Kinew’s tough talk offers food for thought on empty threats

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This article was published 01/12/2023 (686 days ago), so information in it may no longer be current.

Premier Wab Kinew may have barely 60 days of experience as Manitoba’s first minister, but he has quickly embraced some of the long-standing, dark arts of political leadership. Such as the hollow threat.

On Thursday, after an address in Brandon to the Association of Manitoba Municipalities convention, Kinew told grocers he wants them to lower food costs once his government temporarily stops collecting the 14-cents-per-litre provincial gas tax.

Or else.

“We do expect that grocery chains will pass on the savings to you when we reduce their transportation costs starting on Jan. 1,” Kinew said. “And if we don’t see those savings materialize, then that’s when we’re going to follow up on those further steps.”

And what additional steps would the NDP government take to ensure the fuel-tax savings get passed on to consumers through lower food prices? Kinew could not say. Only that when the gas tax is paused, he is confident food prices will come down “right away.”

Why does this qualify as a hollow threat?

Although supply chain costs — inflated labour, energy, equipment and commodities — are to blame for the higher food costs at the retail level, there is no way to lower those costs with an adjustment to any one underlying cause. And among all those underlying causes, fuel prices appear to be among the least impactful.

There has been very little direct research on the impact of provincial fuel taxes on food prices, but there has when it comes to the federal government’s carbon tax. Research from the University of Calgary suggests federal carbon pricing on fossil fuels accounted for 0.9 per cent — or about 90 cents — on a $100 grocery bill in Manitoba.

U.S. research suggests overall transportation costs — where fuel is a key factor — account for only about three per cent of a dollar spent on groceries.

Furthermore, no one has identified a realistic tool for government to force grocers to lower prices.

Kinew is also under some pressure from within his own party, and from the environmental lobby, for the decision to lower fuel taxes. Notwithstanding the NDP’s convincing October election win, His pledge to cut fuel taxes as an affordability measure landed with a definite thud among those who believe it undermines efforts to address climate change.

All that criticism has put the premier under immediate and intense pressure to justify his policy. And what better way than to connect reduced fuel taxes to lower food prices?

Kinew is hardly alone in making this hollow threat. On the federal stage, the opposition Conservative party has argued that lowering carbon taxes would ultimately lead to lower fuel costs. And while the federal Liberal government hasn’t looked at lower fuel taxes as a way of addressing higher food costs, it has spent a lot of time threatening grocers to bring prices back into line.

Ottawa has been regularly summoning the CEOs of Canada’s largest grocery chains to justify the nearly 20 per cent increase in food costs over the past two years. Food prices have risen much higher than other consumer products and the Liberal government wants to see the fluctuation in shelf prices more in line with the rate of general inflation.

In October, the Liberals extracted a pledge from Canada’s largest grocers to begin “stabilizing food prices” and unveiled a five-point plan to bring more oversight and transparency to the industry.

Among the commitments: more monitoring of food prices and commitments from grocers for a wider range of price freezes and cuts; additional powers for the Consumers Bureau to monitor the progress grocers make in stabilizing prices; the creation of a grocers code of conduct; the gathering of more real-time data on food prices and a breakdown on the costs that go into grocery prices; and a modernization of the Competition Act to address the concentration of ownership in the grocery industry.

The Liberals did not offer to cut fuel taxes to further motivate grocery retailers to lower prices. But they have joined Kinew in threatening the grocers to cut prices, or else.

Federal Industry Minister Francois-Philippe Champagne said earlier this fall Ottawa would take action against retailers that do not make “meaningful” progress in stabilizing food prices, and that he would “go after” international manufacturers that have played a key role in increasing shelf prices.

As was the case with Kinew’s hollow threat, Champagne has been unable to enunciate any specific measures he would take if there isn’t meaningful price relief.

What both Kinew and Champagne appear to be relying on is a more organic stabilization of food prices, which is expected in the new year.

Although it’s unclear if food costs will ever go down in a meaningful way, the increases we see on the shelves will likely be smaller thanks to lower inflation and what appears to be a global consensus among central banks to stop increasing interest rates.

If this economic forecast comes to pass, you can expect two things to happen.

First, Canadians will indeed get a bit of relief on their grocery bills.

And second, political leaders will rush to pat themselves on the back for having brought about lower prices.

Even if they really didn’t.

dan.lett@winnipegfreepress.com