MessickFarmEqu said:
Its simple... the cost of doing business is much higher. Canadian taxes are higher than they are in the US and that cost gets passed along to the customer in the form of higher cost goods.
It is actually not quite that simple. The cost of doing business here is not quite that much higher than quite a few states - yet you don't see the disparity in pricing of goods and services quite to the same degree among states as you do today between Canada and the USA.
Additionally, companies also get the large benefit of not having to provide health insurance to their employees here as it is provided out of general tax revenues for the most part. Taxes are higher - yes - but so are the benefits. The cost of doing business here may be slightly higher than in the USA but not to the extent that would justify the difference in prices for USA imported goods.
Case in point - not many years ago when the CDN dollar was 60 some cents to a US dollar, goods cost MUCH less here. The cost of doing business here wasn't 40% less then than it is now. Buying cars and tractors in Canada to import to the USA was the thing that people did then.
There are many non simple reasons for the price disparity.
Retail prices tend not to be very elastic in the medium term and are typically set to what the market will bear.
In the case of tractors it is very important to note that the CDN $ has not gone up in value so much as the US $ has gone down in value against all currencies. So for good being imported from say - Japan - like my Kubota the real exchange rate that is important is the CDN $ to Yen. The US market will not bear a substantial increase in price of tractors in the short term. So this is more an issue of US prices haven't gone up rather than why have Canadian prices for tractors not gone down.
.... that said, many companies here import all sorts of good directly from the US at USA prices in US $ and in this case there is absolutely no good reason why the savings haven't been passed down to the customer other than the fact that they know that the market here has no reason not to bear the prices it has already been paying.
Kioti dealers for example import tractors from the USA and the benefit of the currency exchange rate is passed down to the customer.
Kubota Canada is a separate company from Kubota USA. I don't know if it imports directly from Japan or through Kubota USA at USA prices. If it is the former the Kubota Japan will want to be paid in Yen - which explains why the prices haven't dropped. If it is the latter then Kubota Canada is making a larger profit and benefiting from the exchange rate by not passing it down to customers.
In an ideal market, when goods are imported from the USA to Canada and resold to Canadians, there should be no reason that Canadians should not benefit / hurt when the exchange rates change.
Don't get me wrong here... I really do want to buy tractors for less money given the exchange rate. For all intents and purposes our markets are very tightly integrated so I don't think that the current situation makes much sense. Most imported (non north america ) products here are bought through distributers in the USA. The size of our market does not often make sense for a wholesaler to established here. In such cases, we are being ripped off.
The biggest problem I have is that we are supposed to have free trade but it becomes a hassle for the end customer we want to try to import something here. It is hard to find dealers that will ship up here directly so one has to arrange it himself... no warranty support etc. etc.
