Canadians’ Perception of U.S.-Canada Price Differences for Consumer Goods
Recent negotiation of trade agreements has generated talk promoting the elimination of supply management (SM) on the basis that eliminating supply management would significantly reduce the retail price. This claim relies on the assertion that if SM is eliminated, Canadians will pay the retail U.S. border price for eggs, poultry and dairy products. This implies that observed price differences are completely attributable to SM. One way to verify this assumption is to compare retail prices in Canada and the U.S. for products not under supply management. If retail price differences are observed between the two countries for other food items than the underlying assumption (that all observed price differences are attributed to SM) would have been proven to be incorrect by the principle of reductio ad adsurdum.
Although some authors claim to have made such demonstration (Doyon et al. 2018), others disagree (Cardwell et al. 2018). Retail price comparisons are difficult given that large price variability can exist in time and within a limited geographical area due to an array of factors, including different retail strategies. Given that the literature does not offer any comprehensive study on price differentials between Canada and the U.S. for consumer goods, we consider an indirect approach by surveying the perceptions of Canadians with regard to differences in price between the two countries. This approach is based on the knowledge of Canadian consumers and therefore free of research biases that can taint selection of cross-border prices used for comparison (Ioannidis et al. 2007); and, it is relatively easy to obtain using a nationwide survey.
A representative sample of the Canadian population shows that majority of Canadians perceive prices for consumer goods to be lower in the U.S. than in Canada with no difference in perception between SM goods and non-SM goods. This implies that most Canadians will likely be skeptical of the promise of paying U.S. prices if supply management is eliminated. It also provides counterfactuals to the claim that all observed price differences are attributed to SM, under the assumption that in aggregate the perceived cross-border price differences expressed by Canadians are in fact representative of real price difference,
We argue that while these results are based on perceptions, they do capture the knowledge Canadians have regarding cross-border prices, and better reflect heterogeneous prices that exist across geographical location and types of retail stores. Although this is an imperfect measure, we also argue that the inherent problems associated with retail price comparisons makes perceptions of price differential from a representative sample an interesting tool.