Canada accused of ‘dumping’ drug
Israeli firms say Canadian companies selling at low prices abroad in bid to flood medical market
When it comes to weed, Canada stands tall in the world.
Pot producers may be struggling in a saturated market here at home, but Canada is among the world’s leading exporters of medical cannabis. It sent more than 54,000 kilograms abroad in 2022, capitalizing on its long head start in what is, for most of the world, a new and relatively untapped industry.
The strong international demand is due to the reputed high quality of the Canadian product. But in one of Canada’s most important marijuana export markets, the country’s reputation for fair dealing is taking a hit.
Israel’s Economy Ministry last month opened a formal investigation into claims that Canada is dumping cheap marijuana in the country at rates that are driving its own domestic cannabis industry to ruin.
A preliminary investigation conducted by the country’s commissioner for trade levies, Danny Tal, found there was “a causal link” showing that imports of the drug from Canada “were causing real damage to the local industry.”
Some Israeli companies complain that they are being forced to destroy locally produced cannabis or shutter local growing operations due to the lack of demand. Other companies are increasingly or exclusively focusing on sales of imported marijuana, which requires less capital investment and less financial risk. “Quite a few companies in the past year and a half have closed up shop,” said Itai Rogel, vice-president of business development and marketing with the Bazelet Group, an Israeli cannabis company.
Israel’s medical marijuana imports have risen dramatically, from 23 kg in 2019 to nearly 15,000 kg in 2020 and 22,000 in 2021.
In 2022, 84 per cent of the 24,000 kg of medical cannabis that Israel imported came from Canada, according to statistics cited in a summary of the allegations that prompted the anti-dumping probe.
But the nub of the dispute is the allegation that Canadian companies are selling medical marijuana at about $5 per gram in Canada, but dropping the price to about $3 per gram on average when selling to Israel. This has prompted suspicions that the companies are doing so in an attempt to flood the market — a practice known in international trade as dumping.
The investigation could lead to duties being imposed on Canadian cannabis imports, in order to drive up the prices and create better market conditions for competing Israeli companies.
“We are disappointed with Israel’s decision to initiate an anti-dumping investigation on imports of medical cannabis from Canada and we are reviewing the details of Israel’s decision as we engage with implicated Canadian exporters,” Global Affairs Canada said in a statement.
Ten Canadian companies, including five from Ontario — Organigram Holdings, the Green Organic Dutchman, Canopy Growth, Cronos Group and Auxly Cannabis Group — have been asked by the Israeli government to provide information about their operations, business costs and product prices.
Neither the companies nor the Cannabis Council of Canada, the industry association for licensed producers, responded to the Star’s requests for comment for this article.
News of the probe comes after years of complaints in the Jewish state about the difficulties that newer, domestic startups face when forced to compete against some of the world’s most established and successful cannabis companies.
Israel is reputed to have more medical-cannabis users per capita than any other country in the world. The country first permitted imports of medical marijuana in 2020 when the industry was suffering from a shortage during the COVID-19 pandemic.
More than 60 countries around the world have legalized or decriminalized pot possession, or established programs to allow medical use. But it was the Canadian industry, with more than 20 years of experience dealing in medical cannabis, that stepped into the breach in Israel.
Israel’s first foreign-produced cannabis was imported by InterCure, a firm chaired by former Israeli prime minister Ehud Barak. InterCure struck that first deal with Nanaimo-based Tilray, though the product came from a production facility in Portugal.
“The Ministry of Health said they were going to allow imports for the interim period,” said Rogel, whose Bazelet Group runs a processing facility about 50 kilometres north of Tel Aviv. “But here we have a kind of a saying: ‘You open the door, and you never close it again.’ From that moment on, imports grew and grew.”
Shortly after InterCure announced it had secured Israel’s first import permit, the company celebrated a multi-year deal to bring in up to 6,000 kg of medical marijuana from the Toronto-based Organigram.
That partnership continues to this day, and other Israeli companies have also opted for Canadian cannabis imports. But the mood among local cultivators quickly soured.
In 2021, a coalition of Israeli producers petitioned the country’s High Court to force the government to ban imports of foreigngrown marijuana.
Yaron Berger, then head of the Israeli company Greenmed, told the Hebrew-language Cannabis Magazine at the time that the government should ban imports and support the creation of local entrepreneurs, particularly after the economic pain of the pandemic.
Continuing to permit the sale of cannabis from foreign countries, particularly Canada and Portugal, he said, was “a spit in the face of all the farmers here in the state of Israel.”
The economic committee of the Israeli Knesset, or legislature, took up the matter in January 2022. There, the head of the Israeli Bar Association’s committee on cannabis-related affairs likened the rush to import medical marijuana to an “arms race,” with companies keen to stock up in case of another supply shortfall.
“The warehouses and vaults … are overflowing,” said Ariel Grupper.
Other Israeli producers, including those who had themselves imported Canadian marijuana, also called for an end to the practice.
“We are in favour of a free market,” said one. “But the current situation is really dire.”
Another warned: “If these imports continue, it could really be a death blow to our industry.”
Elected committee members were also outraged to hear that Canada was free to export marijuana to Israel but kept its own market closed to foreign exports.
Health Canada only permits either imports of “starting materials,” such as cannabis seeds and plants, for those newly licensed to grow, or imports of small quantities of cannabis for research or testing purposes.
“Where do you hear such a thing that a country opens the door to another country and imports products from it, and the same product in the other country is blocked?” committee chair Michael Mordechai Biton asked in the 2022 Knesset hearing. The committee recommended that year that the Israeli government temporarily put imports “on hold.”
It also urged the Ministry of Health, which issues import permits, to refuse any further demands “until the equivalence between importing and exporting is established” — a clear swipe at Canada’s closed cannabis market.
Rogel noted that Bazelet processes cannabis flowers grown both in Israel and abroad but also produces patented, high-quality cannabis oils. He said that potential Canadian patients are denied access to these products for no other reason than “there is a political decision not to allow anything that comes from outside your borders.”
“We want to be allowed to compete,” he said.
“Maybe I’ll succeed and maybe not, but we don’t even have that possibility. That’s part of the frustration.”