How Canada Can Regain Global Leadership in Cannabis?

Canada sprinted past the US to be the first G7 country with a national regime governing the use of cannabis for both medical and recreational purposes in 2018. Canadian companies quickly spread throughout the world into any country contemplating legalization of cannabis in any form for any reason, and is arguably the predominant producer of cannabis grown indoors.

Despite this promising start, the US has in turn leap-frogged Canada to become the largest producer of outdoor grown cannabis – erroneously differentiated as “hemp” for maximum confusion (they are both cannabis sativa) – after China (the world’s largest grower of industrial hemp).

On a state-by-state basis, innovations in packaging, edible, drinkable and other non-combustible formats are all led by US companies. Extraction technology manufactured in the US is orders of magnitude more plentiful and varied than in Canada.

All that needs to happen is for the US to regulate cannabis on a federal basis, and Canada’s leadership role will literally go up in smoke, and become a fond memory and historical footnote.

Already, Canada’s largest and first cannabis company is almost a wholly-owned subsidiary of Constellation Brands, Inc. (NYSE:STZ)

How did this happen? How do we regain the lead?

As to the first question, Canada’s nationally conservative and over-regulated approach to anything to do with medicine and/or recreational intoxicants dominated the process for both of the medical and recreational regulatory regimes. In what is viewed globally as a quintessentially passive-aggressive approach to governance, Canada is a two-steps-forward, one-step-backward cannabis regime.

Yes we are first to legalize cannabis nationally ex of Uruguay, but we are also the leader in inflicting oppressive advertising and labelling rules on our producers. So whereas the US markets permit a more-or-less unbridled approach to marketing and packaging of recreational products, Canadian consumers are hard pressed to even be sure which licensed producer is behind every mono-graphic labeled product in stores across the country.

But the US is not without its own bi-polar regulation issues.

The FDA is the poster child for the idea of shutting the barn doors after the horses have stampeded off into the sunset.

The result has been the censure of what would otherwise be leading companies for what that agency deems as unauthorized health claims, despite the near common sense status of  awareness of cannabis’ medical applications.

And the DEA, despite being guided to do so by congress, can’t seem to get out of its own way to license production of cannabis for research purposes.

A group of eight US senators sent a letter on December 19, 2019 to the United States Department of Health and Human Services, the Drug Enforcement Administration, and the White House Offices of National Drug Control Policy, “requesting written guidance on how the DEA will make these licenses available to qualified researchers in a timely manner.”

This agency log jam is precisely Canada’s opportunity to jump back into the lead, if only they could act quickly.

There is abundant research available from the likes of the Raphael Mechoulam and his team at the University of Jerusalem going back to 1963 to support a more supportive governance environment for cannabis research in Canada.

Canada could easily implement relaxed rules for CBD especially, which to date shows almost zero evidence of any side effects other than positive health outcomes when consumed as a nutritional supplement. But because Health Canada seems to be paralyzed by the hypnotic gaze of its US counterparts, no such leadership is in sight.

The fact that cannabis advertising and labelling remains under the limitations of a puritanical mindset also shows little signs of liberation.

So despite obvious pathways toward regaining cannabis market leadership, it is unlikely that the progress toward a US-dominated industry will abate any time soon.

James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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