Canada must help legal cannabis sector complete with the illicit market, experts say

The federal government is considering a Cannabis Act that emphasizes protecting public health — but experts and industry insiders say they must also find ways to promote the legal cannabis industry and help it compete. compete with the illegal market.

actlegalized recreational marijuana in Canada in 2018, which comes with a requirement that the federal government review it three years after it becomes law.

After a period of delay, the government began the review in September 2022. It is led by a team of five experts with a combination of medical, legal and public policy backgrounds. The panel is expected to report its conclusions and final advice to the federal government in spring 2024.

“The expert panel’s work will address the ongoing and emerging needs of Canadians while protecting their health and safety. Through helpful, comprehensive, and evidence-based assessment In light of this, we will strengthen the Act so that it meets the needs of all Canadians while continuing to displace the illegal market,” said Federal Health Minister Jean-Yves Duclos. said in a press release.

But the Cannabis Council of Canada (C3), which represents cannabis businesses across the country, says a number of cannabis rules and regulations aimed at protecting public health are hurting its ability to eliminate the illegal market of the legal market.

In a submission to the federal government as part of the review, C3 has called for major changes to the Cannabis Act. These include reducing excise taxes on cannabis products, reducing restrictions on labeling and advertising on packages, and ending the taxation of medical marijuana.

Pierre Killeen, C3’s vice president of legal and regulatory affairs, told CBC News: “We have a management system that doesn’t make much sense, which frankly prohibits manufacturers’ ability to Legal marijuana competes with illegal products on the market.”

in the federal government The most recent survey on cannabis48% of respondents said they always buy cannabis from a legal, licensed source.

“If we are to achieve our legalization goals, we need a financially sustainable cannabis industry,” says Killeen. “We are government partners in this effort, although we have never really been considered partners in this effort by any level of government.”

Cannabis stores recorded just under $3.8 billion in sales across Canada from January to October 2022, according to the latest statistics of Statistics Canada. Stores sold roughly the same amount throughout 2021.

Killeen says many cannabis businesses will be forced to close if the federal government doesn’t change marijuana laws – and he’s not optimistic about that.

“Your best indication of the future is the past. So if you look at the approach of the Government of Canada and the provincial governments to the economic challenges facing the cannabis industry, there’s no such thing as a success,” he said.

“So I think … at this stage of the journey we are pessimistic about the prospect of a review of the Cannabis Act leading to any measure of resolution to the immediate and urgent financial crisis. times faced by marijuana licensees.”

Michael Armstrong, a professor of operations studies at Brock University who studies the cannabis industry, agrees that the federal government is unlikely to make some of the larger changes C3 wants.

“About some of those questions, I think [C3 is] would be hard to refuse, because they would go against the federal government’s public health and safety goals,” he said.

“Remember, the federal government’s balancing act is that they want the legal market to be attractive enough to lure all existing users away from the illegal market, but they don’t want it to be so compelling that bring in many new users. users.”

Brock University professor Michael Armstrong said the review of the federal Cannabis Act is likely to lead to small, incremental tweaks to the legal cannabis regime. (Brock University)

Health Canada recently announced an increase in the amount of cannabis-infused beverages a person can legally possess.

That’s the kind of smaller adjustment that the Cannabis Act review is likely to create, Armstrong said.

He added that C3’s request for less restrictive packaging and labeling rules is fair.

“I think it makes perfect sense for the industry to give a small introduction, say a paragraph, that says ‘Hey, this is the purpose of this product,'” he said.

Special consumption tax on dried cannabis flowers is $0.25 per gram. Cannabis consumers also have to pay sales tax on the product and, depending on the province, may have to pay extra from exclusive retailers such as the Ontario Cannabis Store. Ontario government recently reported it made $520 million from selling marijuana last year.

Brad Poulos, a lecturer at Toronto Metropolitan University’s Ted Rogers School of Management, said the government has set the excise tax too high to allow the legal cannabis industry to compete with exempted illegal products. tax — and the government should consider lowering it.

“When the time comes to remove that illegal market, to remove the ban, what do you know but don’t do? [cannabis] like crazy,” Poulos said.

Poulos added that he would also like to see the government eliminate the tax on medical marijuana.

“There is only one drug in Canada that is taxed, and that is marijuana,” he said.

“So this tells me that the government doesn’t really consider marijuana to be medicine.”

Brad Poulos, a professor at Ryerson University’s Ted Rogers School of Management, said the government should reduce the excise tax on cannabis and eliminate the tax on medical marijuana altogether. (Joe Fiorino/CBC)

It’s one of many changes Don Davies, health critic of the NDP and member of Parliament for Vancouver Kingsway, wants to see the outcome of the Cannabis Act review.

“I think a lot of the legal cannabis sector is hampered by excessive rules and regulations that, in my opinion, are preventing the industry from reaching its full potential and actually helping to facilitate The advantage for a lot of black markets is still there.”

“In my hometown of Vancouver, the front windows of cannabis stores have to be shaded from the sun. You can’t look in. That’s not the case with liquor stores… More importantly, the stickers. labels on products don’t really tell consumers what they want and need to know.”

NDP health critic Don Davies says heavy-handed regulation is keeping the cannabis industry “not reaching its full potential.” (Ian Christie/CBC)

The Conservatives did not respond to CBC’s request for comment on the review of the Cannabis Act.

Kun Karunaker, CEO and co-founder of Toronto-based cannabis producer Strass Limited, agrees that industry regulation is excessive. Karunaker’s business has four cannabis-related licenses and recently applied for a fifth.

But Karunaker appreciates Health Canada for reaching out to him and his company to get feedback on cannabis laws — something he says provincial governments in Ontario haven’t done often.

“I’m not going to criticize Health Canada now that they’re really listening to people like us more and they’re having conversations about where they can get better and where they can’t be. improve,” he said.

Karunaker said he wants federal government officials to visit his facility so they can see how the cannabis business is doing.

“They need to be on site with people like us who can really show them and go through these things with them,” he said.

Karunaker says some recent tweaks to cannabis regulations make him optimistic about the future of the industry — an optimism Davies shares.

“I hope that we can make progress and we certainly need to because this industry is so important to Canada’s future,” said Davies.

“I’m very bullish on the cannabis sector. It’s sustainable, it’s clean, it’s high-tech. Canada can lead the world.”

Cannabis tourism a missed opportunity: experts

Susan Dupej, a research fellow at the Lang School of Business and Economics at the University of Guelph, said Canada missed its chance to become the world leader in cannabis tourism after legalization.

She said lifting restrictions on promotion and advertising could lead to more tourists coming to Canada in search of a legal token.

“The Cannabis Act outlines where consumption can’t take place, right? It’s restrictive,” Dupej said.

“But there are no rules, no guidelines for the potential growth of the space where consumption can take place.”

Although marijuana is illegal at the federal level in the United States, Dupej pointed out a Forbes Magazine report valued the US cannabis tourism industry at $17 billion.

Dupej said it’s difficult to know how much the cannabis tourism industry in Canada is worth, but she estimates it’s significantly less than $17 billion.

This is not the only area where the US has an edge when it comes to cannabis, Poulos said.

“The Americans are the ones who are building brands that are famous all over the world and so they have missed an opportunity,” he said.


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