Thank you, Mr. Chair and members, for allowing me to contribute to your pre-budget deliberations and to speak to some of the issues that matter to our industry.
For members who haven't heard from us before, RCC is a not-for-profit industry association. Founded in 1963, we represent over 45,000 storefronts and include within our membership department, grocery, specialty, and independent stores, and online merchants. RCC's members sell over 70% of all consumer goods sold in Canada, and we employ the majority of the 2.2 million Canadians who work in retail. That makes us the largest employer group in the largest employment sector in Canada, and one of the very few with a presence in just about every community nationwide.
Paradoxically, because retail is so ubiquitous, it sometimes goes unnoticed by policy-makers. The exceptions that tend to break into headline news tend to be when there are merger proposals, like the recent one between Lowe's and Rona, or shutdowns like Target last year.
I can reassure you that our industry is pretty healthy. We grew by 3.9% in 2014, or about 2% above inflation. While we don't have final numbers for 2015, they will likely come in north of 3%, despite a relatively disappointing December, and 2014 also saw an increase of 21,000 jobs in our retail sector. So to paraphrase Mark Twain, reports of our death are greatly exaggerated.
That is not to say, however, that retail does not face significant challenges. The exchange rate in particular is a big one for us. While the falling Canadian dollar may help curtail cross-border shopping in the near term, it does create a long-term upward pressure on prices. We've seen this first in grocery items, and we'll see the effects on other goods over the course of the year. Some of you may have seen the comments of our chairman, Michael Medline, to this effect in today's Globe and Mail.
Retailers continually strive to keep prices affordable for consumers. While I'd like to pretend that's altruism, it's largely because it's a necessity in a highly competitive environment, and of course, there are public policy issues that have effects on these prices. I'd like to touch on two of these areas, namely tariffs and payments, although in our written brief, we do speak to de minimis, CPP enhancement, EI changes, and payments.
A couple of years ago, the other place—I think that's what I'm supposed to call it—released a study on Canadian pricing. One of its areas of focus was the impact of the Canadian customs tariff, a 98 chapter, 7,000 line item schedule of customs duties. As we understand, the original purpose of tariffs was as tools of industrial policy designed to support domestic manufacturers. Of course, they also serve as revenue generators for the government. While tariffs may once have helped Canadian manufacturers compete with imports, they're now seriously out of alignment with our manufacturing base. There are multiple examples of duties of 17% and 18% in areas where there's not even a single Canadian manufacturer. Once that industrial policy angle is lost, a tariff simply becomes another form of tax targeted at particular goods, like the bicycle tax or the affordable footwear tax, if you will.
Because duties have been removed from most manufacturing inputs, this hidden tax now bites Canadian consumers almost exclusively to the tune of $4.5 billion a year, or about 2% of the value of all consumer goods sold at retail. In numerous cases—footwear is a case in point—these hidden taxes are often double or triple the 5% GST rate on the same items. Most are not luxuries, and in many cases they're necessities.
RCC understands that the government lacks the fiscal capacity to provide immediate tariff relief across the board. What we suggest instead is to begin the process of reductions, especially where there's a duty differential between Canada and the U.S., where the duty in the U.S. is lower. That's a situation that can help to exacerbate cross-border shopping.
Our other recommendation, and one that's obviously very topical for members, is to continue to pursue bilateral and multilateral free trade agreements like CETA and the TPP, and to press for accelerated tax relief under those and future agreements.
The second issue that RCC would like to see addressed is credit card interchange fees. They are the charges that merchants pay to banks every time a credit card is used for payments. These rates are non-negotiable for merchants and are set by the credit card duopoly on the banks' behalf. That's $4 billion in interchange costs which get passed on to all Canadian consumers in the form of higher prices. Worldwide, the EU, Australia, New Zealand, and Israel, among scores of other countries, have moved to cap interchange rates, and their governments have all kinds of political stripes. They've said that enough is enough. Why should a Canadian consumer see the impact of interchange rate fees that are triple those in Australia and five times those in the U.K.?
Burdened as they are by over $4 billion in customs duties and $4 billion in credit card acceptance costs, Canadians are pleased to see the committee examining ways to spur economic activity and growth. We hope these retail sector-specific issues and the ones that we further speak to in our brief may provide some ideas in that regard.
Thank you.