Finance Minister Jim Flaherty said distributors and retailers should lower prices "as soon as possible" to reflect a soaring Canadian dollar, and held up a copy of the latest Harry Potter book as an example of how some items are still much cheaper in the U.S.

Flaherty's comments followed what he called a "frank and open discussion" with industry members Tuesday.

"My message was clear: now that the Canadian dollar is at par with the United States dollar, I strongly urge Canadian distributors, wholesalers and retailers to reduce prices for Canadian consumers," he said.

Flaherty said he looked at a copy of the recent Harry Potter book in Washington this past weekend, which was selling for US$29.74 before tax. He came back to Ottawa and purchased the Canadian version, which was $36 before tax.

"It's a price difference of more than 20 per cent. And the actual price, as printed on the covers, is $45 for the Canadian version and $34.99 for the American version," he said.

Harry Potter is distributed in Canada by Vancouver-based Raincoast Books, and Scholastic in the U.S.

The Canadian dollar closed the day at 103.51 cents US.

"Retailers tell me that there are lag times with respect to inventory that was priced before the dollar reached parity," he said.

"They told me there are also additional costs, which is accurate, for doing business in Canada, such as higher freight costs, additional costs for translation, and higher brokerage tariffs.

"I appreciate that, and I understand that prices cannot be lowered overnight, and that Canadian and U.S. prices may never be identical because of some of those unique differences. But the Canadian dollar has been on an upward trajectory for several years now, and there has been a significant period of time to adjust."

Diane Brisebois, of the Retail Council of Canada, said Flaherty should help retailers by cutting duties collected at the border.

"If you bring in sneakers from China, for example, retailers in Canada pay 18 per cent taxes. Retailers in the U.S. pay absolutely nothing," she said.

Representatives from Wal-Mart Canada, Hudson's Bay Co., Toys R' Us, Staples Inc. and Forzani Group Ltd. were all in Ottawa to meet with Flaherty.

Home Depot Canada spokesperson Harry Taylor said his company was already working hard to cut prices.

"We're going everything we can, both within our merchandising organization but also with our vendor community, to make sure that we are absolutely competitive," he told CTV News.

Wal-Mart Canada said that the company had its "best-ever year of price reductions."

In a press release, the company said it has been negotiating with suppliers for more than a year to have wholesale prices better reflect the strengthening Canadian dollar.

"Canadians are not satisfied, Wal-Mart Canada is not satisfied, and negotiations continue," Mario Pilozzi, Wal-Mart Canada's president and CEO, said in the release.

"We are the agent for our customers, and will continue to work proactively with suppliers to negotiate lower prices. We are committed to turning our negotiations into many pleasant surprises for our customers between now and the New Year."

On Friday, Hudson's Bay Co. announced it would reduce prices on items at nearly 300 Zellers discount department stores.

Additional factors

Still, some industry experts note that the exchange rate is only one factor on the price differentials between products sold in Canada and the U.S.

John Williamson, federal director of the Canadian Taxpayers Federation, sent a letter to Flaherty yesterday arguing that price parity is impossible.

"Our economy has more costly regulations and higher taxes and until this is changed, Canadians cannot expect price parity with the U.S., which has a more dynamic, lower taxed, less regulated and therefore less costly market," Williamson wrote.

"Canada cannot have radically higher minimum wages, higher business taxes and more costly regulations and suppose prices will be the same on both sides of the border."

Williamson told CTV Newsnet on Tuesday that Crown corporations and "government monopolies" should be held to the same standard as Canadian retailers.

"It's not the private market that sets the toll fares across the Canada-U.S. borders, which are still charging much more in Canadian dollars," Williamson said.

"I haven't noticed prices coming down at the liquor monopolies and Canada Post just increased its price of mail going to the U.S. despite the huge increase in the loonie."

Williamson said the Canadian economy remains much less efficient than the American economy due to "costly imputs" imposed on businesses by the government that weren't noticed when the dollar was lower.

"Mr. Flaherty's position would be strengthened immensely if he said, for example, we're going to cut employment insurance taxes right away for employers to allow them to pass these savings on to consumers. Lead by example and then he can go out and beat up some of the retailers," Williamson said.

Economists estimate that Canadians may be paying as much as 20 per cent more than Americans for similar products sold in the U.S.

Some U.S. auto retailers and Bombardier dealers have been told not to sell to Canadians, in order to protect dealers north of the border.

Canadian Auto Workers president Buzz Hargrove said Tuesday that dealers will be forced to lower prices if consumer pressure remains strong.

With a report by CTV's David Akin and files from The Canadian Press