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On a Monday morning, empty cardboard boxes for clothing are scattered around the parking lot of the sprawling Bellis Fair Mall, telltale signs of duty-dodging Canadians who flock to the bargain-packed shopping centre.

And in a Canadian-only touch, some of those evading duty by changing into their newly bought clothes are considerate enough to neatly fold up their boxes before they head for the nearby border.

Bellingham is a small city just an hour's drive from Vancouver, excluding what can be lengthy delays to clear the border, but the shopping experience is light years distant from Canada. There are more brands, greater variety — and best of all, far lower prices for many goods.

With the rise of the Canadian dollar toward parity with the U.S. greenback for the first time in three decades, more and more Canadians are headed to Bellingham, where staff in many of the stores say half their business comes from north of the border, and other U.S. border towns. Business is booming, too, for Canadian customs officials, where lineups can grow to several hours at peak weekend times.

Al Weber, hopping across the border from Surrey, B.C., rattles off the value of the Canadian dollar — to two decimal places — as he prepares to plunge into the shopping bliss of Bellis Fair, where virtually every store is advertising deep discounts and even regularly priced items are far below the cost of comparable Canadian goods.

Two hours later, Mr. Weber re-emerges with a pair of shorts and a shirt that cost him $30, but would have set him back as much as $100 (Canadian) in Surrey, he says. But the savings won't be spent in Canada. "Now, he's taking me out for lunch," his wife, Gale Weber, said with a grin.

That one purchase sums up the challenge for Canada's retail sector: A yawning discrepancy in prices threatens to draw consumers south of the border, now that the currency gap has dramatically narrowed.

For the Canadian economy, the surge in cross-border spending is stellar news. Every dollar spent outside of Canada siphons off inflationary pressures, which have already led to rising interest rates this year. And economists say the heightened competitive threat from U.S. businesses will spur Canadian retailers to greater investments in technology and other efficiency-boosting measures.

However, what is good for the Canadian economy is not necessarily good for any one firm. "It may lead to you going out of business," said Warren Jestin, chief economist with the Bank of Nova Scotia.

For Canadian businesses, the resurgence in cross-border shopping is a return to the painful time of the early 1990s, when recession, a rising dollar and the newly introduced GST pushed Canadians into the arms of U.S. competitors. But for Canadian shoppers, the newly invigorated dollar is an opportunity to rediscover the bustle of U.S. retail.

"We figured we'd come down and check out our buying power," said Roland Beaulieu, who, with his partner, Gloria Denis, was part of a steady stream of Canadians making their way into Bellis Fair.

The story is the same across the northern United States, including New York, where the parking lot of Buffalo's Walden Galleria is awash in Ontario licence plates, even on a weekday.

The two-level Walden Galleria is a typical big American mall, flanked by department stores, including Macy's, Sears and Best Buy. Nearby, there's a Borders bookstore and a Target. The mall is directly off the New York interstate highway, about a two-hour drive from Toronto.

Buoyed by the strong Canadian dollar, Debbie Gresko and her teenaged daughter, Brooke, made the trek to Buffalo this week to do some shopping. And shop they did: two pairs of jeans for $22 (U.S.); five T-shirts for $5.99 each; a picture frame for $12.99; a pair of shoes for $40; a shirt at Hollister for $40; and $155 worth of merchandise at Target.

Almost every store has advertised huge discounts on their windows. JCPenney was taking 60 per cent off some of its merchandise. Shoppers could buy one item and get the next for 50 per cent less at New York & Company.

The mother-daughter team from Waterloo, Ont., spent $500 within a matter of hours, undeterred by the need to pay duties. The strength of the dollar — high enough that the shopping spree costs just $25 more in Canadian currency — is the spark for that spending.

"If it [the dollar] was extremely low, we wouldn't have come. We're not silly," said Ms. Gresko, resting her bags. But, she added, lower taxes and the huge sales are an added inducement. Delays at the border, even the $71 in duties and taxes that the Greskos had to pay, aren't much of a worry. So long as the dollar remains strong, she plans to do another round of cross-border shopping before Christmas.

One of Canada's most prominent retail analysts warns that Canadian businesses near the border — a description that applies to most of this country's big cities — will have to cut prices to keep consumers from border hopping.

"They've got to bring it in line, sure," said John Williams, senior partner at J.C. Williams Group Ltd., a Toronto-based retail consultancy with offices in Chicago. Price gaps of 30 per cent on books and hundreds of dollars on appliances are "just nonsense," he said.

He said Canadian retailers will have to look at buying from suppliers in the United States, in order to be able to match U.S. prices. And the threat is only likely to grow. Mr. Williams said he knows of one major retailer that is in the early stages of launching a catalogue with a single set of prices for Canada and the United States.

Mr. Jestin, who believes the Canadian dollar may soon trade higher than the U.S. dollar, predicts a decade-long upheaval in how the retail sector imports and distributes its offerings, as the currency rally forces firms to find ways to slash costs. "That's going to be the name of the game in the next 10 years."

Craig Alexander, deputy chief economist at Toronto-Dominion Bank, doesn't agree that the dollar is heading to parity, but he does concur that retailers need to become more competitive when the loonie trades for more than 82 cents (U.S.).

Derek Nighbor, vice-president of national affairs for the Retail Council of Canada, said that Canadian retailers, especially those near the border, have been watching the number of shoppers heading south.

While he does not see an exodus similar to the early 1990s, Mr. Nighbor said, a strengthening dollar will hurt retailers in border communities who partly rely on American shoppers. "If consumers are voting with their wallets by going across the border, Canadian retailers are going to have to respond in some kind of way," he said.

Mr. Nighbor said prices are usually a bit higher in Canada because retailers face more cost pressures. Labour is more expensive, as are transportation costs, he said. Also, he said retailers have seen increases in energy prices.

Other observers say that the size of the U.S. market means there are greater cost efficiencies — but that there is greater competition as well, which is even more important in driving down prices.

The rise in the dollar has removed the biggest barrier to cross-border shopping, but others remain. Duties are a factor. Even though goods made within the NAFTA zone of Canada, the U.S. and Mexico are free of such surcharges, there is still an abundance of products from other countries that will have added costs.

And there is the cost of the trip itself, both in money and time. Waiting times at busy border crossings can soar on weekends; even midweek, those using the Pacific Gate crossing to return to Canada faced an 80-minute delay. "You have to put in all that friction," Mr. Alexander said.

Still, there are massive savings to be had on big-ticket items. In the Sears store in Bellingham, a Maytag clothes washer and dryer set that cost nearly $2,700 in Canada could be purchased for just over $1,800, a one-third savings. There are similar steep discounts on refrigerators, stoves and other major appliances. A Sears salesman, when asked about warranty coverage, gives assurances that it won't be a problem — and goes on to say that Canadians account for one in seven of the appliances his department sells.

However, Canadians who buy U.S. appliances may find out that they don't have warranty coverage. Monica Teague, a spokeswoman for Whirlpool Corp. and the Maytag brand, says if a Canadian consumer buys an appliance in the U.S. and takes it back home, there is no warranty, since Canadian appliances have to meet the requirements of the Canadian Standards Association. It is possible to have a U.S.-bought appliance certified to meet those standards, but in any case, Canadian consumers face a complex situation.

But the biggest danger for domestic retailers is that a taste of the U.S. shopping experience may prove addictive for Canadians, whatever the technical hindrances and irritations. Brigitte Jager of Waterloo couldn't contain her excitement about the deals she scored at Buffalo's Walden Galleria. "Can you believe it? This is great," said Ms. Jager, who is in her 60s. "The sales are much better, way better, and there's less tax."

She'll be back before Christmas.