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Free trade for consumers stops at the border

Appeared in the Calgary Herald
Authors:
Release Date: May 15, 2011
Anyone over the age of 30 will remember how a trip to the United States was once a painful experience for the wallet. Think back to how often the Canadian dollar was low relative to the U.S. currency. For much of the 1980s and 1990s, the Canadian buck often traded at a substantial discount to its American counterpart. The all-time low came in the new millennium. In early 2002, one Canadian dollar could buy just 62-and-a-half American cents.

Our currency has been better off as of late. Reasons include relatively more prudent federal budgets since the mid-1990s. (It is only relative; budgets are still stuffed with unnecessary and wasteful spending). It also helps we had no banking crisis, have better control of our debt, and the fact Canada’s natural resources are highly sought after. Thus why the loonie hit an all-time high in November 2007, at U.S. $1.10, or now as I write, about U.S.$1.04.

Cost-wise, shopping and vacationing south of the border is far more pleasant for Canadians but the caveat is that such bliss only lasts until you return to the border.

Then, the long line-up and eventual interrogation over how many bottles of beer and other purchases begins. Free trade at the macro-level between Canada and the United States began officially in 1989, but 22 years later, consumers at the border still get hassled on the smallest of purchases.

For Canadians, any time we cross the 49th parallel and return within 24 hours, we can be dinged for duties and taxes right away (the federal government has no exemption for short visits). That’s unlike Americans who, in the first two days, can buy and bring back $200 worth of Canadian goods before they must hand over their credit card to U.S. customs. Over two days, the exemption is $800.

It’s a different border experience for us. Not only do Canadians get hit with duties and taxes on same-day trips, we’re also subject to lower exemption limits on longer stints abroad. After one day, our “exemption” at the border is a mere $50; between two and seven days, Canadians can bring back $400 worth of goods before the customs cash register begins to ring.

After one week, Canadians have a $750 exemption on most goods. (The exception, as always, is for beer, wine and spirits where different rules apply; Ottawa and the provinces insist on their pound of tax and duty flesh for anything beyond a few bottles of wine and slightly more beer.)

Even American policymakers have noticed how badly Canadians are treated on these miserly exemptions. When I last wrote on this in January, I suggested both the U.S. and Canadian governments stop hassling shoppers for total purchases of less than $1,000. (It would be nice to have an unlimited exemption but perhaps we should expect the government to start with baby steps.)

Moreover, that tax-and-duty free amount should apply regardless of the time spent abroad.

In a wonderful coincidence, someone down south was already thinking the same thing.

According to reporter Bill Curry, and courtesy of a recent Access to Information request, two American politicians, Senator Kirsten Gillibrand and Congressman Bill Owens wrote federal Finance minister Jim Flaherty last July. They also requested a $1,000 exemption for consumers on both side of the border.

Gillibrand and Owens promise to press the U.S. government to let visiting Americans buy $1,000 worth of Canadian “stuff” duty and tax-free if Ottawa does the same for Canadians. But the hold-up is Flaherty, who resists and cites “competitiveness issues.”

That’s weak. Two decades after Ottawa and Washington signed a free trade agreement, it’s long overdue to bring consumers directly in on the deal. Ottawa can start by not engaging in penny-pinching border protectionism. Canadian retailers can and will survive and compete. Also, it’s not as if they didn’t benefit from American shoppers when the Canadian dollar was low.  

It’s always a bad idea for governments to dampen trade by getting protectionist with consumers via pesky and chintzy border exemptions. It’s a tad ironic the best advocate for Canadian consumers are two American politicians and not Canada’s own federal finance minister. Conservatives in Ottawa preach competition and free trade around the world; they might step up to the policy plate at home and respond positively to the American overture.

There’s one last and not inconsequential angle to all this: border security. The point of border guards in 2011, on both sides of the 49th parallel, should be to focus on threats to both countries, and not on my 80-year-old mother’s minor purchases in Bellingham. Or someone’s six-pack.


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