Thank you, Mr. Chairman.
While the Retail Council of Canada submitted pre-budget policy recommendations some time ago, which recommendations we would be pleased to discuss in more detail at a later date, I've chosen to spend the time allotted to us today to discuss the Canadian dollar and its impact on the retail industry in Canada.
RCC speaks for an industry that is vital to the daily lives of all Canadians, and numbers relating to the industry are huge. There are more than 227,000 retail locations across the country and we employ over 2.1 million Canadians.
Reports in the media comparing Canadian and U.S. retail prices for various products have given consumers the impression that with currency parity comes price parity. There are a large number of factors that can create differences in final retail prices between jurisdictions, and many of these tend to push prices higher in Canada, as much as we would like to ignore it. Some reflect fundamental structural differences between the two countries; some reflect policy differences; and some reflect competitive factors. However, as you know, the general realities are that the Canadian market is one-tenth the size of the U.S. market. The cost of doing business in Canada is higher, given our higher labour costs, transportation and logistics costs, and so on. We're very grateful for the many benefits that come with being Canadian, but they do come at a premium.
From an operational perspective, retailers often purchase merchandise up to 12 months before it appears on shelves. This means that many of the products on the shelves this holiday season were purchased when the Canadian dollar was valued at 85ยข American. This presents a challenge for retailers in delivering prices for Canadians that fairly reflect the value at which they purchased the product.
Contrary to popular belief, the great majority of retailers, regardless of size by the way, purchase their goods through Canadian manufacturers, subsidiaries of North American household brands, distributors, and wholesalers. That means that they purchase in Canadian dollars. Thus they have not benefited from the currency exchange, unless those savings were or are being passed through by the manufacturers.
Prices for consumer goods have risen more slowly than those for consumer services and many categories, such as electronics and clothing, have experienced absolute price deflation. We believe that will continue in 2008.
This rise of the Canadian dollar and retailers' shift to offshore sources of supply have played a major role in restraining prices in those categories. Again, we suspect that we will see more and more retailers go offshore to source their products. However, retailers in Canada pay significantly more by way of import taxes to bring goods to market.
As I noted a moment ago, many of our retailers will outsource or will go to China, Asia, or Europe to import products. There is a huge deficit in looking at how retailers pay in Canada and how retailers pay in the United States. For example, generally to import from Asia a pair of steel-toe boots, a retailer in Canada pays a 17.5 % duty versus 8.5 % for a retailer in the U.S. To import cribs, Canadian retailers pay 6 % duty versus zero in the U.S. To import pads for hockey or soccer for sports for children, retailers in Canada pay 15.5 % duty versus zero in the United States. A retailer in Canada pays a 5 % duty on a very popular product that seemed to be in the media quite a bit lately, and that's an MP3, an iPod. A retailer bringing in that product, an equivalent product from Asia, pays a 5 % duty in Canada versus zero duty for retailers in the U.S.
There are hundreds upon hundreds of similar examples that put retailers in Canada--and, I would suggest, importers as well as manufacturers in this country--at a significant disadvantage to their American competitors.
The RCC wants to work with the federal government to help level the playing field here for retailers--small, mid-sized, and large. We urge this committee and the government to eliminate those duties that put businesses in Canada at a disadvantage, and obviously an even greater disadvantage for our small entrepreneurial merchants across the country who are also importing products.
Ladies and gentlemen, I'd be pleased to answer any of your questions.
Thank you.