With legalization, Canada set the stage for a new industry and thus, new marketplaces for cannabis. However, because the country is signatory to several treaties that have effectively created an international regime that limits cannabis export and import to scientific and medical purposes, companies are inhibited – and so too is the market’s potential.

While treaties can be ignored, Canada has a moral and political obligation to abide by the language of the international agreements to which it is signatory. In this case, the movement of cannabis for recreational purposes is restricted under three specific international treaties. The Single Convention on Narcotic Drugs in 1961, the Convention on Psychotropic Substances in 1971 and the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, which was ratified in 1988, all schedule cannabis as a Class A drug, alongside other substances like heroin and cocaine.

As such, Health Canada, which is the government entity responsible for authorizing import and export activities, must restrict the movement of cannabis across borders unless it is justified on the basis of medical and scientific research. This will continue to be the case until the United Nations (UN) has cannabis descheduled, which has been encouraged by the World Health Organization (WHO).

While Health Canada is responsible for maintaining control over the movement of cannabis in a manner that complies with the international drug convention treaties, the Canadian Food Inspection Agency (CFIA) regulates the import, export, certification and grading of cannabis seeds, though importers still require the necessary licenses and permits from Health Canada. Health Canada is tasked with license verification, ensuring that license holders are permitted to import by the competent authority of the receiving country and that it is not in contravention of the laws of the destination country or any transitory country therein, in addition to monitoring import limits. Permits to import or export cannabis are assessed on the merit of each application.

Health Canada assesses each case on the following considerations: the import of starting materials for a new license holder (i.e. seeds); exporting to a destination country that has a legal regime for medical purposes; the import or export of small quantities for scientific purposes; and whether there are risks to public health related to production standards of imported product.

Industrial hemp grain and seed fall under the Industrial Hemp Regulations and are not subject to the same considerations as cannabis, though import and export activities are subject to certain restrictions and must also be permitted.

In the United States, where cannabis is still federally prohibited, even in the states where cannabis has been legalized, export is prohibited. Companies are barred from shipping cannabis products across state lines, though there are efforts underway to prepare for inter-state and international trade when the time comes.

The Governor of Oregon, Kate Brown, signed Senate Bill 582, which is referred to as the export bill, as it prepares the state for just that. Under the bill, cannabis companies in Oregon will have the opportunity to export product across state lines into states where cannabis is legal and where similar export legislation has been adopted. Only one thing stands in the way: federal government approval.

What constitutes approval in this case could be any number of things, as the definition is broad and many government actions could constitute affirmation, be it a memo of approval from the Department of Justice or some other indicator or trigger.

Certainly, perceptions and regulations around the world are changing in favour and acceptance of cannabis for both medicinal and recreational purposes, but the global shift is taking place at a slow pace and if this is any indication, cannabis export is still a way off.

While borders are still closed and markets have yet to achieve their full potential, there are leaders who are paving the way in anticipation of cannabis export. Understanding that there is a strong demand for medical cannabis in Europe, licensed producers in Canada are already selling thousands of kilograms of product to countries like Germany, which lacks the capacity to meet its medicinal demand.

In Germany, medicinal cannabis is not only legal, but a part of the country’s national pharma care program and has been one of several contributing factors that have led to the tripling of the amount of Canadian product being exported over the last several years.

Tilray, one of Canada’s largest licensed producers, has expanded its footprint abroad, opening facilities in Europe to bypass export issues. Its counterparts, Canopy Growth and Aurora, have also made their entrée into the European market to satisfy localized demand in preparation for the day cross-border trade is authorized overseas.

The issue of supply is interesting, especially in the case of Oregon. Oversupply was partly the reason for the passing of SB 582. It was also influential in the passing of legislation that authorizes the Oregon Liquor Control Commission (OLCC), which has oversight over the cannabis industry in the state, to deny cannabis license applications on the basis of supply and demand to avoid oversupply, which has been a problem for the state.

Oregon has ideal growing conditions and produces some of world’s best cannabis. In fact, it has long supplied much of the U.S. with product, but after legalization the market was facing serious oversupply issues, which not only demonstrated the limits of local markets, but the importance of well-developed regulations and market infrastructure. Oversupply caused prices to plummet and the state was forced to suspend cultivation temporarily until the market rebalanced. Last year, the state had 1.3 million pounds of unsold product which could have been shipped out of state. By signing the export bill, Oregon is positioned to be a market leader when markets finally open.

In British Columbia, legal cannabis sales are some of the lowest across the country, but the issue of supply here is not one of material supply, but access to legal supply. According to Statistics Canada, cannabis sales in B.C. were only a fraction of other provinces at $19.5 million, compared to $123 million in Alberta and $121 in Ontario. This is being attributed to a lack of legal cannabis dispensaries and the slow rollout of a legal market infrastructure, which caused people to once again turn to the black market, where product is often better priced and readily available.

According to BDS Analytics, while the value of the Canadian cannabis market is expected to reach $5.2 billion by 2024, it falls short of its expectations of $5.9 billion by 2022. In the U.S, where cannabis is still federally prohibited, the market was valued at $569 million last year, with an expected compound annual growth rate of 44 percent over the next five years.

On a global scale, figures from the Jeffries Group LLC show the market could be worth up to $130 billion by 2029, if legalization was to take place in the U.S., Europe and Latin America. A report by ArcView Market Research and BDS Analytics showed that $6.9 billion worth of sales took place globally in 2016, and in 2017, global cannabis revenue totalled $9.5 billion.

The strength of the market will depend on legislation that not only legalizes cannabis recreationally but establishes the parameters related to cannabis import and export. Until cannabis is descheduled as a prohibited substance by the UN, the treaties to which countries like Canada are signatory will continue to hold weight and a global recreational cannabis market will remain to be seen.