¿Libertad personal o negocio millonario?/Get high, sell high

This fall I wrote a piece for El Cultural, the high-minded magazine supplement of Mexico's La Razón newspaper, about Canada's decision to legalize cannabis. The article was published in Spanish, translated by my friend Wenceslao Bruciaga. It was a complete privilege to work with Wences and be published in El Cultural.

Canadian readers might find this a bit 101, but here is the original English text of the piece.

Get high, sell high: Canada’s cannabis reforms are more about money than personal freedom

By Paul Gallant

One warm fall night two years ago, a lineup of people stretched down a block of Church Street in downtown Toronto, all of them waiting to get into the Cannabis Culture boutique. The store was run by Marc Emery, known as Canada’s “Prince of Pot,” a marijuana entrepreneur who has gone to jail a few times for the cause. The store might as well have been selling bottles of eternal youth, people were so excited. Each time the boutique’s front door opened, marijuana smoke rolled out into the street, but you’d hardly notice because there was already a cloud of pot hanging over the sidewalk—so many people in line were already smoking up. Mostly young, mostly middle-class, the patrons looked like attendees at a Drake concert. Inside, in glass jars on a glass counter, there was a choice of 12 strains of marijuana, with names like Sharks Breath and Girl Scout Cookies and prices ranging from C$5 to C$14 per gram.

At the store’s peak, more than 1,300 people visited the location each day. And it was just one of maybe hundreds of marijuana boutiques that sprung up across Toronto and across the country after Canada’s federal government announced its plan to legalize marijuana. After the government started preparing the policy in 2015, Canada quickly became the Wild West of weed, with entrepreneurs, the police and various governments pulling this way and that, trying to anticipate what the marijuana marketplace will look like after October 17, 2018. In the meantime, on sidewalks, in parks, at parties and at concerts, the smell of dope has become more common than the smell of tobacco. Canadians tokers embraced the transition period as an opportunity to experiment and push the limits. Walking to the grocery store, walking to my gym, in outdoor beer gardens and on restaurant patios, for the last couple of years, I smell weed everywhere I go.

During the 2015 election campaign, Trudeau had promised not just to decriminalize marijuana, like the Netherlands with its coffee-shop culture, but to fully legalize it and create a system for Canadians to grow it, sell it, buy it and smoke it. The system might also provide ways to export it, if the rest of the world wanted to buy Canadian. The old system, Trudeau argued a few weeks before the election, “makes it easier for young people to access marijuana than it is for them to access beer or even cigarettes and continues to fund the kind of crime… that is a real challenge for our communities.”

Soon after the election, entrepreneurs and smokers started acting like all the laws against marijuana had been wiped off the table. Boutiques and lounges like Cannabis Culture sprung up all over, sometimes several on the same block. It seemed like there were no rules at all.

But over the last couple of years, the government has made it clear that Canada’s version of legalization will not be a free-for-all. By the spring of 2017, seven Cannabis Culture locations, including the one on Toronto’s Church Street, had been raided and closed by the police, as had many other pop-up boutiques and dispensaries across the country. Emery and his wife Jodie were charged with drug trafficking, conspiracy and possession. (A year into the court process, Emery had been fined a C$5,000 for trafficking—a mere slap on the wrists.)

When the laws come into effect on October 17, cannabis will be much more tightly controlled now than it has been over the last few Wild West years. “On the face of it, the restrictions that the government is putting on the marketing and the distribution seems pretty strict,” says Jan Westcott, president and CEO of Spirits Canada, an organization that represents the distilled spirits industry. Pot growers might eat into the “good times” market share of his members.

The all-night pot shops and lounges that are still operating will likely be put out of business. The police will again become interested in teenagers smoking dope in playgrounds. Unlicensed marijuana dealers will be arrested and charged.

That’s because the legalization is not so much about fun, but about money. The days of big-business cannabis companies has begun. You’ve heard of Bacardi and Smirnoff, Marlboro and Pall Mall? Get ready to hear about Aurora and Canopy Growth. Sure, Canada’s new pot laws will make life more relaxed and convenient for smokers. No more need to do drug deals in dark alleys. But mostly it’s about going corporate, and most importantly, more taxes. Turn on, tune in, buy low, sell high.

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Canada loves to regulate pleasure. Historically, there’s a culture of trying to protect people from their impulses and the consequences of too much fun. We had national Prohibition on alcohol from 1918 to 1920 (my home province, Prince Edward Island, outlawed booze until 1948). Until the 1960s in Ontario, Canada’s most populous and richest province, liquor-store customers carried booklets where their purchases were recorded, so employees could say “no” if a customer was buying too much booze. “Fundamentally, they don’t trust the users of these products and they want to be sure it’s not too easy to get and it shouldn’t be too easy for children to get,” says Craig Heron, professor emeritus at York University’s Department of History and author of the 2003 book Booze in Canada: A History. Since Prohibition, provincial and territorial governments have controlled almost all alcohol distribution. In some provinces you can buy hard liquor only from government stores, and the sale of beer and wine is also very tightly regulated. There are complex rules about when you can buy alcohol, where you can drink it and how much you must pay for it. Bar closing hours are taken very seriously.

And that’s just booze. Our tobacco laws are among the strictest in the world. Taxes make cigarettes very expensive (an average of C$14 for a pack of 20), and, in the stores that sell them, cigarettes packages must be hidden behind unlabelled doors. Health warnings must cover 75 per cent of the packaging. A new law expected soon will prohibit any branding on cigarette packages—all brands will be forced to use the same font on a plain brown background. So much for selling smoking as a glamorous lifestyle.

So nobody would have pointed to Canada as the first country, after tiny Uruguay, to legalize pot. Though almost half of Canadians (49.4 per cent of men, 35.8 per cent of women) will smoke marijuana at least once in their lifetime, according to the government agency Statistics Canada, only 14 per cent of Canadians aged 15 years and older reported use of cannabis products in the previous three months. Fewer Canadians smoke up than Icelanders, Americans, Italians and Kiwis.

Marijuana was made illegal in Canada in 1923—almost 100 years ago. Maximum penalties for possession of up to 30 grams are a fine of $1,000 or six months in jail, or both. Being convicted of trafficking pot can bring a sentence of life in jail. But since the 1990s, government and police haven’t been particularly interested in enforcing marijuana laws. The Baby Boomers generation, which still holds the strings of power, associate weed with happy memories of their wild, freewheeling youth—something to take as seriously as a few beers. The police have better things to do than arresting people for a joint. In Vancouver, the country’s most relaxed jurisdiction, growers like Marc Emery were mostly left alone to refine their products, creating hybrids for energy or relaxation. Canadian growers became known for more and more THC content in their weed, providing an intense high.

After a court ruling in 2000, the government was forced to permit the use of marijuana for medical purposes. At first, the government envisioned a system where medical marijuana was grown and distributed by the government, for people who had a prescription and a diagnosed health problem, like cancer. But cannabis clubs and lounges opened that were very relaxed about requiring a prescription. Their legality was questionable, but they were mostly discreet, and the police didn’t pay them much attention. But then Justin Trudeau and his Liberal Party won the 2015 federal election, after promising to legalize marijuana across the board. Suddenly the cannabis suddenly industry exploded. Nobody cared about discretion anymore.

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Although pot legalization is good for the “nice and easy” Canadian brand, Trudeau is not interested in making Canada a party destination, like the Netherlands. He’s mostly interested in making money. While there will be additional healthcare costs due to increased marijuana use, legalization is expected to be very profitable for all levels of government. Government revenue from the control and sale of alcoholic beverages was C$11.9 billion in 2016/2017. Government revenue from tobacco sales was an estimated C$8.4 billion in 2016/2017. Cannabis is expected to be taxed at C$1 per gram, or 10 per cent of a product’s price, which may earn the federal government C$100 million in the first year. But there will also be revenue from sales tax, government distribution profits, licensing and property taxes, leading some to speculate that various levels of government could make C$2 billion annually from pot.

Will crime go up or down? Right now, most crime in Canada related to marijuana are connected to its sale and use. About 58 per cent of police-reported Controlled Drugs and Substances Act offences in 2016 were cannabis-related (the rest were for offences relating to the importation, exportation, trafficking, production and possession of other drugs). Of course, these marijuana-related “crimes,” 54,940 of them in 2015, will disappear off the books when marijuana becomes legal. Even then, cannabis-related offences have decreased over the last five years, maybe because the police aren’t even trying to enforce them any more. The rate of drug-impaired driving is low (8.5 incidents per 100,000 trips), especially compared to the rate of alcohol-impaired driving (186 per 100,000).

Although legal pot is a new frontier, it will probably look a look like a combination of existing alcohol and tobacco regulation. Canada’s 10 provinces and three territories will be in charge of distribution, just like with booze. The provinces and territories will also make rules about who gets to sell (in some cases, just the government; in others, government and private stores) and under what conditions. Municipalities will be able to create their own rules, and may be able to prohibit the sale of marijuana altogether—some Canadians may have to buy their legal dope online from government websites. Better than striking a deal in an alleyway from a dealer who’s a friend of a friend, I suppose, but not as convenient as popping by one of Amsterdam’s coffeeshops.

Actually, when you look closely at the provincial laws, there will be very few places outside the home where Canadians will be able smoke marijuana; there’s been a debate about whether it should be allowed in places like seniors’ homes. Smoking tobacco isn’t allowed inside most public buildings, including bars and nightclubs, and, so far, it looks like pot will be treated the same way. Though some provinces will allow “public” smoking, there are rules to keep it away from where children might be.

Just weeks before the official legalization date, there is a tremendous uncertainty about how things will unfold. Alberta, the province with the most liberal liquor laws, will allow as many as 250 retail locations, some private, some government, to open in 2018. Ontario first planned to open government-run stores. Then the provincial government changed and declared that pot will be sold only through a government website until April 1, 2019, when a plan for private retailers will come into effect. Most provinces will allow consumers to grow as many as four plants at home for personal use; Quebec, usually seen as a liberal province, won’t allow it.

“Where we are going to be on October 17 is going to be vastly different from where we’ll be five years from now,” says Westcott. “One of the aspects of this whole thing is that there’s almost no medical research. Almost zero, partly because it’s been illegal.”

The reforms are a dream for medical, sociological and crime researchers, who will finally be able to conduct experiments, and observe how legal access to marijuana plays out in various jurisdictions. Will violent crimes go up or down? Will productivity at work go up or down? Will there be more health problems or fewer? Will the black market shrink and disappear? Will more people smoke more pot in the provinces where pot is more freely available? What we do know already about marijuana is that it’s less harmful than alcohol, at least in the short term.

“When it’s legalized, it’s likely that cannabis will in many cases substitute for alcohol,” says Tim Stockwell, a professor of psychology at the University of Victoria and director of the Canadian Institute for Substance Use Research. “[For example,] although cannabis is not a good thing to use while driving, people tend to go slower, while people who are drinking tend to go faster. There is some evidence that impaired driving and road crashes could be reduced. That may also apply to violence…. There are 60 ways that alcohol can harm you; there are only two or three ways cannabis can.”

It will take years to collect statistics on how legalized pot will transform Canadian society. But the most dramatic change has already been taking shape on the business side. Because the provinces will be the main distributors—and they’ll want to buy in bulk—the playing field will be skewed toward big players that can cut deals to sell to uniform-quality pot to populations of millions. This new industry, perhaps one that will eventually rival alcohol, tobacco and pharmaceuticals, intends to go global. Although nine U.S. states now permit the sale and use of marijuana for recreational purposes, and 36 permit it for medical purposes, the drug remains illegal in the U.S. nationally. Federal enforcement officials in the U.S. have let the pro-pot states do their own thing—within reason. That’s kept their industries small, more local and less corporate. In Canada, companies like Canopy Growth (WEED.TO), Aurora Cannabis (ACB), Aphria Inc. (APH) and Cannex Group Holdings Inc. (CNNX) are listed on the Canadian Stock Exchange. Investors have already made millions on this industry, which, in the U.S., still has difficulty accessing traditional financing.

This summer, Corona beer maker Constellation Brands invested C$4 billion into Canopy Growth, which already had an estimated value of C$10 billion. Just last year, Constellation Brands had made a C$200-million investment last summer to help Canopy produce a non-alcoholic cannabis-based beverage (which will not be legal in the early days of legalization). Canopy predicts as many as 30 countries are likely to allow medical marijuana in the near future. Its chief executive, Bruce Linton, says the company is targeting C$1 billion in overseas acquisitions over the next 12 months. With the right strategy, Canada could become to pot what Hollywood is to movies or Silicon Valley is to tech.

Although great fortunes await, the pot business still carries risks. Some employees at legal-in-Canada cannabis companies have been turned away at the U.S. border and banned for life from entering the U.S., deemed inadmissible because they are considered to be living off the profits of the drug trade. Going global might be trickier than some investors think. Unlike in California, one of the nine U.S. states where recreational marijuana is legal, medical marijuana outlets may not get preferential treatment in getting licences to sell. The provincial and territorial governments that will be doing the licensing are unlikely to issue licences to businesses that broke the law during the Wild West period. Mark Emery, for example, by being a pioneer, may have shut himself out of the legal pot business. There have been calls for a “marijuana amnesty” to clear the criminal records of people convicted of past marijuana offences. Considering that the government apologized last year to LGBT Canadians for past laws against homosexuality, you have to wonder if the government might apologize to potheads for past government persecution.

After three Wild West years, it may be hard for the government to restore Canadian-style law and order. Businesses that have made big profits in the last few years may be reluctant to close, even if they don’t get licences. Potheads who have grown accustomed to smoking up wherever they want may not want to limit their use to their own home. Police officers who have spent years turning a blind eye to marijuana use will have to again become diligent, arresting black-market dealers, people who are smoking in the wrong places and people growing more plants than they’re allowed. Sounds like a real nuisance.

Habits are hard to break. This month I dropped by the fifth annual Karma Cup, a cannabis trade show held in a parking lot on Church Street in Toronto, across the street from where Cannabis Culture did its booming business. Crowds packed in to sample the wares of dozens of booths selling “elite cannabis products” that were judged for quality. There were lots of Guns N' Roses T-shirts, leather jackets and dreadlocks. Many of the products—edibles, for example—probably won’t be legal after October 17, but at this point who cares? I didn’t see police anywhere, even as the clouds of marijuana smoke wafted down the block.

Yet now there is a multi-billion-dollar industry with lobbyists and the power to create thousands of jobs and fortunes for investors. Industry demands for a level playing field will put the police and the government under much more pressure than worried parents, priests and school teachers ever did. The stakes are much higher than a few joints in the school playground. Canada has created a new industry and the world is watching.