Canada's new marijuana laws must attend to business: Don Pittis

The Canadian government has a difficult task ahead, building a framework of marijuana rules that will satisfy many different interests. Health and safety considerations will be at the forefront for many, but Don Pittis looks at the one-time chance for getting the business rules right.

Now is the time to make sure pot laws are in Canada's long-term interest

It's the smell of money. Master grower Ryan Douglas does quality control on a marijuana plant at Tweed Marijuana Inc in Smiths Falls, Ont. New Canadian laws liberalizing pot rules may give Canadian businesses a world-wide advantage. (Blair Gable/Reuters)

As rural youth have known for more than a generation, growing pot, even in the Canadian climate, is not so difficult. A sunny patch between young pines, a bit of fertilizer and seed and then go away till autumn.

The constraint on pot production has never been agricultural. 

Marijuana laws have been in place for so long that there will be political pressure to make sure any changes put health and safety first as Canada leads the way on pot regulation. But as governments across the country consider how to liberalize the rules on the distribution and use of cannabis, they are also laying the ground rules for a multibillion-dollar industry.

There are two ways for Canadian governments to benefit from legal pot. Finance ministers may have been salivating over new tax revenue. But having a strong and functioning industry, and even a major export sector, may provide greater opportunities for the economy.

The previous government's 2014 licensing rules on medical marijuana opened the door to new entrants. Meanwhile, the Canadian Consortium for the Investigation of Cannabinoids is a leader in medical marijuana research.

Explosive growth

But with a move to recreational use the business faces explosive growth, taking revenue out of the hands of illegal producers and importers and making all that income taxable.

In many ways it is a huge international opportunity, says David Sparling, an expert in agricultural systems and a professor at the Ivey School of Business. 

"We are sitting in a place where we actually can be a leading supplier, if we act quickly," says Sparling, who studies agricultural supply management from crop to customer.

A strong system of regulation and quality control would make Canadian product credible on international markets. A clear legal framework for security and distribution would give foreign investors a safe place to invest without worrying about the conflicts between federal and state rules we have seen in the U.S.

But Sparling says the industry must be given the latitude to experiment, creating good product by importing the best genetics from around the world. He says a successful recreational marijuana industry must not make the same early mistakes as Canadian vintners who used local grapes to make bad wine. 

"We don't want to spend a lot of time on that," says Sparling.

Cannabis appellation contrôlée?

A better system might be to replicate the French appellation contrôlée system for local hybrids of Canadian marijuana produced by regional growers. That would require a much more open system of production and distribution than many Canadians might prefer.
Jamie Shaw, spokeswoman for the B.C. Compassion Club, greets patients at the East Vancouver marijuana dispensary. Regulators must consider how to keep businesses local while considering the potential of world distribution. (Julie Gordon/Reuters)

The current laws for medical marijuana are still very restrictive, says Barry Kurtzer, the president of DelShen Therapeutics, a company applying to start production near the mining town of Kirkland Lake in northeastern Ontario. He doesn't rule out expanding into production for the recreational market at some point in the future, and says a widely distributed industry is good for the Canadian economy in places like Kirkland Lake.

"Obviously with the downturn in the economy and the downturn in resources pricing, the area as a whole was significantly impacted," says Kurtzer, a medical doctor, who claims the company would provide about 100 local jobs after it is up and running.

The B.C. advantage

One of the places most ready for a truly open system of marijuana distribution and sale is British Columbia, where in 2003 the value of the industry was already said to be worth $6 billion. There, medical marijuana shop fronts have already become a grey market business.

It is important to take advantage of the expertise of the people in the medical marijuana sector rather than turning distribution over to state bureaucracies, what some people call the liquor board model, says University of British Columbia professor Zach Walsh, who has studied the industry.

Walsh says it would be a good business strategy to let both small and large players have a hand in the game.

"Making sure that the full range of people are allowed to participate in this new economy is going to be important," says Walsh.

He says that just as with household production of beer and wine, the new rules should allow Canadians to grow some of their own pot. But finance ministers hungry for taxes shouldn't worry. As with home brewing, Walsh insists, pot growing will only attract hobbyists. 

As to the danger of foreign giants taking over the industry as they have with the international beer sector, Walsh isn't worried about that either. B.C. consumers have a culture and tradition of buying locally produced quality goods.

Besides, he says, "Maybe it'll be a big international business run by B.C."

Follow Don Pittis on Twitter @don_pittis

​More analysis by Don Pittis


Don Pittis

Business columnist

Based in Toronto, Don Pittis is a business columnist and senior producer for CBC News. Previously, he was a forest firefighter, and a ranger in Canada's High Arctic islands. After moving into journalism, he was principal business reporter for Radio Television Hong Kong before the handover to China. He has produced and reported for the CBC in Saskatchewan and Toronto and the BBC in London.


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