Canada’s Head Start on Cannabis

As the U.S. cannabis industry faces a crackdown, Canada is set to lead the globe.

By Nushin Rashidian

Tagged CanadaCivil Libertieslawmarijuana legalization

“The current approach to cannabis does not work.” This was the forceful first line of the Canadian government’s April 13 announcement for their proposed bill to legalize cannabis nationally for recreational use. Only one other government so far, Uruguay, has followed the path toward legal, regulated cannabis sales. However, the broader implications are greater in Canada, which has ten times the population and is one of the fastest growing economies in the G7. Even though legalization (in varied forms) is spreading across the United States, including in eight states and the District of Columbia, the federal government still wants nothing to do with it.

As Anne McLellan, former Canadian deputy prime minister and chair of the legalization task force, said in December, when the group’s recommendations were released, “We are the largest developed country to ever move on legalization.” This means that Canada will be an important barometer for countries considering legalization, and may well set the foundation for the global cannabis industry.

To begin with, Canada’s cannabis market will be free from many restraints that continue to hamper the growth of the industry south of the border. The industry is projected to be at $7 billion, similar to estimates for California. In the United States, many businesses are cash-only because federal prohibition limits their access to banking, which has also kept some established investors and institutions at bay. And, in crafting rules for an industry that is against federal law, state regulators are thus left without guidance on important quality-control topics like purity and potency, which, for most other products, would usually be handed down from experienced federal entities like the Environmental Protection Agency or the Food and Drug Administration. A total lack of federal-state cooperation around cannabis in the United States is untenable, especially around issues like consumer safety一there is, for example, a federal standard for what’s considered “organic” produce. Canada, by contrast, is setting some ground rules before allowing each province to pave, in many ways, its own path. This will allow Canada to move forward with a cohesive approach to  legalization advocates in the United States are still fighting for: an end to federal cannabis prohibition, removing obstacles for states that choose a new course on cannabis.

Canada, with the full force of the federal government behind legalization by July of 2018, will be able to quickly step ahead as a global leader, not just in terms of investment and innovation, but in shaping regulation that can serve as a model for those countries that will follow in its footsteps. While Canadian officials evaluated existing approaches in the United States and Uruguay in shaping its own model, Canada’s plan very much paves its own path in important ways.

There may be some areas of relative similarity between Canada’s legalization bill and laws regulating legal cannabis in U.S. states: laws on local control, possession limits, and home growing. However, the manner in which these are implemented will likely differ and could prove an important litmus test for U.S. states to consider going forward. States provide varying degrees of control to localities, but they are generally allowed to set their own rules around things like hours of operation, licensing, and taxes. In Canada, provinces and territories will be the ones that “authorize and oversee” sales; they will even be able to opt-out altogether. This means that some regions of the country might become industry or tourism hubs, like Vancouver, which has historically embraced cannabis, while others could become cannabis deserts. The Alberta Urban Municipalities Association has said that 2019 is the earliest their municipalities will be ready.

Cannabis consumers in opt-out provinces need not worry, however: They will be able to order cannabis online from federally licensed producers and have it mailed directly to them. This is how the current system works for medical cannabis as shops are federally prohibited. A Health Canada spokesperson I emailed explained that this postal system was put in place in an effort to provide a “legal supply of cannabis for purchase and a viable alternative to the illegal market.” National mail-order cannabis for medical and recreational use at this scale is untested, so, again, this possibility could provide either an example or a lesson for other countries一if and when they follow suit. Nothing like this exists in the United States一in fact, the USPS has explained that they are not legally obligated to mail anything that even promotes cannabis use. Just this month, they refused to let a cannabis business mail their taxes, labelling  them “drug money.”

There will likely be fierce competition in Canada over licenses, which will be awarded in a merit-based application process federally, while provinces will be free to set up their own requirements. Campaigns to legalize cannabis in the states have made the case to voters to “regulate marijuana like alcohol,” and most state cannabis industries are overseen by liquor control offices. However, cannabis is never sold alongside alcohol. Up north, however, Ontario’s Premier Kathleen Wynne has already spoken in favor of sales through the province’s existing provincial liquor stores. This means that, in Canada, anyone who wants a license might have to compete with liquor stores and existing medical cannabis providers for a piece of the market. In comparison, American states that have legalized such licenses, have given them to private individuals and companies一with the exception being one shop in Washington that belongs to a city government. Should cannabis shops in Canada be province-run, it would put to the test  an alternative some drug policy experts have proposed for over here: legalize, but don’t commercialize, and let states regulate the industry. This proposal has yet to take hold in any legal states.

Canada has also taken the novel step of excluding edibles sales while the government takes extra time deciding how exactly to regulate them. In Colorado, lax edibles regulations might have been a contributing factor in a handful of well-publicized deaths. And, of course, there was Maureen Dowd’s infamous overdose, which she later revealed. Washington state delayed allowing edibles after these incidents, as both states quickly realized the high demand for them and the attention that needed to be paid to things like the strength of THC levels, as well as the quantity most people were consuming at one sitting. (Canada’s task force has also suggested THC limits and defined single serving portions.) Consumers in Canada will still be able to purchase and possess 30 grams, which is close to the one ounce (28 grams) de facto standard amount allowed for purchase and possession in American states.

Canada will similarly allow home growing of four plants per household, as currently permitted for residents of every legal cannabis state except Washington. However, Canada has taken the unusual step of restricting plant height to “one metre,” likely to ensure households are producing for personal use only. Colorado has recently openly grappled with the grey market of homegrown cannabis, which is sometimes illegally sold across state lines and may have influenced Canada’s decision around plant height. Canada may nonetheless confront the difficulties of regulating the quality of homegrown marijuana, or whose hands it ends up in.

There are, however, important distinctions in Canada’s law that have little precedent in the United States. One of the most important areas of regulation? Taxation. Shortly after Prime Minister Justin Trudeau took office in late 2015, he claimed that a steep cannabis tax would allow the black market to remain competitive through lower prices, and that this unregulated cannabis would remain easily accessible to children. Therefore, in keeping with the bill’s focus on public health and safety, he said that taxes on cannabis will likely be low, with revenue being directed toward things like education, addiction treatment, and mental health. The country’s legalization task force, however, recommended higher taxes on stronger potency cannabis, meaning the potency-based tax would make the most intoxicating cannabis more expensive, thus potentially discouraging heavy usage. Cannabis taxes in the United States, on the other hand, are based on weight or on a percentage of cost, and are generally high because a legalization selling point means tax revenue for states. In Uruguay, where the law’s priority was reducing the power of the black market, the government set the price per gram at a low of only $1. Getting taxation is essential since it is about more than revenue; it is an important form of regulation.

The most significant differences, however, with existing U.S. laws will come down to Canada’s approach to legalization and rules around stoned driving and the legal age of consumption. The first campaign in the United States to emphasize this issue was in Washington which set a 5 ng/ml blood limit for THC, but subsequent states have either set looser limits or none at all, citing that research on this issue remains inconclusive.

Yet, Canada’s legalization effort is hyper-focused on impaired driving. In fact, new, tougher laws were introduced as a separate, but complementary, bill. Before moving on to legalization, Canada will put in place what they’ve forcefully called a “regime that would be amongst the strongest in the world” for driving while stoned. They weren’t kidding: It sets the limit at a low 2 ng/ml. However, the penalty is a fine of under $1,000; jail time doesn’t kick in until the 5 ng/ml limit is passed. The 2 ng/ml level is due, according to a Health Canada spokesperson with whom I communicated, to a “scientific consensus that consuming cannabis impairs the ability to drive. There may be some pushback on this by those looking to Washington’s experience however, where a group of pro-legalization advocates vigorously argued against Washington’s legalization effort because, they said, 5 ng/ml would penalize sober drivers. No legalization, they said, was better than bad legalization. Already, it looks like the legality of Canada’s bill could be challenged, and, considering officials have been clear this bill must be cleared before the legalization bill, it remains to be seen whether Canada’s experience will lead to similar conclusions.

Canada is also setting the legal cannabis consumption age at 18, the same age for legal drinking (some drug rehab centers in Canada have already come out for a legal age of 25 instead). In U.S. states, the age has been, not surprisingly, set at 21. Canadian officials say they will still instead double down on public education, discourage use, and curb any packaging or promotions that would appeal to potential underage users.

Yet Canada also “seeks to avoid criminalizing youth and avoid subjecting them to the lifelong consequences of a criminal record,” according to the government’s release, and, therefore, those under 18 who possess up to 5 grams will not be penalized. American drug policy advocates have called for a similar focus away from penalizing underage users, though it’s often treated as an afterthought. This policy might be especially relevant in Canada, though, considering that their youth cannabis rates are the world’s highest: 21 percent of those ages 15 to 19 have used pot in the past year. (Though, those who give cannabis to a minor can face up to 14 years in jail一which is particularly harsh when compared to the one year maximum in Ontario with regard to alcohol.) This focus on youth education over punishment, should it be successful, may further galvanize advocates in the United States.

However, the most notable part of Canada’s legalization bill may actually be who proposed it: the federal government一led by Prime Minister Justin Trudeau, with backing from the ministers of Justice, Public Safety, and Health一an unimaginable scenario in the United States, particularly under the Trump Administration. Canada’s cannabis market is, therefore, set to take off at a time where top U.S. cannabis entrepreneurs wonder if a major crackdown is about to chill the American cannabis market completely. Even The New York Times’s editorial board pointed to this juxtaposition in a recent piece entitled, “Canada, but Not Jeff Sessions, Moves Boldly on Marijuana.”

But despite policies at home, the U.S. Embassy’s response to Canada’s new policy was more innocuous than some might have expected, considering the tremendous pressure the United States has historically exerted on countries to uphold the war on drugs. Although it did reiterate the fact that cannabis is against U.S. federal law and that U.S. Customs and Border Protection would enforce that law, they wrote:

Our relationship with Canada is one of deep friendship and mutual trust and it is up to the people of each nation to decide which drug policies are most appropriate for their country, within the framework of their domestic law and international law.

Ah yes, international law.

While some might interpret decades-old international drug control treaties as prohibiting Canada’s chosen course on legalization, a spokesperson for Health Canada told me that the government of Canada “takes its international obligations very seriously” and will “engage in constructive dialogue with our international partners.” In fact, Health Canada sees legalization as a means of “protecting our society from the adverse consequences of illegal drug use and combating international drug trafficking”一both of which constitute the supposed aims of existing drug control treaties.

Still, these treaties could play into how Canada’s cannabis industry expands across the globe. Already, medical cannabis from companies in Canada is being exported to a handful of countries, including Australia, but the treaties only allow cannabis to be imported and exported for medical purposes. And, so far, there are no plans to allow for the export of cannabis for recreational use, even if more countries move to legalize it for such use.

Yet entrepreneurs are still planning for what might come. As Bruce Linton, the CEO of Canopy Growth, Canada’s largest medical cannabis company, told Cannabis Wire last summer, “Part of the reason we wanted Tweed to be positioned where it is now is because we want our success to reach far beyond Canada, to the global marketplace.” Tweed is currently the largest brand in their portfolio, and has already partnered with Snoop Dogg. He added, “We think others will look over and see what we’re doing here in Canada and want in.”

With Sessions stomping out excitement around the U.S. cannabis industry, all eyes are indeed looking north.

Read more about CanadaCivil Libertieslawmarijuana legalization

Nushin Rashidian is the co-founder of the non-partisan news organization Cannabis Wire, and the co-author of the book A New Leaf: The End of Cannabis Prohibition (The New Press, 2014). She is also a research fellow on the Platforms and Publishers project at Columbia Journalism School's Tow Center for Digital Journalism. She can be followed @nushinrashidian.

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