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Global marijuana trade is still five to seven years off, but Canada aims to be world’s cannabis king

Cam Battley believes that in the not-too-distant future, his company — one of Canada’s largest licensed producers — will be exporting a “significant chunk” of the cannabis it is growing domestically.

“We have a massive market over in Europe, even in Latin America,” says Battley, chief corporate officer at Aurora Cannabis Inc. “These countries are legalizing medicinal cannabis one by one but they’re not growing as much as us. They’re going to need product, and we’ve already got the ball rolling on exporting.”

It’s a sentiment shared by other major producers here, many of which are spending tens of millions of dollars to build up international footholds with the intent of being key players in the emerging global cannabis industry. But before they can make good on those ambitions, some things will have to change.

Under the Cannabis Act, Canadian producers are currently only allowed to export weed for medical use, and then only to countries that allow cannabis to be imported.

When it comes to recreational cannabis, the rules are ever more strict: a number of international treaties fundamentally ban the movement of cannabis for recreational purposes, regardless of the domestic legal status of cannabis in specific nation.

“Where the rubber hits the road for domestic cannabis producers is that international trade is largely restricted. And my view is that that is unlikely to change in the next five to seven years at least,” says Martha Harrison, a partner at McCarthy Tetrault LLP who specializes in international trade and investment law.

Canada is signatory to three international treaties that prohibit the movement of cannabis for recreational purposes — the 1961 Single Convention on Narcotic Drugs, the Convention on Psychotropic Substances (1971) and the UN Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, ratified in 1988. Under those treaties, Health Canada has an obligation to restrict the movement of cannabis to “medical and scientific purposes between countries.”

Earlier this year, the World Health Organization, citing new research touting the medical benefits of cannabis made headlines for calling for the removal of the drug from Schedule IV of the 1961 convention, the most restrictive category, which contains Class A drugs such as cocaine and heroin.

But the United Nations has yet to follow through, due in part to the organization’s historically conservative stance on drugs.

“The UN is kind of in an awkward position. They don’t want to dilute controls on marijuana because it would be viewed by some members are diluting controls on all narcotics. It’s kind of that slippery slope argument that you see in governments that are against legalizing marijuana,” says Adams Lee, an international trade lawyer at global law firm Harris Bricken.

According to Harrison, until the UN or the WHO reclassify cannabis and products containing THC outside the scope of international treaties, cannabis trade will be limited.

Nevertheless, a handful of large Canadian cannabis producers such as Aurora, Tilray Inc., Canopy Growth Corp., and Aphria Inc., remain bullish on the prospects for international cannabis trade.

Tilray recently announced the opening of a cultivation facility in Portugal that it says will feed medical demand in Europe and both Aurora and Canopy Growth have large production hubs in Denmark for similar reasons.

While the producers say they are aiming to serve medical markets, these facilities have enough capacity to eventually meet a significant portion of Europe’s demand for recreational cannabis — if and when cannabis is ever permitted to be moved across borders for non-medical purposes.

Harris Bricken’s Lee calls the industry’s optimism “a little bit too rosy.” But, he adds, if Canadian companies want to position themselves as first movers, projecting the “best-case scenario” to investors, then their investments abroad “perhaps make sense.”

“We know that the demand will be there internationally. And right now, we have a significant advantage because American cannabis companies cannot export their product,” says Battley.

Canada’s edge stems from the fact that U.S. federal guidelines continue to classify cannabis as a Schedule 1 drug, making it ineligible for export.

Until that changes (assuming it does), Europeans who consume cannabis for medical reasons will continue to get a taste of Canadian weed.

Canada’s major licensed producers currently export thousands of kilograms of cannabis to supply medicinal markets in countries that lack cultivation capacity.

And as Canadian production of cannabis has ramped up, so have cannabis exports: Since 2015, when it became legal to trade cannabis for medical purposes, shipments of dried cannabis have tripled.

Most this product goes to Germany, a country of 82 million people, where cannabis is legal for medical use and insured by the government as part of its national pharmacare program.

Producers only need an export permit from Health Canada and a import permit from the German government in order to begin their shipments.

“We’ve gotten good at this, we’re able to get our permits on both sides in under 30 days,” says Battley, who credits Aurora’s German branch (Aurora Deutschland) with administering the trade process.

Harrison, for her part, believes that the scenario most likely to have a domino effect on the international trade of cannabis is if countries begin reclassifying cannabidiol (CBD) as a permitted medical ingredient in the same vein that ingredients in natural health products are. “Based on industry intelligence, I can say that the trade on CBD oil is going to open up in a quicker and more fluid way that recreational cannabis.”

“That’s going to engender a larger regime shift in how governments and international bodies view the movement of cannabis globally. It’ll be good if Canada can lead the way on that.”


Facebook’s cryptocurrency chief says if you don’t trust our digital wallet use our competitors

An executive behind Facebook’s venture into cryptocurrency told CNBC on Tuesday that consumers shouldn’t be worried about the social media network gaining access to their financial data.

“To earn people’s trust, we are going to have to make strong commitments on privacy,” said David Marcus, the head of Facebook’s Calibra division, a newly announced subsidiary to host a digital wallet by the same name for storing and exchanging the digital coin called Libra.

“If people don’t want to trust us, they can use any of the other wallets that will be available,” Marcus said in a “Squawk Box ” interview. “There will be plenty of competition.”

At a time when it is trying to rebuild user trust after data privacy and security scandals, Facebook announced Tuesday an ambitious endeavor to create Libra and launch it in the first half of 2020.

The goal — using blockchain, the technology underlying bitcoin on other cryptocurrencies — is to make it as easy to send money across the world as it is to send a photo. But unlike bitcoin and others, Libra will be backed by more stable government-backed money.

The Libra currency will not be run by Facebook, but rather by a nonprofit association supported by a range of companies and organizations.

“We painstakingly removed ourselves from governing this network,” said Marcus, the former PayPal president whom Facebook hired in 2014 to lead its Messenger app.

The Calibra digital wallet will be the way Facebook eventually makes money through financial services such as loans. However, Marcus said those add-ons won’t happen anytime soon.

Marcus said the latest venture is “very close” to Facebook’s mission of connecting people across the world. People in the U.S. are privileged when it comes to having a stable currency and trusted institutions, he said. “But that’s not the case for many people across the world.”

He said the new currency would lower the barrier for cross-border payments.

“We felt it was time to try something new, and this is the beginning of a long journey in launching this new network,” Marcus said. Other cryptocurrencies are “investment vehicles or investment assets rather than being a great medium of exchange. [Libra] is really designed from the ground up to be a great medium of exchange, a very high quality form of digital money that you can use for everyday payments.”

Shares of Facebook opened Tuesday’s trading up 2.3%, after soaring more than 4% to $189 per share on Monday ahead of the announcement. The stock has gained 44% this year.

Libra is backed by other payment companies, including Visa and PayPal and tech giants eBay, Lyft, Spotify and Uber. The 27 companies in total each will be expected to invest a minimum of $10 million to fund the project, according to The New York Times.

Reports speculating about the Facebook news over the past few weeks helped boost the price of bitcoin. The world’s biggest digital coin jumped across the $9,000 level on Sunday, on the thought that Facebook’s entry in crypto would add legitimacy to the industry. Bitcoin gained ground Monday as well, but slipped some in Tuesday trading.


Cannabis edibles and infused products could be $2.7B market

The Canadian market for next-generation cannabis products is worth an estimated $2.7 billion annually, with edibles contributing more than half, according to a new report from Deloitte.

This spending once the final edible pot regulations roll out in the coming months is expected to be on top of the roughly $6-billion estimated domestic market for recreational and medical cannabis, the consultancy said Monday.

Consumers are looking to snap up these new pot products in addition to the dried flower, oils, plants and seeds they have been buying from legal retailers since legalization last fall, a recent survey of 2,000 Canadians conducted by Deloitte suggests.

The first wave of legalization last October was quite limited in terms of product range and the type of consumer, said Jennifer Lee, Deloitte Canada’s cannabis national leader.

“When we legalize in October again for edibles, we are in a world where the formats and the assortment is much broader,” she said. “The use cases are much broader.”

Cannabis-infused foods, other products

Canada is gearing up to legalize cannabis-infused foods, beverages, topicals and other next-generation products in the coming months, once Ottawa rolls out the final regulations.

Pot companies, as well as food and beverage makers, have been preparing to roll out their own pot-infused products which they anticipate will appeal to a broader audience — particularly those who aren’t interested in smoking weed.

The federal government wrapped up its consultation on the draft edible rules in February, and has said the regulations must be brought into force no later than Oct. 17, 2019.

Deloitte estimates that roughly $1.6 billion will be spent on edibles in Canada, followed by cannabis-infused beverages at $529 million and topicals at $174 million. Spending on concentrates is expected to hit $140 million, followed by tinctures at $116 million and capsules at $114 million.

Waiting for the gummy bears, cookies

Roughly half of likely edible users surveyed by Deloitte say they plan to consume gummy bears, cookies, brownies or chocolate at least every three months.

The global market for alternative cannabis products is expected to nearly double over the next five years, the consultancy added.

Lee doesn’t expect these new products to eat into revenues from existing categories in Canada, at least in the early days.

“Over time, in the long term, you may,” she said. “But right now, there’s too much demand in the market and there’s not enough product.”

Legal pot retailers, both government and privately owned, have been contending with a shortage of cannabis since legalization last October, but have said the situation has improved in recent months.

Shortage of cannabis easing

For example, the Alberta government lifted its moratorium on new cannabis retail licences, citing an increase in the pot supply.

Deloitte’s market estimates for cannabis 2.0 products reflect overall Canadian consumer demand, but realizing the market’s full potential too may take some time. Many of the new pot products may not be available, or available in sufficient quality, come October, Deloitte said.

Companies should take a three- to five-year view on the market, said Lee.

“The regulations will need time to settle, even after legalization in October,” she said.

While this presents a growth opportunity for companies readying themselves for the next wave of the green rush, it may come at the expense of sales in more established industries.

“Our research is showing that the occasions that consumers use the product, i.e. mostly edibles, overlap a lot with alcohol … On a limited wallet, there are going to be tradeoffs,” Lee said.

As well, consumers view topical cannabis products such as lotions used for ailments such as pain as a potential replacement for other medicinal products, Deloitte’s survey showed.

“This could be cause for concern for the traditional pharmaceutical sector, as 45 per cent of current consumers and 48 per cent of likely consumers say they see cannabis topicals as an alternative to prescription medications, not a complement,” Deloitte said in the report.

Deloitte surveyed 2,000 adult Canadians online between Feb. 26 and March 11.

According to the polling industry’s generally accepted standards, online surveys cannot be assigned a margin of error because they do not randomly sample the population.


Till debt do us part: Russia’s holdings of US Treasuries plunge to 12-year low

Foreign investors led by Russia accelerated the reduction of US debt securities in April, decreasing their holdings of Treasury bills by $29.5 billion, data released by the US Treasury Department shows.

Russia cropped its stockpile of US debt by $1.6 billion. The country’s holdings decreased from $13.7 billion in March to $12.1 billion in April. That’s the lowest figure since May 2007 when Russia’s ownership of US debt stood at $11.8 billion.

Once a leading holder of US Treasury bonds, Russia has been sharply reducing its holdings in recent years. It has cut nearly 85 percent of the holdings from $96.9 billion in January 2018. The drop is even more significant from 2010, when Russia held over $170 billion in US debt bonds.

Data showed that the largest US creditor, China, has also trimmed its holdings in April to the lowest level since May 2017. Chinese holdings of Treasury securities declined for a second straight month, to $1.113 trillion in April, from $1.120 trillion the previous month. The country still remains the largest foreign holder of US Treasuries.

The second-largest non-US holder of American debt, Japan, also reduced holdings in April, to $1.064 trillion, from $1.078 trillion the previous month.

Statistics showed that overall foreign holdings of US Treasuries dropped to $6.433 trillion in April, from $6.473 trillion in March.


Canadians can expect tight supply when cannabis edibles become legal mid-December

Canadians should expect a small initial supply of cannabis edibles when they become legal in mid-December, and the limited range of products won’t include goodies that might appeal to kids, government officials say.

Health Canada released new regulations on cannabis edibles, beverages, topicals and extracts today — products that will be on the legal market as early as mid-December.

Officials say the regulations — which include strict packaging and labelling requirements — are designed to limit the appeal of cannabis products and reduce the risk of food-borne illness or over-consumption.

The products will require child-resistant and child-proof packaging, and products must not “be appealing to youth.”

Border Security and Organized Crime Reduction Minister Bill Blair, the Liberal government’s point man on the cannabis legalization file, said safety was top of mind when the government drafted the regulations.

“I’ve heard from the industry and people say, ‘You know, we could make more money if you did this or relaxed these regulations.’ But quite frankly, that’s not our motivation,” he said during an event in Coquitlam, B.C. Friday.

“Our motivation is, and will always be, to protect our kids, protect health and safety of Canadians, to keep our communities safe and displace that illicit market that has developed over decades in this country.”

Blair warned that buying from the black market is a “crap shoot” because consumers can’t be assured of the potency or purity of the product. Black market products can contain insecticides, pesticides or fertilizers that are not fit for human consumption, he said.

“We are replacing those illegal products, those far riskier products, with a safer product, with a regulated product,” he said.

No ‘youth appeal’ allowed

In a briefing with reporters Friday, Health Canada officials said proposed products will be assessed for flavour, colour, shape, smell and branding to determine if they could be enticing to children.

Items will be evaluated on a case-by-case basis — and it’s not clear exactly where the lines will be drawn.

“If you’re asking if a gummy bear is appealing to a young person, would that be permitted, the answer is no,” one official said in response to a question about what will or won’t be allowed for sale.

“A gummy bear that is appealing to kids is prohibited … and it’s an offence that’s punishable by very serious consequences … five years in prison and a million dollar fine.”

The ban on selling products appealing to youth and associated restrictions are similar to the laws governing tobacco and vaping products.

NDP health critic Don Davies accused the government of dragging its heels on legalizing edibles, leaving it in the hands of the black market. Canadian businesses are hamstrung when they could be “going gangbusters,” as they are in jurisdictions like California, he said.

No reason to wait

“There’s no reason that we shouldn’t be going forward with edibles on policy grounds, on health grounds and finally for business reasons,” he said.

Officials said the licensed industry will need time to design and build their inventory before getting government approval.

“As such, adult consumers should expect to see a limited selection of products appear in stores initially, with additional products becoming available over time,” said one official.

Health Canada said it could not predict how long it would take for a bigger and more diverse supply of products to hit the market. As of July 15, existing federally regulated processors can apply to Health Canada to make sure they can sell their products, and can advise the department of proposed products as of Oct. 17.

They can then make those products available for sale 60 days later.

To limit adverse reactions due to accidental consumption or over-consumption, each individual package will be limited to a maximum of 10 mg of THC, the primary psychoactive component in cannabis. Officials said that while smoking cannabis can have an almost immediate effect, ingesting cannabis can take up to four hours to take effect, and the effect can last much longer.

They also warned that chronic use of cannabis can have serious health consequences, such as addiction and memory or concentration loss.

Awareness campaign urged

Conservative health critic Marilyn Gladu said some young children in the U.S. have wound up in emergency rooms “poisoned” by over-consumption or accidental consumption of cannabis. She urged the government to launch a major awareness campaign ahead of the legalization of edibles.

“We have to get the education out there about the products so that people understand how to keep them away from children,” she said.

When dried cannabis became legal for recreational use last October, the government continued consultations on rules for edibles and other products, which wrapped up in February.

The new regulations will give authorized distributors and retailers access to three new classes of cannabis products: 

  • Edibles (candy, baked goods).
  • Cannabis extracts.
  • Cannabis “topicals” (ointments, oils, makeup).

Cannabis-infused alcoholic beverages and cannabis products containing tobacco, nicotine or caffeine will be prohibited. Some goods with low amounts of naturally occurring caffeine, such as chocolate, will be permitted.