U.S. Goods: Lure, Curse To Canadians -- B.C. Ad Ban Hints Of Trade War On Border

NELSON, B.C. - Charlie Gilligan's efforts to sell a few groceries have put him on the front lines of a war with Canada.

Each week, hundreds of British Columbia residents flock across the international border to his Art's Food City at Metaline Falls, Pend Oreille County, to shop for bargains and avoid higher prices and taxes back home.

Responding to pressure from merchants at home, newspapers in the southeastern British Columbia towns of Nelson, Trail and Castlegar stopped accepting weekly grocery ads from his store.

It's all part of an increasingly hostile dispute between the two countries involving free trade, currency exchange rates and an unpopular tax.

"It's not going to stop me," Gilligan says of the advertising ban. "We're going into a global world in all respects. For them to artificially deny that doesn't make sense."

Bill Barlee, B.C. minister of agriculture, fisheries and fruit, says cross-border shopping has cost the province $6 billion in retail sales and 41,000 jobs over the past five years.

More than half of Gilligan's business comes from Canadians who cross the border to take advantage of cheaper food and gasoline.

Robyn Langille of Trail, B.C., regularly shops at Art's for her family of four. She saves $200 a month, despite the 40-minute drive to the store. On a recent trip, she bought $96 worth of groceries - the equivalent of $116 Canadian - that would have cost her $200 in Trail.

There used to be a sign at the border crossing urging Canadians to keep their money at home. Some stores sport "shop at home" posters in their windows in downtown Nelson - a year-round resort city that was backdrop for the Steve Martin-Darryl Hannah movie "Roxanne."

Under pressure from hometown storekeepers, newspaper publishers reluctantly began refusing to accept U.S. grocery advertising in the past year.

Reaction to the ban has been mixed, says Verne Shaull, publisher of The Nelson Daily News.

"Some say we should take stateside advertising and others say we shouldn't," Shaull says. "No other business in town would refuse U.S. business. Cross-border shopping has been in existence for years."

Gilligan's advertising represented about 3 or 4 percent of the newspaper's total advertising space, Shaull says.

The ban covers only grocery ads, but not those of other U.S. businesses, such as hotels and retail clothing stores.

Others refuse to accept any advertising from U.S. merchants.

The protectionist feelings were fanned by the announcement late last year by officials at Cominco Ltd. that 500 jobs would be eliminated at the world's largest lead smelter and the region's biggest employer at Trail.

Shaull doesn't think the shopper leakage to the south is as bad as some would have it. Retailers in Vancouver and other large Canadian cities are a bigger threat, he says.

In a marketing survey by the newspaper, only two people of 300 questioned indicated they shopped in the United States regularly.

Some of those who make weekly trips across the border do so to protest Canada's goods and services tax, notes Jim Swift, manager of the Nelson and District Chamber of Commerce.

Nicknamed the "Go South Tax," it adds 7 percent on top of a 6 percent provincial sales tax on many goods and services. Most groceries, however, are exempt from the GST.

The GST, Canada's effort to reduce its national debt, is resented by many who feel it is arbitrary and mismanaged.

The shop-at-home campaign that appealed to Canadians' fierce patriotism has softened somewhat. Merchants in border towns have responded to the challenge by stocking wider selections and better marketing, Swift says.

But U.S. businesses are doing a little marketing of their own to capitalize on the situation.

Although the Canadian dollar is discounted as much as 17 percent, some stores and hotels in Spokane offer to exchange it at par to entice Canadians to make the 150-mile drive south.

Merchants in lower British Columbia also complain that the 3-year-old U.S.-Canada Free Trade Agreement benefited Americans and hurt Canadians, who had been insulated by duties that will shrink and gradually be eliminated by the pact.

Shoppers complain that prices on many items are higher and selection is poorer in Canada. Especially for dairy, poultry and paper products, the price difference is very noticeable.

A gallon of milk costs half as much at Art's as it does in a Nelson supermarket. A dozen large eggs that sell for $1.89 at the Nelson store are priced at $1.29 at Art's.

Gasoline costs about half as much in Washington state, so B.C. shoppers can buy their groceries, fill their tanks, pay duties at the border and still save more than if they had shopped at home.

Gilligan and his partners in Seattle bought the 5,000-square-foot grocery in May 1990, just three weeks before a cement plant that was the town's largest employer closed.

"It was really the Canadians who attracted us," Gilligan says.

Gilligan is getting around the advertising ban by using radio, a regional shopper newspaper and sending direct-mail circulars to the 20,000 households in lower British Columbia.