YOU ARE HERE: LAT HomeCollections

Market Scene : U.S. Prices Are Definitely Right for Canadian Shoppers : The torrent of business is devastating the economy north of the border and causing some surprisingly short tempers on the American side.


NIAGARA FALLS, Canada — Last year, when Gilbert Little was trying to make a living running a gas station in this border city, he would watch in dismay as his fellow Canadians went zipping over the international bridge to fill up on cheap American gasoline. Some even carried red jerrycans with them, to bring home extra fuel.

"We had to subsidize the gas, the help and everything else" in last-ditch efforts to compete, he recalls. But to no avail: "Our business was all going across the border."

Indeed, for the past year, and especially since January, Canadians who live anywhere near a U.S. border crossing have been flocking to the other side to shop. Gasoline is a favorite buy. In the Niagara Falls region, American pump prices have lately been about a third less than Canadian ones. And elsewhere along the 5,482-mile border, the longest undefended international boundary in the world, the price gaps have been even wider.

The consequences for Canadian retailing have been dire. Little, for one, decided he didn't stand a chance and boarded up his gas station. Today, he runs a profitable car-repair shop in another Niagara Falls neighborhood.

"If the gas business had stayed good, we would have stayed where we were," he says ruefully.

According to Statistics Canada, a government fact-gathering agency, Canadian motorists made more than 14 million border crossings for one-day trips in the first four months of this year, a 22% increase over the first four months of 1990.

The Canadians are certainly not going for the scenery. In the Niagara region, they cruise popular strip-mall developments in the shadow of smokestacks and landfill heaps, while to the west in Windsor, they cross with trepidation into crime-ridden central Detroit.

They go in hopes of saving money, especially since January, when the Canadian government imposed a hated new 7% tax on virtually all retail transactions. The levy is called the goods and services tax, or GST, but disgusted Canadians joke that the initials really stand for "go south tax."

As the stream of Canadian shoppers has become a torrent, guidebooks have begun appearing in Canadian bookstores, instructing tax-evaders and bargain-hunters on where to find the best deals in U.S. cities. Small, once-tranquil Canadian border towns, such as St. Andrews, New Brunswick, are now finding themselves choked with border-bound traffic.

On the U.S. side of Niagara Falls, the congestion has grown so bad--and tempers so short--that the city visitors' bureau has dispatched a public relations man to preach homilies in local churches on loving thy neighbor.

"People are open-minded and thinking good thoughts when they're at church," explains the bureau's John Oliver, who adds that his office is trying to combat the image of Canadians as rude litterbugs and causers of endless lineups in supermarkets.

In southern Ontario, the Border Examiner, a new tabloid, offers detailed directions to American malls and ringing editorials on the free market. Toronto travel agents have found a rich opportunity in packaging overnight bus trips to Buffalo. And in the Ontario city of Oshawa, the local college has even added mini-courses on how to shop in New York to its curriculum.

While all this has been going on, Canadian retail sales for the first quarter of 1991 have fallen by 6% (12% if adjusted for inflation) compared to 1990--the deepest decline in 30 years.

The Ontario Ministry of Industry, Trade and Technology estimates the U.S. shopping craze will cost the provincial retailing industry nearly $2 billion this year. That would mean 14,000 jobs lost in Ontario alone. And analysts say a $2-billion loss for Ontario translates into a $4.5-billion loss for all of Canada.

"We used to think about (Canadian) border retailing being crippled," says Tim Carter, vice president of the Canadian Council of Grocery Distributors. "Now, I think a better word is 'decimated.' "

Retailers, financial analysts, politicians--practically everybody in Canada except the southbound bargain-hunters--are worried about the long-term effects of the cross-border shopping boom. They fear that if too many retailers founder, malls will then collapse, and the reverberations will spread through Canadian real-estate investment and banking.

"I've been here 20 years, I have 85 shopping centers, and I'm going to see a lot of them go down the drain," says Jerry Sprackman, an embittered Ontario shopping-center developer.

"Where does this all stop?" adds John Winter, president of a retail-consulting firm in Toronto. Winter has already noticed the beginnings of a sort of retail redlining, as lending institutions refuse to put any more money into retail ventures near the U.S. border. "Once you get into a whirlpool, you can't change the direction of it. We could lose a whole generation of retailers," he says.

Los Angeles Times Articles