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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Fewer Canadians Venture South Of Border Low Exchange Rate, Tax Penalties Slow Flow Of Tourists, Shoppers To U.S.

Tom Laceky Associated Press

Here’s the deal: You give us a dollar and we’ll give you 73 cents.

That’s what Canadians are offered if they spend their money in Montana or anywhere else in the United States. So, as the showbiz saying goes, they’re staying away in droves.

“We used to do a lot (of Canadian business),” said Butch Nielsen, owner of Cassidy’s Bar in the northeastern Montana town of Plentywood. “We haven’t done any Canadian business in three years. The business just died off overnight.”

Nielsen estimates he lost $30,000 a year as the Canadians disappeared.

The story is the same from Washington to Montana to Maine.

Overall, tourism in Montana is flourishing, but the number of Canadian tourists has declined drastically, especially in towns like Scobey near the border.

The chief culprit, most agree, is the exchange rate for Canadian money, which headed down several years ago and now hovers around 73 percent. That means Canadian shoppers get only 73 cents in U.S. money for each of their own dollars. Their buying power goes down as the exchange rate does.

In addition, Canada has taken aggressive steps to keep shoppers at home and bolster its troubled economy. Stiff border taxes, shop-at-home campaigns and other inducements such as expanded gambling and new resorts seem to be working.

The number of Canadians’ one-day trips to the United States has been declining since 1991 and last year hit the lowest level since 1988, according to Statistics Canada, a government agency. Every province reported a decline.

U.S. shopping in Canada has been increasing at the same time, presumably signaling that American companies are losing business. The number of one-day trips to Canada last year rose 10.1 percent to 22.7 million, the biggest increase since 1980.

Washington state has seen a steady decline in Canadian visitors, especially in border towns, said Carrie Wilkinson-Tuma of the state tourism division. The numbers dwindled 13.4 percent from 1993 to 1994, and 8.1 percent the year before.

“The exchange rate is a big part of it. Also, Canada has initiated a shop-at-home program,” she said.

The problem may be even worse in Maine, where border neighbor New Brunswick adds an 11 percent provincial tax to Canada’s 7 percent national tax on incoming goods. Maine has complained for years, but Gov. Angus King hopes a resolution can be reached.

New Brunswick plans to merge its tax with the national tax next April. King says the lower tax will ease the pressure on Maine businesses.

Canadian tourism in Montana boomed in the 1980s, largely because of Canada’s 7 percent general sales tax. Canadians promptly dubbed it the Go-South Tax.

“It was wonderful,” recalls Mike Labriola of the Great Falls Area Chamber of Commerce. “Some of our retailers estimated as much as 15 percent of their business was Canadian trade.”

However, he said, the Canadian government wised up quickly and imposed the tax on goods Canadians brought home from the United States.

Great Falls, an easy 120 miles down Interstate 15 from the border, has long been a popular Canadian shopping destination, but Canadians begin to disappear when the exchange rate is about 80 percent, Labriola said.

But it’s primarily the GST, not the exchange rate, that’s keeping Canadian business away, said Mike Jackson, vice president at Kalispell First Interstate Bank.

“To me, what happened was they just lost 7 percent of their spending power across the board,” he said. “It takes away their disposable income all year long. If you haven’t got it in the first place, there’s nothing to save” by coming to the United States.

Neither government nor private agencies track Canadian business in Montana, but some businesses try. Dorrie Hipschman, longtime head of the Flathead Convention and Visitor Center in Kalispell until February, said her rough guess is that Canadian business in northern Montana is off 10 percent to 20 percent. Hardest hit, she said, are recreational and retail businesses such as casinos and clothing stores.

“Three years ago gambling was one of our biggest attractions for Canadians,” said Chris Christensen of the Institute for Tourism and Recreation Research. “In fact, they were our No. 1 out-of-state gambling customer, by far.”

Since then, he said, Alberta and Saskatchewan have expanded their legal gambling, which has kept many Canadians home - and lured Montanans across the border as well.

xxxx DAY TRIPS DECLINE Same-day trips are considered a gauge of how many shopping trips Canadians make to the U.S. The number peaked at 59.1 million in 1991 and dropped to 36.4 million in 1995.