U.S. pot firm urges Trump to deny Canadian producers ‘competitive advantage’
WASHINGTON — An American cannabis producer is warning U.S. President Donald Trump that Canada is poised to dominate the North American marijuana industry unless the United States takes steps to eliminate barriers to financing and market capital south of the border.
A full-page ad in Tuesday’s Wall Street Journal, framed as a plea to the White House and its most prominent occupant, warns that the U.S. is rapidly losing its competitive advantage to Canada, where recreational pot became legal as of today.
“The cannabis industry is legal in 31 states, yet most domestic companies do not have access to traditional banking or institutional financing,” reads the ad, signed by Derek Peterson, the chairman and CEO of Californiabased Terra Tech Corp.
“As a result, many U.S. companies are being forced to move to the Canadian public markets to access capital and build their businesses.”
The ad also warns that Canadian firms have tapped into U.S. investor interest in order to raise and spend money in order to acquire American cannabis assets.
“Regrettably, this will put what should be one of our homeland’s greatest economic drivers in foreign control.”
As of today, Canada will be the first G7 member to greenlight legal recreational pot — a move Prime Minister Justin Trudeau has justified as an effort to better protect young people from the drug’s effects and eliminate the influence of organized crime.
In an interview, Peterson admitted to having mixed feelings about the momentous shift happening north of the border as the federal government’s promise to legalize recreational pot becomes a reality.
“It’s a double-edged sword,” he said. “I’m afraid of the economic impacts right now if we don’t do anything. But at the same time, [Canada] really triggered and ignited the national discussion.”
The challenge for U.S. firms lies in the fact that while recreational cannabis is legal in nine states and medicinal pot in 22 others, it remains illegal under federal law. Sending product across state lines is impossible, as is the ability for companies to obtain financing from major banks.
Federal statutes aimed at curtailing the cocaine trade in the 1980s remain on the books, making it impossible for companies such as Terra Tech to deduct routine business expenses and such capital equipment as computers and payroll costs against their taxes, Peterson said.
Producers have to rely on smaller financial institutions such as credit unions for financing, while the major players in the world of institutional capital have been flocking to back Canadian rivals, he added.
The result is what Peterson called a “federal illegality tax” that extends across the spectrum of a U.S. producer’s operations and swallows profit margins whole.
“The reality is, like it or hate it, you guys are getting a firstmover advantage,” he said of the Canadian industry.
“We’re sitting here with no access to banking, getting our credit cards shut off, having all these crazy headwinds due to the dichotomy between state and federal law, and you guys took the first-mover advantage.”