Gerald Tempton, president of Liquidation Channel, said he always felt like he was in familiar territory when visiting Canada. The movies are the same, the food is the same and the language is the same. However, when it comes to business, the rules of commerce are not the same.
Canada and the U.S. are drifting apart from an economic perspective. After decades of being in near total agreement on economic and social policies, both sides appear to be enacting legislation that threatens the harmonious relationship of the past.
“The Canadian market is a very important market for us” Mr. Tempton says, “Our Canadian client base is very loyal. It can be a challenge at times to understand the regulations but we plan to continue serving them to the best of our ability.”
The Canada-U.S. border is the longest undefended border in the world. The countries trade $60 billion a month according to Statistics Canada. With all this activity between the two nations, what is contributing to the new chill in relations?
Rooted in Protectionism
The Canadian government has understandable concerns with a US-based company selling their products on a large scale to the Canadian public. Chief among them is the fact that US products do not produce jobs for Canadians. Therefore, the United States is ultimately benefitting over Canada.
To better understand the Canadian viewpoint, it is important to understand the history of Canadian government regulation in regard to commerce.
Collapse Spurs Spending
After the financial collapse in 2008, the U.S. and Canadian governments embarked on a massive round of “stimulus spending” to keep their economies moving. The U.S. policy came with strict “buy American” which left Canadian companies unable to bid on any of the US stimulus projects. This policy came despite the U.S. and Canada having a North American Free Trade Agreement (NAFTA).
A 2009 article in Macleans Magazine explains how the “buy American” policy was easily able to breach the NAFTA. In Canada, the individual Provinces wanted safeguards from U.S. firms bidding on infrastructure projects and so the agreement had a “sub-national procurement” clause which gave the Provinces the right to opt out of certain provisions in NAFTA.
In the end, both national governments approved a temporary agreement allowing limited access for both countries. The dispute, however, is still ongoing.
Canadian Dollar Rise
In 2008, the Canadian dollar ($CAD) began to increase in value relative to the U.S. dollar ($USD). After bottoming out in the 1990’s at $.63, the $CAD rose to a point where it traded briefly above the $USD. Despite this, the Canadian consumer was still being charged inflated prices for U.S. goods. Canadians were irate at being charged up to 30% more for items as compared to buying in the U.S.
In a 2011 article in the National Post, writer John Ivison asked why Canadians “pay one third more than Americans for the same bottle of shampoo, two thirds more for ketchup and double for a bottle of Aspirin?”
Despite expert explanations for the differences, including higher cost of operating in a big, sparse, bilingual country, as well as generally high taxes and tariffs, Canadians were left feeling they were being gouged.
Cross Border Beef
In 2008, the U.S. introduced a Country of Origin Labelling (COOL) provision for beef and pork producers. In effect the legislation would require every animal sold or processed in the U.S. to contain a COOL advising where the animal was born. This created chaos in the Canadian beef and port industries and resulted in exports to the U.S. falling by nearly 50%. Like the Liqudation Channel, Canada was now discovering the playing field was being bent in favor of Americans.
The Canadian government sought a ruling from the World Trade Organization (WTO) citing the requirements as being a protectionist move. The court ruled “that the COOL measure violates Article 2.1 of the TBT (Technical Barriers to Trade) Agreement by according less favorable treatment to imported Canadian cattle and hogs than to like domestic cattle and hogs.”
As with most national disputes, the ruling was appealed. In January, the U.S. attached additional provisions to COOL in a farm bill, prompting Canadian officials to warn of reprisals.
Keystone Creates XL Headache
The proposed Keystone XL pipeline to transport bitumen from the Canadian Oilsands to U.S. refiners has become a national hot potato on both sides of the border. After receiving approval in 2009, the pipeline has been subject to additional reviews, a change of route around a sensitive water table and continues to be awaiting approval.
Opponents say the pipeline will increase greenhouse gasses and stall green energy initiatives. Proponents cite the fact the bitumen is being transported by rail currently and the environmental impact of a pipeline is much less.
At last report, the U.S. State Department said the pipeline ‘"does not significantly exacerbate the problem of carbon pollution,” which was greeted with applause and jeers from both flanks.
Access to Canadian Airwaves
The Canadian Radio and Telecommunications Commission (CRTC) restricted entry into the Canadian market of U.S. specialty channels while it sorts out the new 500-channel universe. Preference is given to Canadian companies producing Canadian content.
As Tempton of the Liquidation Channel discovered, “U.S. Shopping networks will continue to face challenges breaking into Canada but in the end it is in the best interests of both countries to get along.”
Liquidation Channel like many other specialty networks, are hoping to find a place on Canadian TV.
“Canadians already buy our products through our U.S. channel and ecommerce platform,” Gerald Tempton said. “We hope to expand our services in Canada and have confidence we will. Sometimes neighbors have disagreements but in the end we are each other’s best friends.”
Consumers on both sides of the border would probably agree with his sentiments. With $720 billion in economic activity crossing the borders each year, the argument for more trade agreements seems valid. As the Liquidation Channel knows, the current round of protectionism by both countries is bad for consumers, business and ultimately each government.