I expect that in New Brunswick you are well aware that there are large and persistent gaps between the prices charged in the United States and in Canada for similar goods. Many Canadians feel the same way. We can’t blame Canadian consumers for being both puzzled and annoyed. Isn’t free trade supposed to close this price gap?
Shouldn’t competitive market forces cause domestic and foreign prices to converge? And if prices can’t move, shouldn’t our flexible exchange rate adjust to offset any differences? And, finally, if neither prices nor the exchange rate are moving to close these gaps, is something wrong with the system? These are good questions, and they deserve good answers.