(Bloomberg) — Canada’s push to legalize recreational marijuana is rippling beyond its borders as companies move to boost exports of medicinal pot.
Prime Minister Justin Trudeau’s government unveiled its framework last week, quelling concern it would clamp down on export permits for existing medical-pot producers such as Canopy Growth Corp. and Aurora Cannabis Inc. Those firms, which have a head start on the legal recreational market, will continue to be allowed to export marijuana to countries such as Germany and Australia for medical and scientific use.
“It might not be so limited,” said Emily Larose, a partner with law firm Cassels Brock who specializes in cannabis regulation. Industry fears of onerous export restrictions have receded over the past year as bureaucrats typically approve any permit so long as the main requirements are met. “The way in which they’ve been granted so far seems to be more box-ticking.”
Firms in Canada, the second country and first major economy to unveil plans for legalization of recreational pot, have already secured investments and partnerships in countries where support for legalized medical marijuana is gaining ground. The global cannabis market may be worth $200 billion, with the medical market accounting for 25 percent to 50 percent of that, Daniel Pearlstein, a research analyst in Toronto at Eight Capital, said by email.
Canopy is already exporting to Brazil and Germany. Last year, the Smith Falls, Ontario-based company acquired pharmaceutical distributor MedCann GmbH, which has placed its cannabis strains in German pharmacies.
Bedrocan Canada Inc., a unit of Canopy, exported 10 kilograms of dried cannabis to Brazil to be used in a clinical study targeting epilepsy and pain management, according to a November statement.
Canada is emerging as a leader in public policy around marijuana and other countries will need its know-how as they shift toward making cannabis and cannabinoids part of standard medical treatment, said Chief Executive Officer Bruce Linton. That gives Canopy the chance to export product while the domestic industry makes that transition, and to set up production on the ground once it has, he said.
“All of these jurisdictions are contemplating or structuring a way in which production will occur in them,” Linton said by phone. “We are actually an exporter of public policy.”
That meshes with Trudeau’s view for the future of the Canadian economy: one pivoting from raw resource extraction toward white-collar jobs in the services sector.
“You’re going to develop know-how on how to make this stuff,” said Eileen McMahon, a partner at Torys LLP and chair of the law firm’s intellectual property and food and drug regulatory practices. “That know-how arguably could be used” outside Canada under the Trudeau law, she said, adding it’s possible “employees with that expertise could cross the border.”
Aurora intends to be a “significant” player in the Australian market and is looking at others as well, said Cam Battley, an executive vice president. The Cremona, Alberta-based company plans to use its capital and experience to export its product, and to set up in countries where marijuana may soon be legal, he said.
“Canada more broadly is a leader in the cannabis industry,” Battley said by phone. “That gives us a lot of potential power in other markets.”
Exports will be allowed “as long as they meet the strict regulatory requirements,” lawmaker Bill Blair, a former police chief and Trudeau’s point man on pot legalization, said in an interview. He brushed aside questions about whether the government wants to encourage companies to be exporters. “We want to make sure there is a viable industry capable of supplying that well-regulated retail market” domestically in Canada.
The government has to issue export permits repeatedly, and could clamp down, change guidelines or slow its issuing of permits if it wanted to cool the market.
In a notice posted last year, Canada said it “does not support facilitating a regime premised on servicing global demand given the associated public health, safety and security risks” and that export “would be permitted under very limited circumstances.” Fears stoked in industry by that notice have since eased, Larose said.
Aurora secured a 19.9 percent stake last month in Cann Group, the first Australian company to be licensed for research and cultivation of medical cannabis for human use.
Aphria Inc., based in Leamington, Ontario, is investing $25 million in a dispensing operation in Florida, the company said April 4. Aphria’s U.S. expansion strategy is to target key states that have approved medical marijuana, according to the statement.
Canada’s legalization effort may violate its obligations under international law, Steven Hoffman, director of the University of Ottawa’s Global Strategy Lab, wrote in a Globe and Mail editorial this week. “Unless we change our constitution, Canada cannot legally legalize cannabis without either renegotiating the UN treaties, obtaining special exceptions, finding creative workarounds, or withdrawing from them,” he wrote.
The government believes its restrictions on production or sale outside its strictly regulated regime, as well as restrictions on some exports and use by minors, keeps it onside, Blair said.
“We believe this enables us to uphold and maintain our obligations under those treaties,” he said, speaking in an interview after Justice Minister Jody Wilson-Raybould referred questions on the matter to Blair.
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