GUNTER: Protectionist Canadian regulations drive up consumer costs, lower productivity
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This week, Canada’s largest grocery retailer, Loblaws, announced it would eliminate property restrictions in its leases with landlords.
“Wow, Lorne,” you say. “Thanks for that fascinating glimpse into the scintillating world of commercial real estate.”
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Actually, the move could mean more competition in the grocery business and lower prices for shoppers.
Loblaws includes property restrictions in the leases it negotiates to prevent landlords who want a Loblaws (or one of its other brands like Superstore, City Market and No Frills) from leasing a site to another grocery chain within a fairly large radius.
It’s a deliberate attempt to limit competition by a retailer that already controls about 30 per cent of grocery marketing in Canada. For reference, Walmart is the largest grocery retailer in the U.S. and it controls around 20 per cent of that market.
But don’t blame Loblaws. While the federal competition bureau has long argued that such competition-limiting rules penalize customers, restraints on competition are the Canadian way. And they generally have the blessing of government regulation to back them up.
Consider that the first resolution passed by the current Parliament, after the election and the throne speech by King Charles, was a BQ measure to affirm Canada’s commitment to supply management in dairy and other products. It passed unanimously, a sign of just how deeply engrained restraint of free-market competition is in Canada’s political psyche.
Most economists accept that supply management in dairy products (mostly milk and cheese) costs the average Canadian household about $400 a year in added cost at the till.
The carbon tax certainly drove up prices by raising the cost of producing and delivering foodstuffs, but government-backed trade restrictions add even more.
And it’s not just groceries. According to data from Conservative party deputy leader, Melissa Lantsman, “Rogers, Telus, and Bell control 85 per cent of the Canadian wireless market. Six banks hold 90 per cent of all Canadian mortgages. The top five grocery chains have cornered 87 per cent of the grocery business. And just two airlines — WestJet and Air Canada — have locked down over 80 per cent of our airline market.”
Not surprisingly, Lantsman didn’t mention supply management, presumably because the Conservatives voted right along with the other parties to protect regulated dairy prices and block foreign competition.
The Bloc motion prevents supply management from being used as a bargaining chip in any future trade negotiations with the U.S., Europe or elsewhere.
But it doesn’t end there.
As a result of government-approved corporate concentration in the cellphone business, Canada has the highest wireless prices in the world’s 48 most-developed countries.
Australia has cellular fees less than half of ours and so do the Americans. Curiously, the Australians have even less population density than we do.
It used to be claimed by cellphone companies and government regulators like the Canadian Radio-television and Telecommunications Commission (CRTC) that higher fees were required in Canada because of the cost of building cell networks over such a vast landscape. But Australia is just vast and sparsely populated.
One of the biggest problems is foreign-ownership restrictions. For decades, federal politicians have been economic nationalists, leery of letting foreign competitors into the Canadian market. A Canadian, for instance, cannot fly on a foreign airline between two Canadian cities. That means we have two national air carriers — and only two — and it costs hundreds more to fly cross-country than it should.
While there has been a push, rightly, to bring down interprovincial trade barriers, there has been no corresponding push to eliminate archaic, protectionist regulations that add thousands to the annual costs of Canadian consumers.
Another side-effect of our national lack of competition has been a lowering of our industrial productivity. Our governments and industries have become so dependent on a cheap dollar making our exports affordable that they haven’t bothered to upgrade equipment, technology or worker training.
A little dose of competition would go a long way for consumers and the economy.
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