Cross-border shopping may have soared between 2006 and 2012, according to a Statistics Canada report released Wednesday, but at least one senior Canadian economist believes the falling dollar will reverse that trend.

“I do think 2012 was probably close to the high-water mark, if not the high-water mark for cross-border shopping,” said Douglas Porter, chief economist and managing director, BMO Financial Group.

While the loonie traded at and above par with the U.S. dollar in 2012, it was trading Wednesday morning at $89.5 cents (U.S.).

“Some people have a favourite store or mall or make it an annual tradition. But the casual cross-border shopper won’t really see the point when the currency drops to 85 cents U.S.,” said Porter.

Increased promotional activity by Canadian retailers and a new premium outlet mall

in Niagara, just minutes from the U.S. border, are also likely to keep more Ontario residents shopping at home, he said.

According to the Statistics Canada report, cross-border spending by Canadians in the United States rose from an estimated $4.7 billion in 2006 to $8 billion in 2012.

With the exception of 2009, cross-border shopping rose annually, but even so, it represented just 1 to 2 per cent of total Canadian retail sales, according to the study.

The figures reflect the fact that the Canadian dollar surpassed parity with the U.S. dollar in 2007, and remained strong until the Great Recession began in 2008, said Jackie Maisonneuve, Statistics Canada chief of household expenditure.

In 2009, during the depths of the recession, overnight trips to the U.S. fell by five per cent.

Recently the number of those visits dropped again. In the first six months of 2014, the number of overnight trips to the U.S. decreased 1.1 per cent on a seasonally adjusted basis, compared to the first six months of 2013, said Maisonneuve.

Traffic to the U.S. across the Peace Bridge meanwhile, has mostly dropped for the past two years, with the exception of a couple of months in 2013.

The StatsCan study analyzed data from a range of sources. The upper estimate for cross-border spending in the U.S. was pegged at $10.8 billion in 2012.

Porter said his estimate is closer to $20-billion, and includes retail spending by Canadians who winter in the U.S.

The good news is retail trade in Canada also rose during the same period, increasing every year from 2006 to 2012, except in 2009, when there was a 2.9 per cent decline, according to the study. Annual sales rose from $389 billion in 2006 to $468 billion in 2012.

There remain structural differences between the two countries that need to be addressed, said Dave Wilkes, senior vice-president, Retail Council of Canada.

“Canadians are voting with their wallets because there are some structural challenges that create an unlevel playing field,” said Wilkes.

He pointed to tariffs as high as 18 per cent on products including footwear, linens and clothing for children. Suppliers who charge higher prices to Canadian retailers is another problem, he said. There are also regulatory differences between Canada and the U.S. — for example, differences in regulations governing sleepwear for infants.

“This is the challenge retailers are facing every day. We are seeing money and jobs leak out of the country every day,” said Wilkes.

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Eliminating all tariffs would increase economic activity in Canada by $20-billion, according to one study, said Wilkes. While he acknowledged the government has begun addressing the problems, more remains to be done.

About three-quarters of Canadians live within 160 km of the Canada–US border, according to the Statistics Canada report.

Cross-border shopping estimates in the report included same-day trips; spending on overnight trips; postal and courier imports; and motor vehicle imports.

In 2012, Canadians made almost 56 million visits to the United States, up 38 per cent from 2006, according to the report.

The study also found that the annual amount brought back to Canada from same-day trips grew from $370 million in 2006 to $844 million in 2012. The annual total from overnight trips doubled from $1.8 billion in 2006 to $3.6 billion in 2012.

The value of goods imported into Canada from abroad by post and courier were included. The value of these goods was estimated at $3.1 billion in 2012, up 12.7 per cent from a year earlier and 50 per cent higher than in 2006.

Motor vehicle imports totaled $426 million in 2006 and then more than doubled to over $1 billion in both 2007 and 2008. By 2012, they had declined to a level almost identical to that in 2006, according to the report.

In 2012, overnight trips and goods delivered from abroad by post and courier accounted for most of the cross-border shopping total, at 45.3 per cent and 38.9 per cent respectively.

In 2014, a falling loonie is expected to put a drag on cross-border shopping trips.

Same-day trips accounted for 10.5 per cent and motor vehicle imports made up the rest, at 5.3 per cent.

“Several factors can contribute to the growth in cross-border shopping. Among them is the relative strength of the Canadian dollar over the study period, as well as price differentials, changes in retailer landscape, duty-free limits, tax changes and economic conditions,” the study concluded.

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