Will cannabis trade develop between Canada and the U.S.?

QUESTION: “Ted. I saw on the news that the U.S., Mexico and Canada have reached an agreement (USMCA) to replace the North American Free Trade Agreement (NAFTA). Do you think this will be good for cannabis and our cannabis stocks?”

From MdG, Netherlands

ANSWER: In the short run, I doubt it will have much impact. But I think it is good that the three nations have reached a trade agreement because, coming from an economics background, I believe international trade is good for the economies of the world.

The three countries are in very different stages when it comes to marijuana. In under two weeks, Canadians will be able to buy recreational cannabis and in 2000 the court ruled Canadians have a constitutional right to use cannabis as medicine. Mexico legalized medical marijuana in 2017 and on a recent visit to Canada Vicente Fox, former Mexican president and board member of Khiron Life Sciences (TSXV: KHRN) expressed the opinion that Mexico could legalize recreational cannabis as early as 2019. In the United States, cannabis is illegal under federal law. By state law, medical cannabis is legal in 30 states and recreational marijuana is legal in 9 states.

Since USMCA/NAFTA falls under federal jurisdiction in the U.S., nothing will happen at least until the federal government removes marijuana as an illegal drug. Even then I suspect the attitudes of the U.S. and Mexico will have to be much more closely aligned with Canada before any serious attempt is undertaken to include cannabis under international trade laws.

If cannabis is ever considered a normal agricultural form of produce, then it might well be included in a trade agreement such as USMCA.

Even if we reach such a point of enlightenment, the issue is still problematic. As Mr. Fox observed, “On vegetables, on fruits, on avocados, Mexico produces and provides up to 70% of the U.S. and Canadian market so we are efficient in producing, we’re efficient in farming and we’re low-cost and competitive.” I doubt Canadian and American growers would like to see borders opened to Mexican, lower cost cannabis growers.

We have already seen how different elements in societies come to bear on cannabis in a way it doesn’t on wheat or corn. There is the legal aspect, there is social acceptance to consider, there is the business perspective, health issues, crime and criminal records and the politicians that tie it all together. I’m older than many of you but I don’t see a legal cannabis trade developing between the USMCA members in my lifetime.