Grow­ing our Own: Canada’s Po­ten­tial as a Cannabis-Ex­port­ing Pow­er­house

Policy - - In This Issue - Michael Nashat

Prime Min­is­ter Justin Trudeau has said that le­gal­ized multi-use mar­i­juana will be­come a fact of Cana­dian life some­time this sum­mer. While much of the de­bate over the move has fo­cused on the do­mes­tic le­gal and pub­lic health im­pli­ca­tions, the rapid scal­ing up of Canada’s mar­i­juana in­dus­try will also po­si­tion the coun­try as a ma­jor med­i­cal cannabis ex­porter.

In June, the Se­nate of Canada will fi­nal­ize its con­sid­er­a­tion of Bill C-45, the foun­da­tion of Canada’s new le­gal cannabis regime. Once the prov­inces fi­nal­ize their own frame­works and the sup­ply pipe­line starts to fill, Canada will be the first ma­jor coun­try to have na­tional le­gal mul­tiuse cannabis within the con­text of a re­spon­si­ble, rea­son­able, and highly con­trolled le­gal and reg­u­la­tory en­vi­ron­ment. And while recre­ational or adult-use cannabis has taken the lion’s share of at­ten­tion in re­cent months, we can­not over­state the im­por­tance of this new cannabis regime to mak­ing Canada the sin­gle pre-em­i­nent leader glob­ally in med­i­cal cannabis. A com­bi­na­tion of first-mover ad­van­tage, rig­or­ously strict qual­ity con­trols, a fu­ture over­abun­dance of sup­ply and ex­port ac­cess will po­si­tion Canada as a dom­i­nant player in the global med­i­cal cannabis mar­ket­place.

Why is Canada set up to be the global leader in cannabis? We are emerg­ing— and be­ing rec­og­nized—as the gold stan­dard in cannabis grow­ing, pro­cess­ing, for­mu­la­tion and distri­bu­tion. In most sec­tors, tra­di­tion­ally, in­dus­try ab­hors over­reg­u­la­tion. In the emerg­ing cannabis in­dus­try, it is a strength. Med­i­cal cannabis was first le­gal­ized in Canada in 2001 by court rul­ing. Ini­tially, the fed­eral gov­ern­ment al­lowed pre­scrip­tion-bear­ing pa­tients to grow their own sup­ply, or for des­ig­nated grow­ers to cul­ti­vate on their be­half. As of 2014, the gov­ern­ment started to li­cense pri­vate com­pa­nies to pro­duce cannabis. By the end of that year, Canada’s pro­duc­tion mar­ket­place went from a sin­gle third-party grower to twelve pri­vate cul­ti­va­tors. Today, three years later, there are more than 90.

Yet, as the cul­ti­va­tion in­dus­try ex­ploded in an­tic­i­pa­tion of sig­nif­i­cant de­mand, the in­dus­try has grown within a cul­ture sim­i­lar to phar­ma­ceu­ti­cals, not an agri­cul­tural one. All of the pro­duc­ers op­er­ate ac­cord­ing to and are gov­erned by con­trolled- sub­stances, phar­ma­ceu­ti­cal and health reg­u­la­tions, and not agri­cul­ture ones. It is a func­tion of the high de­gree of reg­u­la­tion in Canada’s cannabis space: the com­plex web of rules and qual­ity con­trols mean the lay farmer look­ing “to grow pot” sim­ply can­not get ap­provals to cul­ti­vate at the en­hanced Cana­dian stan­dard.

Canada’s cul­ti­va­tion and pro­cess­ing is char­ac­ter­ized by lab coats, sci­en­tists, and rig­or­ous en­vi­ron­men­tal con­trols. In short, as the in­dus­try has grown, it has im­me­di­ately adopted the cul­tural traits of a med­i­cal mar­ket. That, in turn, yields high-qual­ity, pre­ci­sion prod­ucts in terms of the bal­ance of the known cannabi­noids like THC, CBD, as well as the over 100 cannabi­noids that still re­quire further anal­y­sis. Dif­fer­ent strains are be­ing painstak­ingly cul­ti­vated and hy­bridized to achieve very spe­cific and dif­fer­ing re­sults.

Canada will never be able to com­pete with low-cost pro­duc­tion en­vi­ron­ments like Por­tu­gal or Colom­bia. Our ad­van­tage will lie in our high-qual­ity, pre­cisely-tested and mea­sured prod­ucts that we pro­duce and for­mu­late. In any drug­store, Cana­di­ans have a choice be­tween reg­u­lar ac­etaminophen, ex­trastrength, or spe­cial for­mu­la­tions for cold or fever. Al­ter­na­tively, they can turn to ibupro­fen op­tions, and ASA— again, with vari­able la­belled de­grees of strength and ef­fect at­tributes. Be­cause of the strin­gent con­trols gov­ern­ing Canada’s cul­ti­va­tion, our cannabis prod­ucts will of­fer sim­i­lar nu­anced se­lec­tion. This will be of im­mea­sur­able use for physi­cians—know­ing ex­actly what and how much to pre­scribe. It will also be help­ful for im­porters— know­ing ex­actly what they are buy­ing, and there­fore how to mar­ket their prod­uct.

But our ad­van­tage goes be­yond com­pound pre­ci­sion. Canada’s strict ad­di­tive con­trols of­fer an ad­di­tional ad­van­tage. We all know that pes­ti­cides and chem­i­cals can be harm­ful in hor­ti­cul­tural prod­ucts. Not only do many Cana­dian con­sumers choose to avoid them (fu­elling an ex­plo­sion in or­ganic pro­duce sales in Canada), but chem­i­cals can be out­right harm­ful for in­di­vid­u­als with sen­si­tive or com­pro­mised sys­tems. In med­i­cal prod­ucts, im­muno-sup­pressed pa­tients with con­di­tions such as such HIV and can­cer, the risk pro­file can sky­rocket with chem­i­cally-treated prod­ucts. The po­ten­tial com­bus­tive method of cannabis con­sump­tion leads to even greater cau­tion in the cannabis space, in terms of prod­ucts al­lowed to use on our soils and plants.

Cana­dian reg­u­la­tions are emerg­ing as the most strin­gent in the world in re­la­tion to chem­i­cal ad­di­tives, to the de­gree that many gen­eral hor­ti­cul­tural prod­ucts—for ex­am­ple, My­clobu­tanil, an anti-mildew agent used on toma­toes and other pro­duce—are out­right banned in cannabis cul­ti­va­tion. This is a higher safety thresh­old than we have yet to see emerge in many other ju­ris­dic­tions de­vel­op­ing their own cannabis cul­ti­va­tion regimes.

In fact, Cana­dian reg­u­la­tion al­lows only 13 very spe­cific ad­di­tives in cannabis cul­ti­va­tion. More­over, our harsh out­door grow­ing cli­mate makes it chal­leng­ing to cul­ti­vate a med­i­cal grade prod­uct out­doors with­out ei­ther go­ing be­yond this pro­hib­ited list or pro­duc­ing a sub-phar­ma­ceu­ti­cal grade prod­uct. This, in turn, further re­in­forces the pro­file of our in­dus­try as an in­door or quasi-in­door, en­vi­ron­men­tally-con­trolled process led by spe­cial­ized sci­en­tists.

Global mar­kets are al­ready rec­og­niz­ing Canada for our su­pe­rior (and greener) prod­ucts. Euro­pean mar­kets, in par­tic­u­lar, tend to be very cau­tious with new regimes, gaug­ing qual­ity of prod­uct as a top con­sid­er­a­tion. In Ger­many, do­mes­tic law does not per­mit ir­ra­di­a­tion of prod­ucts. Given Canada’s grow­ing en­vi­ron­men­tal con­trols and strict reg­u­la­tions, the Cana­dian cannabis in­dus­try has es­tab­lished it­self as one of the only ac­cept­able sources of sup­ply for that large mar­ket and other cau­tious ju­ris­dic­tions. In Ger­many, al­most all the phar­ma­ceu­ti­cal dis­trib­u­tors are buy­ing prod­uct from Cana­dian com­pa­nies. We are their de­fault sup­ply.

Canada also has one of the only fed­er­ally reg­u­lated cannabis regimes, mean­ing univer­sal prod­uct and qual­ity stan­dards across Cana­dian cul­ti­va­tors. With for­eign im­port con­trols tend­ing to be coun­try-level stan­dards, a Made in Canada stamp has sig­nif­i­cant mean­ing in nav­i­gat­ing those con­trols. We avoid the un­cer­tainty cre­ated by a patch­work of sub­sovereign reg­u­la­tory stan­dards, each of which have to be as­sessed sep­a­rately by the re­ceiv­ing coun­try.

Fed­eral reg­u­la­tion also al­lows for a com­mon qual­ity-de­rived brand to emerge, based on coun­try of ori­gin— when Canada ex­ports its med­i­cal cannabis, it will be a known com­mod­ity with a known and uni­formly rec­og­nized high stan­dard. Sev­eral U.S. states may have had a jump on Canada in med­i­cal cul­ti­va­tion and prod­uct va­ri­eties, but Amer­i­can cannabis suf­fers from a stan­dards patch­work, im­pact­ing the over­all na­tional brand and con­sis­tency of prod­uct. More­over, the U.S. does not per­mit ex­port of cannabis prod­ucts, open­ing the mar­ket wide for a Cana­dian mar­ket­place ad­van­tage. Canada is, in fact, the first coun­try in the world to be able to fed­er­ally ex­port world­wide with a com­pet­i­tive pro­ducer land­scape—this is a sig­nif­i­cant edge.

Global im­port de­mand for qual­ity cannabis is ris­ing. The global mar­ket in 2017 for le­gal cannabis was es­ti­mated at $7.7 bil­lion USD. By 2021, it is ex­pected to reach $31.4 bil­lion, and these are con­ser­va­tive numbers.

We are al­ready the prime coun­try ex­port­ing cannabis, with Cana­dian com­pa­nies ex­port­ing to nu­mer­ous ju­ris­dic­tions across mul­ti­ple con­ti­nents. Ger­many is our num­ber one mar­ket; Aus­tralia is num­ber two, and Cana­dian cannabis prod­ucts are also al­ready go­ing to New Zealand, the EU, and South Amer­ica. With pro­duc­tion ever-in­creas­ing, and an­a­lysts pre­dict­ing sig­nif­i­cant over-sup­ply for the in­ter­nal mar­ket­place in the medium term, Canada will have the ex­port-ready com­mod­ity vol­umes to con­tinue sup­ply­ing this global de­mand for qual­ity Cana­dian cannabis.

While Canada is al­ready le­gal­iz­ing out­right, most other coun­tries are still only in the process of de­vel­op­ing med­i­cal cannabis regimes. That means they are look­ing for ex­ist­ing, sta­ble, qual­ity sup­ply chains—at least un­til they de­velop in­ter­nal ca­pac­ity. And, as it takes sev­eral years to de­velop that do­mes­tic com­pe­tence, our first-mover sta­tus means a sev­eral-year head start in the mar­ket over the com­pe­ti­tion.

New ju­ris­dic­tions, such as Thai­land and the Nether­lands, are al­ready us­ing Canada’s reg­u­la­tions as a tem­plate for build­ing their own frame­works. This is a recog­ni­tion that the fruits of such a reg­u­la­tory en­vi­ron­ment are a top-qual­ity and ex­port-friendly com­mod­ity. Thai­land in par­tic­u­lar could eas­ily opt for an open-air cul­ti­va­tion regime, yet they see our frame­work as yield­ing a su­pe­rior prod­uct, and one that is bet­ter for ex­port.

The fi­nal piece of the puz­zle is ex­port pro­mo­tion. Our cul­ti­va­tion and pro­cess­ing in­fra­struc­ture is al­ready po­si­tion­ing Canada for sig­nif­i­cant over­sup­ply rel­a­tive to do­mes­tic need. We are built for sur­plus. It would be a log­i­cal next step for the Cana­dian gov­ern­ment to ac­tively en­dorse cannabis as an ex­port com­mod­ity. While gov­ern­ment pol­icy is not presently op­posed to ex­port, there is no frame­work de­signed to har­ness and syn­the­size all our ex­port abil­i­ties and ac­tively sup­port this new in­dus­try in a concerted man­ner. Do­ing so would also be in keep­ing with the Bar­ton panel rec­om­men­da­tions, which see more to be done in mak­ing Canada an agri-prod­uct ex­port su­per­power.

Cul­ti­va­tion and pro­cess­ing vol­umes are not yet even close to peak pro­duc­tion, yet we are al­ready the dom­i­nant global ex­porter. Imag­ine the op­por­tu­ni­ties if gov­ern­ments har­nessed the power of all our ex­port pro­mo­tion and fa­cil­i­ta­tion agencies within a Cannabis Ex­port Pro­mo­tion Frame­work. We could fully seize the ad­van­tages of our high-qual­ity, first­mover mar­ket po­si­tion, and lever­age strate­gi­cally by help­ing pro­duc­ers iden­tify mar­kets, map part­ners and nav­i­gate im­port rules. Canada has what it takes to be for med­i­cal cannabis what Switzer­land was for pharma. Let’s not squan­der the op­por­tu­nity.

Global im­port de­mand for qual­ity cannabis is ris­ing. The global mar­ket in 2017 for le­gal cannabis was es­ti­mated at $7.7 bil­lion USD. By 2021, it is ex­pected to reach $31.4 bil­lion, and these are con­ser­va­tive numbers.

Michael Nashat is the Pres­i­dent and CEO of Ter­rAs­cend. Based in Mis­sis­sauga, Ter­rAs­cend is a Cana­dian com­pany fo­cused on cre­at­ing and de­liv­er­ing qual­ity cannabis prod­ucts and ser­vices that meet the evolv­ing needs of pa­tients. [email protected]­ras­

Ter­rAs­cend photo

Work­ers trim­ming med­i­cal cannabis plants at the Ter­rAs­cend fac­tory in Mis­sis­sauga, On­tario.

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