Governments are nipping the cannabis industry in the bud

VICTORIA, B.C.—In 2015, legalization of cannabis seemed like such a good idea. Then-third-party Liberal leader Justin Trudeau laid out a plan for legalization that appealed to young people across the country, but was responsible enough to not turn off older folks like me. It was a vote-getter for the Liberals. However, as with so many other times government has been involved in trying to regulate an industry in the “public good,” it failed to take into account the problems that might arise. Nonetheless, once the structure was in place for the federal government to permit licensing, and the provinces and territories to manage distribution, the first sales of cannabis occurred in October 2018. Four years later, whether legalization was a good idea is the subject of the (year-late) expert panel review of the Cannabis Act “to determine if legalization is meeting Canadians' needs and expectations.” The panel will be led by former Health Canada deputy Morris Rosenberg. While the review focuses on the health impacts of legalization, it also includes study of “the establishment of a strictly regulated cannabis supply chain.” In Victoria, B.C., I had the chance to speak to a couple involved in that supply chain. Their experience is a cautionary tale for the panel and anyone contemplating the jump into cannabis production. First of all, Katy and Shawn Connelly are not your average cannabis growers. Both in their mid-50s, Shawn is a retired lieutenant-commander in the Canadian Navy, and Katy has a PhD in education and taught school for many years. Having purchased a farm in rural Central Saanich, they decided to grow an array of crops for their fruit and vegetable stand. Looking at the prospect of making a little extra income, they decided to include cannabis as a cash crop. In November of 2019, they received their licence from the federal government as an outdoor “micro” grower, the first on Vancouver Island and ninth in Canada. Katy and Shawn Connelly began a small outdoor cannabis-growing operation on Vancouver Island, B.C., and immediately ran into roadblocks. Photograph courtesy of Andrew Caddell They immediately ran into roadblocks. As small outdoor growers, they did not have the leverage held by the big, indoor operations like the now-humiliated Canopy Growth. They also had to pay for plants, fees, and licensing—an outlay of $15,000. All this, and they were limited to a space of ground the size of a tennis court. Unlike the big growers, they are environmentally conscious: they add no chemicals, fertilizer, herbicides, or rodenticide. They ensure their product has “terpene”—a special flavour or aroma, like a good whiskey—and choose the best plants each year and plant those seeds. But for all their work, they have not recouped their start-up costs, and this year made $9,000, or 70 cents per gram for a product that retails at $11.19 per gram. The rest is processing, taxes, taxes, and taxes. They acknowledge for someone just starting out, “the process is arduous, difficult, and not worth it.” They have no home or farm insurance, because insurance underwriters in the United States don’t understand the industry, and they have had trouble obtaining a bank account to receive their payments for the same reason. And then there’s the competition from what they call “the self-regulated market”—your friendly local dealer, who pays no taxes, has no regulations, and doesn’t report to Health Canada. Or consumers who grow their own with a doctor’s prescription, are not regulated, and often supply the black market. And yet they say this has been “an incredible journey.” They believe it should be better, and Katy speaks regularly to cannabis conferences, pointing out the flaws in the system. At one such conference, she was preceded by a B.C. bureaucrat who bragged how cannabis had been a $2-billion tax windfall. Not what struggling growers want to hear. Their frustration with regulations, testing, taxes, and licensing should be a wake-up call for politicians who saw cannabis as a way of controlling public consumption and creating a new “made-in-Canada” industry. Liberal MP Nathaniel Erskine-Smith, co-chair of the House cannabis caucus, said, “We are going to displace the illicit marketplace. It's only a matter of time … The legal marketplace will be where Canadians continue to turn." That will depend on the survival of domestic growers, and if the Connellys’ experience is any guide, Erskine-Smith is dreaming in technicolour. Andrew Caddell is retired from Global Affairs Canada, where he was a senior policy adviser. He previously worked as an adviser to Liberal governments. He is a fellow with the Canadian Global Affairs Institute and a town councillor in Kamouraska, Que. He can be reached at pipson52@hotmail.com. The Hill Times

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Governments are nipping the cannabis industry in the bud

Small producers’ frustration with regulations, testing, taxes, and licensing should be a wake-up call for politicians.

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