Is a cannabis cartel in Canada inevitable? No one knows when the United States will legalize cannabis, but it feels imminent. Once this occurs, will Canada’s large licensed producers‘ lobby for domestic protection? Like Canada’s telecommunications industry? Canadians are “protected” from American competition. So we end up with a cartel: Bell, Rogers and Telus. And the highest internet/phone prices in the developed world.
Is this the future of Canadian cannabis?
The US House of Representatives passed the MORE Act the other week. The legislation aims to legalize recreational cannabis across the United States. If approved in the Senate, then it’s game over for Canada’s comparative advantage. In the multi-billion dollar global cannabis industry, what role is there for Canada, if any? Our growing season is short. And we can’t compete with grow-lights humming 10 months of the year.
The Conditions are Ripe for a Cannabis Cartel in Canada
So far, a Canadian cannabis cartel hasn’t emerged. Too many consumers demand craft, premium products. Instead, Canada has positioned itself as the largest exporter of legal cannabis in the world.
But underneath the surface, things aren’t what they seem. A United Nations agreement from 1961 considers cannabis a dangerous narcotic. International imports and exports are limited to scientific and medicinal purposes.
As well, our domestic laws are cankerous. Excise taxes (or “sin” taxes) on recreational cannabis are unnecessary. On medical cannabis, they are downright immoral. Other government markups hurt the industry and the consumer. For example, provinces like Quebec completely outlaw private retailers.
What if the US Legalizes It?
More States south of the border are legalizing cannabis. But so long as it remains illegal federally, there is no cross-border trade. But suppose the MORE Act makes it into law and this time next year Americans are enjoying federally-legal cannabis. Does that mean Canadians can finally import high-potency edibles from their southern neighbours?
Or will a ban prevent Canadians from peaceful acts of trade? In the same way we’re barred from purchasing cheaper internet? And phone plans with actual unlimited data? Will a cannabis cartel damn Canadians to 10mg edibles forever? Meanwhile, our American friends enjoy edibles with ten times that amount.
An Inevitable Cannabis Cartel? Read Between the Lines
Rick Savone is senior vice president of Aurora Cannabis and chair of the board of the Canadian Cannabis Council. He told the Financial Post, “It’s time for the federal… and provincial governments in Canada to stand behind our sector to get ready for this economic and competitive opportunity that’s just around the corner.”
What exactly that means is anyone’s guess. Innocent statements or calls for a cannabis cartel? Sounds like he could be calling on governments to secure the Canadian cannabis market from foreign competition.
Does he want Canadian cannabis to look more like our banking sector? Again, Canadians are at the mercy of a cartel: RBC, BMO, CIBC, TD Bank and Scotiabank. These companies can (and do) invest heavily in the American banking sector.
But are American banks allowed to operate in Canada? Of course not.
Can Canadians start a bank like one can open a hardware store? Absolutely not.
Future of the Canadian Cannabis Industry
Is the same sort of cartel shaping up here? Will Canada’s large producers absorb the smaller ones? Will the larger producers finally get their cartel? Cartels that seem to be a right of passage for every major Canadian industry? Despite, officially, being illegal?
Only time, and American legalization, will tell. Until then, history is not on the side of free-market competition, unfortunately. Canada’s small cannabis industry will likely be seen as a David against a Goliath.
The Goliath, of course, the massive US cannabis market. It’s a situation ripe for the kind of anti-American propaganda many Canadians eat up like Timbits.
It’s an excuse for a Canadian cannabis cartel.