Retail Council Report

7/29/2019 Retail Council Report

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Retail Council of Canada1255 Bay Street, Suite 800Toronto, Ontario M5R 2A9Telephone (416) 922-6678 Fax (416) 922-8011www.retailcouncil.org

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Submission to:

Senate Committee on National Finance (NFF)

April 24th

, 2012

Study on the potential reasons for price discrepancies

Between

Canada and the United States


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Table of Content

About Retail Council of Canada: ................................................................................................................... 3

Vision Statement: ...................................................................................................................................... 3

Mission Statement: ................................................................................................................................... 3

The Retail Industry in Canada: ...................................................................................................................... 3

Study on the potential reasons for price discrepancies between Canada and the United States: .............. 5

Four Areas for Government Action: .............................................................................................................. 6

Country Pricing: ......................................................................................................................................... 7

Duty Remission on Imported Consumer Goods: ...................................................................................... 8

Supply Management: .............................................................................................................................. 12

Regulatory Harmonization/Red Tape Reduction .................................................................................... 13

Conclusion ................................................................................................................................................... 16


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About Retail Council of Canada:The Retail Council of Canada (RCC) has been the Voice of Retail in Canada since 1963. We speakfor an industry that touches the daily lives of Canadians in every corner of the country by

providing jobs, career opportunities, and by investing in the community they serve.

RCC is a not-for-profit, industry-funded association representing more than 45,000 store

fronts of all retail formats across Canada, including department, specialty, discount, and

independent stores, and online merchants.

RCC is a strong advocate for retailing in Canada and works with all levels of government and

other stakeholders to support employment growth and career opportunities in retail, to

promote and sustain retail investments in communities from coast-to-coast, and to enhanceconsumer choice and industry competitiveness.

RCC also provides its members with a full range of services and programs including education

and training, benchmarking and best practices, networking, advocacy, and industry

information.

Vision Statement:Retail Council of Canada (RCC) is the leader in advancing and protecting the interests

of the retail industry in Canada.

Mission Statement:Retail Council of Canadas (RCC) mission is to be the Voice of Retail in Canada by

providing advocacy, research, education and services that enhance opportunities for

retail success, and increase awareness of retails contribution to the communities and

customers it serves.

The Retail Industry in Canada:

Collectively, the retail sector is the largest employer in Canada, providing jobs for more

than 2 million Canadians generating sales in excess of $300 billion dollars a year. The

retail sector continues to be a critical component in Canadas economic wellbeing.


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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

$74.2B to Canadas gross domestic product (GDP) in 2009, the retail sector affects otherindustries as well through its pioneering of innovative practices. In 2009, The retail sector

invested:

$5.9B in machinery and equipment, of which $1.6B was in information and communicationtechnologies (ICT) in 2008, greater than both the Canadian manufacturing sector and the

U.S. retail sector in terms of dollars invested in ICT per GDP.

$5.5B in infrastructure and led to a further $2.7B invested by other industries in thedevelopment of shopping centres, plazas, malls and stores in 2007.

$1.0B in logistics and transportation services in 2008.After an unexpectedly soft Fall and holiday sales season in 2011, retailers anticipate a

continuation of slow demand growth over the course of 2012. Research done with a significant

sample of RCCs large and mid-sized members indicates that a substantial majority (61 per cent)

expect sales growth in 2012 between one and five percent. Most of these respondents expect

growth in the two to three per cent range. With inflation expected to be in the two per cent

range, the growth in the actual volume of sales would be minimal. About one quarter expect

growth in excess of five per cent, but many of these sell luxury products, and this part of the

market has consistently been the strongest segment for some time. A minority, 13 per cent

expect sales to be flat or to fall.

These soft demand conditions will, combined with a number of other elements, change the

competitive dynamic in Canadas retail industry. Growing consumer use of the internet has

greatly increased price transparency. Parity with the U.S. currency has encouraged consumers

to compare prices across the border, and indeed to shop in the U.S.. New foreign competitors

continue to enter the Canadian market, bringing world-class competitive capabilities. Slightly

more than half of the members that participated in RCCs research expect their retail prices

overall will be lower than in 2011. Only one-third expect their retail prices will rise. For the

latter group, commodity costs are sighted as the reason for higher prices (e.g., food, building

materials, etc.). Many of the respondents have planned further initiatives to reduce costs and

improve efficiencies which should help retailers keep prices competitive. Retailers will be

helped further by a manageable pace of inflation in other operating costs such astransportation, occupancy, and labour costs.


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Study on the potential reasons for price discrepancies

between Canada and the United States:

At the request of Minister Flaherty, on October 19th

, 2011 the

Senate Committee on National Finance commenced its study into

the reasons for price discrepancies between Canada and the

United States. The study has focused primarily at the retail level

with the Committee members looking to academics, government

officials and others to try to explain the potential reasons for price

differences. What the committee has heard to-date is a mix of

solid evidence and facts on the part of some witnesses as well as

conjecture and speculation on the part of others, with very few

concrete recommendations proposed to assist the Federalgovernment in taking actions that would benefit Canadians and all

affected industry sectors.

According to Statistics Canada1, in 2009, operating profit margins

in the retail sector were just above 3.4%. When compared to

profit margins in

the Unites States

(Fortune 500

report on topindustry

performers

2009) which were

reported to be on

average at 3.5%,

one can see that

retailer profit

margins in Canada are the same or similar to those in the United

States. As such, it becomes clear that retailers play a very small

part in determining final prices of the goods they sell and that

there are significant external factors at play that contribute to the

often vast differences in pricing of Canadian products versus

identical products sold in the Unites States. In fact, as the

1Source: Statistics Canada, Retail Trade, sales by trade group based on North American Industry Classification System

Proceedings of the Standing

Senate Committee on

National Finance

Issue 6 Evidence October

25, 2011

In summary, there were four

main interrelated reasons that

retail shelf prices were different

in Canada compared to the U.S.

The first is scale; Canadian

wholesalers and retailers had a

smaller scale compared to their

U.S. counterparts. Second, the

structure of the Canadian

distribution channel included an

extra participant, an importer or

subsidiary operation, compared

to many U.S. distribution channel

structures.

Third was the input price to the

channel. Prices charged bymanufacturers for goods

destined to be sold in Canada

were frequently higher than in

the United States. The fourth and

final reason was the cost of

doing business. Factors such as

occupancy costs principally

rents and corporate taxes

were higher in Canada at the

time.

Ian Gordon, President,Convergence Management

Consultants Ltd.

The Chair:The frustration we have is that

we keep hearing from witnesses saying it

could be any of a number of factors. We

would like to try to reduce that number of

factors so that we can understand the

significant ones in different industries.

That is what we are working on. (Senator

Day)


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Committee heard, the 1992 study conducted by Ernst and Young concluded that: most of the

reason for retail price differences traced to manufacturers, who accounted for 37 per cent of

the total retail shelf price difference for all the goods considered in the non-automotive

category. Retailers accounted for just 9 per cent here. Channel companies other than retailers

accounted for 27 per cent, and the remaining 27 per cent was accounted for by transportation

tariffs and duties and other costs.2

In conducting such a broad study, which touches on virtually all consumer goods (both general

merchandise and food), it is important for the Committee to understand that there cannot be a

one size fits all solution that would impact all goods sold in Canada. In this brief RCC will

highlight a number of key issues and recommend a series of solutions that, if implemented in

combination, could assist in leveling the playing field between Canada and the U.S. and change

the competitive dynamic as we know it.

The committee has heard that the differences in the cost of labour, gasoline, transportation,

taxation rates and labeling requirements are all factors that affect the price of retail goods in

Canada. RCC has canvassed its members regarding these elements, and while they are

considered to be the cost of doing business in Canada, they do contribute to potential

differences in prices between Canada and the US depending on the type of store and types of

goods being sold. However, they do not, even collectively, represent the main contributors to

the difference in retail prices in Canada.

Four Areas for Government Action:The Committee has been seeking to understand the real reasons for the differences in retail

prices between Canada and the United States as well as to find areas where the Federal

Government can influence or take action. RCC believes that there are four key areas where the

Committee should focus its attention.

2Testimony before the Standing Senate Committee on National Finance by: Ian Gordon, President, Convergence Management Consultants Ltd.


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Country Pricing:It has been discussed at the Committee hearings that large, multinational, retailers should be

able to negotiate with their suppliers for a single international or North American price for theproducts that they are purchasing for sale in Canada. However, the reality is that many

multinational vendors and suppliers who sell to Canadian retailers do so by way of contracts

that are negotiated specifically for the

Canadian market. While retailers in Canada

strive hard to provide Canadians with the

largest variety of products at the best

available prices, they are at the mercy of the

suppliers who demand certain prices for their

products. RCC has canvassed its members

and has found that, for retailers who havestores in both Canada and the United States,

they are charged anywhere between 10% and 50% more for identical products by some

suppliers. Retailers have been told by those suppliers that the reason for this discrepancy is (a)

that Canadians are used to paying more for products in Canada e.g. we charge what the

market can bear, and/or (b) the higher prices charged to retailers in Canada subsidize the costs

of maintaining supplier offices and operations in Canada, and/or (c) that higher prices are

necessary to compensate our Canadian distributors/wholesalers. While this is not the case for

all suppliers and all products, it does account for the largest contributing factor to the

difference in prices between Canada and the United States in situations where it occurs. Some

examples of every-day consumer items where this occurs have been provided by RCC members

as follows:

Item Description US Cost Canadian Cost Difference

Soap 16 pk $6.99 $8.98 43%

Shampoo 1.5L $9.33 $12.46 34%

Conditioner 1.18L $6.23 $10.00 61%

Automobile Tires $128.21 $169.69 32%

46in LED TV $888.75 $1,001.00 13%

Printer $116.65 $171.99 47%

Water Filters 6 pk $22.77 $26.76 18%

Coffee Maker $127.76 $167.19 31%

Electric Toothbrush $91.29 $100.99 11%

Ibuprophen 200mg 250ct $10.76 18.29 70%

Aspirin 81mg low dose 350ct $10.16 $21.78 114%

Ketchup 2.5 L $3.92 $6.90 76%

Freezer bags 150 pk $6.10 $9.24 51%

Laundry Detergent 5L $11.27 $13.94 24%

Orange Juice 7.56L $10.01 $12.66 26%

Multi-national suppliers often charge

Canadian retailers more than U.S. merchants

This is because of volume discounts that large

U.S. retailers can obtain due to economies of

scale. (Professor Tom Vassos, University of

Toronto)


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While RCC acknowledges that the Federal Government does not, and should not, have a role to

play in dictating how businesses negotiate contractual agreements between each other, the

government does have a role to play in ensuring that they do not perpetuate the ongoingmisinformation to the Canadian public regarding the reasons for price differences in Canada

versus the United States. Suggesting that Canadian retailers are to blame for the difference is

pricing is not only misleading and misinformed, it only acts to undermine the critically

important relationships between Canadian retailers and their customers.

We would encourage the Committee to call on some of these suppliers to explain their pricing

practices that result in an over inflation of prices for Canadians. The Committees final report

must set the record straight about the real cause of price differences in Canada.

Duty Remission on Imported Consumer Goods:

As recently as this year, the Federal government has taken steps to eliminate the duties on

manufacturing inputs. However, for reasons unknown to RCC, they have stopped short of

reducing or eliminating duties on finished goods entering into Canada. RCC members tell us

that they have no problems competing in areas

where they have control over pricing, but

cannot compete when they have to pay

considerably greater import duties than their

American counterparts for products importedfrom around the world.

Department of Finance officials have argued

that the average tariff into Canada is 3.9% and

thus does not represent a major contributor to

the differences in Canadian prices. RCC would

maintain that, while the averages may be

relatively low, it is the spikes in duty rates for

certain products that can contribute to

significantly elevated costs (see table below).

In addition to contributing to higher prices in

Canada, elevated costs for many of the products in question are in direct conflict with good

public policy. As an example, the Federal government provides tax relief in the way of family

tax credits to support childrens participation in athletic activities however, for hockey

equipment the level of duties on those products contribute significantly to their overall costs:

measures that make a North American

market so that shipping across the border into

Canada is exactly the same as selling, in the

North American sense, in Mexico or the United

States will get the benefit of economies of

scale, will increase the completion here in

Canada and will have the net benefit to

Canadian consumers. That runs the gamut

from tariffs to other regulations, which may

need to be kept for good reasons, but that is

part of the consideration. (Mark J. Carney,

Governor, Bank of Canada)


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Products Duty applied into Canada Duty applied into

US

Ice Hockey Pants 18.0% 2.9%UP/Pant 15.5% 0.0%

Gloves 16.5% 0.0%

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%

The Committee has heard from a number of witnesses regarding the merits of reducing or

eliminating outdated tariffs that are imposed on finished goods entering into Canada. RCCsupports these views and believes that eliminating tariff rates on goods that must be sourced

from outside of Canada is an important, and necessary, action that could lead to lower prices,

for those products, in Canada. While the Committee has heard that only ten per cent of all

products imported into Canada carry tariffs, RCC has heard from its members that the

percentage of those products sold at retail represents more than ten percent of their total

business. The range is anywhere between ten to one hundred per cent of a retail business

depending on the products being sold. As an example, the Committee heard from The

Canadian Apparel Federation that More than any other issue, tariffs have been identified as a

major determinate of retail prices. While duties on many other consumer products are low, the

average most-favored-nation (MFN) rate of duty for apparel is 18 per cent. Theyrecommended that The government should

consider tariff reductions on finished apparel in

situations where there are clear benefits to

Canadian consumers and minimal negative

impact on any domestic producers. RCC

supports this position more generally and urges

the Committee to recommend that the

Government review its tariff regime in this light

for all general merchandise products imported

into Canada.

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. This measure

would also mirror actions recently taken by some of our largest trading partners,

including the U.S., where it has been acknowledged that the elimination of unnecessary

and outdated tariffs would provide immediate and direct relief to hard working families.

We must be concerned with the removal of

potential barriers to competition or consider

more hands-on measures, including changes to

tariffs or duties payable, in the hope of jump-

starting Canadian retailer commerce that is

more price friendly to consumers. (Michael

Janigan, Executive Director and General

Counsel, Public Interest Advocacy Centre)


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On most items imported to Canada, retailers pay significantly more by way of import

taxes to bring goods to market. Canadian retailers have identified a number of

mainstream consumer products that are subject to import duties for no reason otherthan they have never been challenged or captured by free trade negotiations.

Pursuant to section 19 of the Canadian International Trade Tribunal Act, the Minister of

Finance has the ability to mandate the Tribunal to provide advice on the availability, or

lack thereof, of certain retail products from Canadian manufacturers and where the

applicable Canadian customs tariff rate of certain retail products is higher than the

United States MFN general customs tariff rate.

Our proposal for a remission of import duties on finished goods that retailers must source

outside of Canada, because they are, by-and-large, unavailable from domesticproduction, is beneficial to Canadians. Further, in view of our desire to ensure the

competitiveness of our retail industry vis--vis that of our largest trading partner, we

suggest that products which carry a lower MFN duty rate in the U.S. than in Canada

also be considered. A sample of the proposed tariffs to be eliminated is as follows:

Sample of Tariffs3

Tariff # Product Tariff

6104.42.00 Dresses (Girls and Womens) Of cotton 18%

6105.10.00 Cotton Men's or boys' shirts, knitted or crocheted 18%

6109.10.00 Cotton T-shirt 18%

6103.41.00 Cotton trousers and shorts 18%

6212.10.00 Cotton Brassires 18%

6201.92.10 Cotton winter jacket 18%

6115.10.10 Panty hose and tights 18%

6101.90.00 Women's or girls' overcoats, wind-jackets and similar articles 18%

6106.10.00 Cotton blouses, shirts and shirt-blouses 18%

6207.21.00 Nightshirts and pyjamas Of cotton 17%

9401.61.10 Upholstered chair with wooden frames for domestic purposes 9.5%

9403.50.00 Wooden furniture of a kind used in the bedroom 9.5%

9403.60.10 Desk - for domestic purposes 9.5%4203.10.00 Leather or patent leather overcoat 13%

6302.10.00 Bed linen, knitted or crocheted 18%

6302.60.00 Towels and linens of cotton 17%

9404.90.10 Pillows, cushions and similar furnishings, of cotton; Quilts, 14%

3Source: Canadian Boarder Service Agency: Custom Tariffs (T2011-2). Issued 2011-08-17

http://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/2011/01-99/tblmod-t2011-02-eng.html
http://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/2011/01-99/tblmod-t2011-02-eng.htmlhttp://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/2011/01-99/tblmod-t2011-02-eng.htmlhttp://www.cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/2011/01-99/tblmod-t2011-02-eng.html


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eiderdowns, comforters and similar articles of textile material

9608.10.00 Ball point pens 7%

9608.20.00 Felt tipped and other porous-tipped pens and markers 7%

3926.10.00 School supplies - Looseleaf binders and covers 6.5%

9506.70.11 Ice skates 18%

6404.11.00 Sports footwear; tennis shoes, basketball shoes, gym shoes,

training shoes and the like

18%

6402.19.10 Soccer footwear cleats 17.5%

4203.21.10 Leather Gloves for golf, baseball, hockey 15.5%

6112.11.00 Track suits 18%

9506.99.50 Elbow or shoulder pads excluding those for football; Waist,

thigh and hip protective equipment

15.5%

Finally, the discussion on duties and tariffs would not be complete

without addressing personal exemption limits. Despite the fact

that this study is ongoing, in the Federal Budget 2012 the

government moved to increase these limits significantly. RCC

maintains that changing personal exemption limits, without

addressing other factors outlined in this submission, will have very

negative results on Canadian retailers and ultimately the Canadian

economy, because retailers are unable to compete with U.S pricing

on many products. The suggestion that the Committee has heardfrom some witnesses that increasing personal exemptions would

increase pressure on retailers in Canada to match U.S. prices4

is

only valid if there was a level playing field. Clearly this is not the

case and expecting that retailers would be able to simply match

U.S. pricing without other interventions is unrealistic and highly

detrimental to an industry sector that contributes so significantly

to Canadas economic stability.

It should also be noted that Canadian retailers respect the laws of

Canada as they relate to the Consumer Packaging & Labelling Act,the Textile Labelling Act and other regulations relating to the sale

of products, which regulations are in place to safeguard consumers

and help them make informed purchasing decisions. (Other regulations which carry additional

costs also include provincially legislated waste diversion programs).

4Ambarish Chandra, University of Toronto, Rotman School of Management Proceedings of the Standing Senate

Committee on National Finance, Issue 7 Evidence November 1, 2001.

Organization for Economic

Cooperation and Development

Liberalization of product markets

is the first place governments

should look at. Reducing barriers

to entry in the retail trade and

liberal professions would deliver

quick income and job gains. Easing

administrative burdens on business

and removing barriers on foreign

direct investment could also have a

quick impact. (OECD, Going for

Growth, 2011)


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Unless these regulations are uniformly enforced, such as for products purchased by consumers

via the Internet or via cross-border shopping, retailers and indeed manufacturers legitimatelyselling goods in Canada will continue to bear greater costs than their American counterparts.

It is for these reasons that RCC recommends that the Committee urge the Government in its

report to expedite its review of the tariff system in Canada in order to minimize the impact of

the June 1st

, 2012 exemption limit changes.

Supply Management:One area that has not come up in the Committees discussions to-date relates to the large

difference in pricing between Canada and the United States for Canadas supply managed

products. However, this issue plays a pivotal role when media reports cite price differences

between both countries. It is also often, once again, retailers who are seen as the culprits. It is

important that the Committee understand how Canadas system of supply management affects

the price of some food products in Canada in order to make informed decisions regarding any

recommendations to the government on this issue. It is also important that Canadians

understand that it is government policy that is at the root of this issue and not retailers.

While retailers respect and support Canadas farming community and agro-food industry, it

should be noted that the most popular products purchased by consumers during a cross-border

same-day trip include: dairy products, poultry, beer, cigarettes and gasoline. Some examples

as of February 2012 are as follows:

Product Average Canadian Retail Price5

US Price6

Eggs (per dozen) $3.22 $1.79

Chicken (Kg) (boneless breast) $6.92 $3.00

Butter (4.54g) $4.43 $3.46

Milk (1L) $2.40 $0.92

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 ofsmaller high cost producers. The system's rigidity discourages innovations in processing that

adds value and creates jobs. In order to control prices, marketing boards restrict imports. In

retaliation, foreign governments often restrict exports from Canada. Abandoning these failed

5http://www40.statcan.ca/l01/cst01/econ155a-eng.htm

6http://www.bls.gov/ro3/apmw.htm
http://www40.statcan.ca/l01/cst01/econ155a-eng.htmhttp://www40.statcan.ca/l01/cst01/econ155a-eng.htmhttp://www40.statcan.ca/l01/cst01/econ155a-eng.htmhttp://www.bls.gov/ro3/apmw.htmhttp://www.bls.gov/ro3/apmw.htmhttp://www.bls.gov/ro3/apmw.htmhttp://www.bls.gov/ro3/apmw.htmhttp://www40.statcan.ca/l01/cst01/econ155a-eng.htm


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methods through an equitable transition program is the best way to ensure a vibrant and

sustainable farm economy.

The strongest marketing powers held by boards are those to determine prices, when enforced

by the power to apply supply-controlling quotas. These limit entry of new producers and

restrict the amount of the product produced or marketed. The use of these pricing- and supply-

control mechanisms by provincial and national boards, backed up by tariff-rate import quotas

for poultry and dairy products, has been criticized. Advocates note that these programs have

reduced variability in farm prices and increased producers' incomes; critics say the programs

have contributed to increased food prices, high quota values, and economic inefficiencies in

production and marketing. Boards which do not possess or exercise supply-control powers have

created less controversy.

It is RCCs position that the government should not favour one industry over another, in this

case farmers over retailers, to the detriment of the latter. If marketing boards are to remain

part of the Canadian landscape, the Committee must acknowledge the role they play in setting

prices in Canada, which are substantially higher than in the United States. That said, RCC

believes that a thorough review of Canadas supply management system and its down-stream

impacts needs to be undertaken and measures need to be put in place to protect retailers

should government choose not to change the existing system. Such measures could include

exempting or limiting supply managed products from personal exemption limits at the border

(similar to exemptions for tobacco and alcohol) and more strict enforcement of those limits at

the border.

Regulatory Harmonization/Red Tape ReductionThe Committee heard compelling testimony from a wide range of organizations involved in the

business of selling books in Canada which illustrates clearly how poorly thought-out and

outdated regulation can affect consumer prices in Canada. With regards to books, which have

unfortunately been used as the poster children of the so-called egregious price differences in

Canada versus the Unites States, the Committee heard testimony regarding the Federal

governments own Copyright Regulations that allow for a 10% markup on U.S. sourced books

(15% on UKsources books) and that this tax has been collected, to the detriment ofCanadian consumers and booksellers, by the multinational book distributors since the

regulations came into force in 1999. RCC sees this is a perfect example of how Canadian

regulation, developed in isolation, can negatively affect Canadian consumers and Canadian

prices.

RCC is encouraged by the fact that, on February 4, 2011, Prime Minister Stephen Harper and

President Barack Obama announced the creation of the Canada-United States Regulatory


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Cooperation Council (RCC) with a goal to increase regulatory transparency and coordination

between Canada and the United States.

In the governments own words:

Unnecessary regulatory differences and duplicative actions hinder cross-border trade and

investment and ultimately impose a cost on our citizens, businesses and economies. Given the

integrated nature of our economies, greater alignment and better mutual reliance in our

regulatory approaches would lead to lower costs for consumers and businesses, create more

efficient supply chains, increase trade and investment, generate new export opportunities, and

create jobs on both sides of the border.7

RCC and our members are supportive of this initiative as inconsistencies betweenregulatory/policy regimes can add to price differentials between the two countries. This is due

to the fact that the Canadian and U.S markets are highly integrated and any regulatory

misalignment will ultimately affect pricing and availability of a variety of products in Canada. A

recent example of the lack of harmonization between Canada and the United States is with

regards to the recent development of new Canadian regulations regarding child car seats.

The regulations came into force in Canada on the 1st

of January, 2012 and at the time Transport

Canada explained that the regulations were rewritten to align with the United States on many

issues and to incorporate some new and unique Canadian testing requirements. However, it is

precisely these new and unique made in Canada requirements that perpetuate the

misalignment of standards between Canada and the United States.8

The differences between the Canadian and U.S. regulations include:

The need for labels, information, and instructions to be provided in both of Canadas

official languages;

The minimum weight requirement to use a booster seat remains at 18kg (versus 13.6 kg

in the US);

The mandatory use of a tether strap for front-facing child seats;

A mandatory inversion test for both infant and child seats;

A unique booster deflection test;The lap/shoulder seat belt testing requirement for all types of car seats;

The extension of the limitation on rebound to all rear facing child seats; and

7Regulatory Cooperation Council, Joint Action Plan for the Canada-United States Regulatory Cooperation Council

8Transport Canada: Frequently Asked Questions: New Child Seat Regulations

http://www.tc.gc.ca/eng/roadsafety/safedrivers-childsafety-faq-1131.htm


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Energy absorbing material requirements.

However, despite the above differences in regimes, Transport Canada maintains that car seatssold under the previous standards continue to provide a high level of safety and do not have to

be replaced. This begs the question as to

why it would be necessary for Canada to

have unique regulations that result in

differences in pricing and availability in

Canada when full harmonization with U.S

standards would avoid this.

The Government of Canada announced in

Budget 2010 the creation of a Red TapeReduction Commission tasked with the

following mandate:

Identify irritants to business that

stem from federal regulatory

requirements and review how those

requirements are administered in

order to reduce the compliance

burden on businesses, especially small businesses. The focus is on irritants that have a

clear detrimental effect on growth, competitiveness and innovation; and

Recommend options that address the irritants and that will control and reduce the

compliance burden on a long-term basis while ensuring that the environment and the

health and safety of Canadians are not compromised in the process.9

The then Minister of Industry, Tony Clement, responded to the initiative by implementing a

one-for one rule to control the administrative burden associated with regulation on

businesses. In theory, what this means is that regulators will be required to: remove at least

one regulation each time they introduce a new one that imposes administrative burden on

business. In addition, regulatory changes that increase administrative burden on business need

to be offset with equal administrative burden reductions.10

9What is the Red Tape Commission: http://www.reduceredtape.gc.ca/about-apropos/redtape-paperasse-eng.asp

10January 18, 2012 News Release: Minister Clement welcomes recommendations from Red Tape Reduction

Commission - Clearing the way for economic growth and job creation: http://www.tbs-sct.gc.ca/media/nr-

cp/2012/0118-eng.asp

"Red tape frustrates entrepreneurship,

raises prices and reduces choices for

consumers. By impeding growth, red tape

lowers people's incomes and standards of

living. It is a hidden tax on all Canadians. In

the words of the 2011 federal budget,

"businesses, especially small business

owners and entrepreneurs, have told the

Commission that the government must act

now to begin addressing these concerns

and to promote growth and

competitiveness," (Maxime Bernier)


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RCC supports this initiative wholeheartedly, however, we believe that it does not go far enough

and may result in the proliferation of government mandated industry voluntary initiatives (in

lieu of regulations) which often carry the same administrative burden on industry as regulationswould but would not necessarily be captured under the Treasury Boards one-for-one initiative.

Recent examples of voluntary measures that are being proposed in the food industry are:

proposed sodium targets; proposed nutrition labeling for food service; proposed new food

safety labeling for ground meat. While RCC encourages government to move to voluntary

measures where practical, they do impose burdens on industry which should be captured under

the Treasurys board one-for-one initiative.

ConclusionRetail is one of Canadas most important economic engines and its largest employer. It has

benefited from tremendous growth in the past several years and it has contributed to

Canadas economic growth and well-being.

As the Committee prepares to present its findings in relation to this study, RCC urges the

Committee to assist in setting the record straight about the real causes of price differences for

products sold at retail in Canada versus the United States and consider the recommendations

found in this submission; all of which have the potential to contribute to lower prices for

Canadians for products that they use in their daily lives.

Retailers in Canada play an important role in generating employment within the industry,

within other sectors such as advertising, technology, logistics and transportation, construction

and the likes. Retailers also contribute substantially to the community at large through

community giving and support.

While retailers of all sizes and shapes across Canada understand and respect consumers rights

to shop where and when they want, they are deeply concerned with the misinformation

propagated across Canada about the industry and a general lack of understanding about the

industrys competiveness despite the lack of a level playing field.

In light of the most recent Government 2012 figures on cross-border shopping, the Committee

cannot ignore the negative impact of the absence of a level playing field for retailers in Canada.

Canadian residents made 5.2 million trips abroad in February, a 3.9% increase from

January. The majority of these trips, 4.4 million, were to the United States, a 4.5%

increase.


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The main factor behind these gains was an 8.0% increase in same-day car travel by

Canadians to the United States, to 2.6 million trips. This was the highest monthly level

since December 1997.

RCC would like to thank the Senate Committee on National Finance for the opportunity to

submit its recommendations on behalf of an industry that employs 2 million Canadians from

coast to coast. It looks forward to collaborating with the Committee and Government to work

towards a level playing field, to ensure the growth and success of retail businesses in Canada

and to provide Canadian consumers with value, product selection and innovation.

Documents

Retail Council Report