: My logic is not talking about increasing the
exemption. My logic is talking about harmonizing the regulations, be they
safety regulations on various products or other such things. Remove barriers
to trade, period. That is not necessarily a direct cost to government. We do
not have to worry about foregone tax revenues. We can probably save some
money in staff costs for regulating the goods that come over the border.
If we had a more streamlined health and safety regulatory process for
some of the products that cross the border, we would be able to get more
choice here for Canadian retailers and Canadian consumers as well as more
This is a first step. Let us start looking at the bigger competitive
picture with our largest trading partner and eliminate the minutia that is
creating a barrier to competitiveness.
The Chair: Is this a good first step? That is the question we want
you to comment on. We know that you think some other things should be done,
such as harmonization. We understand that, and we have been studying that in
our other study. We now have to deal with the exemption when a Canadian goes
across the border and brings back product. Is this a good first step or just
a trivial thing? Do you believe that the main changes should be
harmonization and not an increase in exemptions?
Mr. Brunnen: I absolutely think this is a good first step. It is
reciprocal and it leads to harmonization and streamlining. It makes sense to
have equity cross border, and that is the principle. Look at the principle
of equity cross border, apply it to the exemptions as a first step, take
that principle and apply it to the rest of the trade that we are doing with
the U.S. and you have a competitive trade environment.
The Chair: Would you like to comment on that, Ms. Proud?
Ms. Proud: On whether this is a good first step?
The Chair: Yes, and harmonization leads to great things.
Ms. Proud: The Retail Council certainly welcomes harmonization. We
are very much in favour of what this government is doing towards that end.
As I mentioned earlier, we had hoped that this government would wait for the
study to be completed here on the price differences between Canada and the
U.S. before taking a small and possibly negative step, which this budget is
doing. I think our members would have preferred to see a comprehensive
approach to looking at the retail industry in Canada that first, would
remove some of the barriers so that we could have a level playing field, and
second, would allow the retailers to compete.
However, to suggest that the retailers can compete with their U.S.
counterparts for some products is just not the case. When you have products
that carry an 18 per cent tariff, then right off the bat the retailers are
put in a difficult position because they cannot possibly compete. We would
have preferred to see the government put the move to harmonize with these
exemption limits in next year's budget. Along with the elimination of
tariffs and other changes, it would have allowed the retailers to compete
with their U.S. counterparts.
Senator Buth: In the spirit of providing quotes from different
organizations, I thought I should provide some. I did not bring a whole list
Senator Ringuette: I have more.
Senator Buth: It is okay. I do not need your quotes.
I will just read a quote from a Mark Startup of Shelfspace, which is an
organization that represents retailers in B.C. and Alberta. He told The
Province in Vancouver recently:
Many retailers will see this as a threat -many retailers will see
that British Columbians are going to get goods and services south of the
The reason the government did this is to improve the speed with which
goods and services will get over the border.
By keeping more consumers from clogging border crossing, truckers can
charge less and Canadian businesses will prosper.
. . . that should allow the Canadian economy to be more competitive.
I just want to put this out there, because there have been a lot of
negative comments and quotes, as expected, on the retail side of things. I
wonder whether you can comment on consumer attitudes and reactions to these
Ms. Proud: I was a bit surprised with the reaction I heard from
consumers, based on some of the media that surrounded this when the changes
were put in place. A lot of people who were asked wondered why this was done.
I know that some consumer associations have come out in favour of the
changes. In fact, one was an association that we reached out to work with us
on proposing tariffs that could be eliminated. As I said, the Retail Council
of Canada does not want to tell Canadians where to spend their hard-earned
dollars. We just want a level playing field so our retailers can compete.
They are all about the consumer. That is the heart of their business. They
want the Canadian consumer to be happy shopping in Canada and finding the
Senator Buth: Mr. Brunnen, would you like to make any comments in
terms of whether you have heard from consumers in Calgary or in your area?
Mr. Brunnen: That quote you shared makes a very valid point — to
think about it in terms of reducing congestion at our borders. This could
very well go a long way. It is hard to say exactly how far, but it does mean
that the border crossings will be more efficient. One of the key pieces we
hear from both consumers and businesses in Alberta is about border crossing
congestion. It is an enormous issue. We have the Coutts border crossing. We
heard Mr. Menzies, the Minister of State for Finance, talk about some of his
constituents bringing that up.
From a consumer perspective, we have not heard directly from consumers.
My interpretation or impression at first blush is that there would probably
be some positive news for consumers in that regard. I think it enables
choice and it will bring new choice to Canadian markets too for consumers.
At the end of the day, in the aggregate big picture it is a good first step.
Senator Ringuette: When one talks about quid pro quo, reciprocity,
equity and so forth, one of the major problems with regard to higher prices
in Canada on certain items is the transportation cost with the cost of gas
and diesel per litre. Mr. Brunnen, on average, there are 31 cents more tax
per litre in Canada than in the U.S. Transportation costs for the goods for
the retail sector are certainly an issue, if you want an additional step to
recommend to the Minister of Finance. The flip side is that it removes
reciprocity because the cost of fuel for the U.S. citizen coming to Canada
is enormous in their perspective. Therefore, if they have to make a trip,
they will make it within the border area. We have the statistics that prove
they are coming less and less frequently to Canada; and the cost of fuel is
certainly a factor. Maybe the second step would be to reduce taxes on
gasoline and diesel. What do you think?
Mr. Brunnen: Certainly in my comments there are three areas of
harmonization and consumption tax or tax policy harmonization would be a
step, too. That speaks to equity. It is about removing the distortions to
trade and finding levels of equity that can be achieved, whether it is
eliminating the tariffs, harmonizing the regulation or adopting comparable
tax policies across the borders. It is a step in a direction that would be
positive for trade.
Senator Ringuette: Thank you very much, sir. I hope that your
Chamber of Commerce makes that recommendation to Minister Flaherty ASAP.
The Chair: Honourable senators, that is the end of my list. On
your behalf, I thank Ms. Proud, from the Retail Council of Canada, and Mr.
Brunnen, from the Chamber of Commerce in Calgary, for being here to share
their points of view.
We will now meet in camera to deal with Supplementary Estimates (A).