Maurice Doyon, Stéphane Bergeron, and Bruce Muirhead recently published the results of their latest research, titled “Canadian Consumers’ Perception of Canada-U.S. Price Differences”, which explores the assertion that eliminating supply management would reduce the price of Canadian supply management products (dairy, chicken, turkey, eggs and broiler hatching eggs) to that of their equivalent price at U.S. border retail outlets.
This claim implies that observed price differences in these goods are wholly attributable to the supply management system. The authors postulate that there is in fact an existing Canada-U.S. price difference for all goods – not just for those produced under supply management – and that this all-encompassing differential means that removing supply management would not lower Canadian retail prices.
Because of the challenges of comparing the prices of goods on either side of the Canada-U.S. border, such as the potential for wide price variability over time and across geographic areas, the differing marketing strategies undertaken by retailers, and the different aggregating methodologies used by national statistic bureaus to collect their pricing data, the authors took an indirect approach to their research question, conducting instead a survey on Canadian consumers’ perception of price differences in Canada and the U.S.
Given that existing research on consumer knowledge of grocery prices found that, in general, median price estimates closely match real prices, and given further that 90% of Canadians live within 160 km of the U.S. border, that Canadians frequently travel to the U.S. (more than 44 million trips in 2018), and that more than 11 million Canadian households consume cable tv that broadcasts U.S. channels and commercials, the authors assume that, in the aggregate, their respondents’ perceptions of cross-border price differences will be relatively accurate.
Overwhelmingly, the survey results demonstrate that the majority of Canadian consumers (71%) perceive the prices for all consumer goods to be higher in Canada than in the U.S. For instance, 71% of respondents perceive electronic goods to cheaper in the U.S., 62% and 69% perceive internet and cellphone, respectively, to be less expensive there, and 68% of respondents feel this is the same for cars. When it comes to food products overall, 61% of respondents perceive that prices are lower in the U.S. than in Canada.
Interestingly, there is little observable difference in the perception of prices for supply managed and non-supply managed goods. While 51% of respondents feel that the price for chicken, a supply managed good, is higher in Canada than in the U.S., nearly the same percentage, 47%, feel that this was also the case for beef, a non-supply managed good.
Supply managed dairy products are seen as more expensive in Canada by 37% (fancy cheese) to 55% (cow’s milk) of respondents, while eggs, which are also supply managed, are perceived as more expensive by 48% of respondents. However, fruits and vegetables, which are not supply managed, are seen as cheaper in the U.S. by 55% of respondents.
These results imply that most Canadians, perceiving that all goods are more highly priced in Canada, will be wary of the claim that eliminating supply management will reduce the U.S.-Canada price differential for supply managed products. The results also support the authors’ assertion that that the difference in prices between dairy, poultry, and egg products in Canada and in the United States has little to do with supply management, and thus disprove one of the major arguments made in support of dismantling the system.
The full report can be found here.
