Canada vs US: Who Will Dominate the Cannabis Industry?
Although the United States got the head-start in terms of legalizing recreational marijuana, Canada easily pushed past its neighbor by becoming the second country in the world to decriminalize cannabis.
Now, the two allies are in competition with each other to get the biggest portion of the pie.
For instance, the four largest companies in the industry are already located in Canada. Their total worth is upwards of $10 billion. However, when counting down the list of the top 10 largest companies, half of them are based in the US.
This forces investors to make a choice: are they going to put up their business in Canada or in the U.S.?
Both have their pros and cons. For instance, the national legalization of marijuana solves a lot of hurdles like cross-border transport. The Canadian government is also very supportive of any laws that will develop the industry, especially shipping to countries that need pot for medical or recreational use.
Meanwhile, the US has something that Canada does not have: population and land mass.
According to the report, the U.S. can handle the vast production of the marijuana industry. In fact, California has a larger population than all of Canada.
But it doesn’t mean that the weed industry in the U.S. is not aware of the threat posed by their immediate neighbor.
In fact, the industry ran a full-page ad on the Wall Street Journal begging for President Donald Trump to intervene. The letter was signed by Derek Peterson, CEO of Terra Tech Corp.
Peterson cited industry studies on the contributions that the cannabis industry has on local economies where marijuana use has been legalized. Not only that, but legalization also factors into the decline of opiate abuse and drug overdoses.
While 31 U.S. states have already legalized recreational and medical marijuana, most local businesses are still hesitant to take the leap and invest in the industry, due to the active criminalization of pot under the federal laws.
They are also unable to obtain loans from banks and financing institutions to raise enough capital to invest in a marijuana business. As a result, they turn to Canadian banks, which are more than willing to lend a hand.
These restrictive barriers are causing America to quickly lose ground to Canada in terms of exports and transshipments of marijuana and weed products.
Peterson told CNBC that his reasons to run a full-page ad was two-fold: first, he wants to reach out to President Trump who has already shown that he has one ear tuned into social and mass media. Second, he wants to raise awareness in the industry and spark serious discussions pertaining to the economy and stock markets.
This access to capital is ultimately Canada’s advantage over its American neighbor, in terms of advancing policies, technologies and distribution in the U.S. pot industry.
For instance, a comparison made by Jonathan Cooper in his column at Seeking Alpha revealed a stark disparity in the capital between the US company, MedMen, and Canadian company Aurora.
MedMen is valued at around $4 billion and yet, it’s having a hard time trying to raise capital for any kind of investment in the industry. If it manages to borrow money, it will suffer very high-interest rates. In contrast, Aurora can borrow legally from the biggest banks in Canada at friendly interest rates and longer terms.
While the US does have the land mass to theoretically grow an over abundant amount of marijuana, it’s just an asset that will go to waste in the absence of necessary capital from the investors.
This is what Peterson is referring to when he’s calling for a change in policy now before it’s too late. He claims that in two years’ time, the US would be playing catch-up with Canada with no guarantee that the country will go past its neighbor in terms of profits and revenues from cannabis related investments and infrastructure.
The Terra Tech CEO said that the industry grew by leaps and bounds despite federal prohibition, contributing billions to the economy. Imagine what they can do when the floodgates are left open.
The U.S. federal government spent between an estimated 1.196 to 6.032 billion dollars in 2010, regulating and policing cannabis according to a report by the ACLU. Another report commissioned by the Drug Policy Alliance and Marijuana Arrest Research Project, claimed that the New York Police Department devoted 1 million hours to enforcing marijuana crimes that were considered low level offenses between 2002 and 2012. There were 587,000 marijuana arrests in 2016, which made up 40% of total drug arrests.
If the U.S. decided to legalize marijuana nationwide, cannabis would generate revenue for the U.S rather than cost it money. Police could use their already strained resources to police street drugs and violent criminals. Another benefit would be job creation, economic growth and the opportunities for people to invest in the industry.
With more and more states legalizing marijuana it’s only a matter of time before cannabis is legalized on a national level. The only question that remains, is how long will that take? The longer it takes, the longer Canada has a head start on every country that insist in keeping the old “prohibition labels”.