Subsidizing legal producers of cannabis may seem outlandish, but it might be the solution to bringing the Trudeau government closer to its goal of “keeping marijuana out of the hands of children, and the profits out of the hands of criminals.”
With the Cannabis Act (Bill C-45) supposed to come into effect in the Summer of 2018, Parliament is on track to legalize the recreational use of marijuana. If it does, which the countrywide implementation of new provincial legislation on marijuana suggests it will, the Liberals will meet one of their most talked-about 2015 campaign promises. However, some policy questions about Bill C-45 remain unanswered.
One key concern centres on Section 17 of the Bill, which prohibits the promotion of cannabis. Would-be legal producers argue that if they cannot promote their product, they will be unable to compete effectively with their already well-established black market counterparts. Instead of giving into these demands, the federal government should subsidize legal producers, which would ensure that official retailers get a fair shot at driving illegal producers out of business. Additionally, such a solution would avoid the trap that advertising might encourage drug usage among youth, such as university students, who often find themselves in an environment that can nurture a culture of substance abuse.
As Professor David Hammond of the University of Waterloo’s School of Public Health and Health Systems maintains, price is the most important factor that customers take into account when deciding which cannabis product to buy. No customer wants to miss out on a good deal.
Finance Minister Bill Morneau’s proposed profit-sharing formula sets the price of one gram of marijuana at approximately $10. This price, he argued in December 2017 to his provincial counterparts, would render the black market unsustainable, forcing most illegal producers to put an end to their operations. However, Statistics Canada recently found that Minister Morneau’s proposed $10 per gram price was less competitive than current black market prices, meaning that the potential for a significant black market would still exist after legalization. Government subsidies represent a more proactive way of tackling this dilemma, by allowing the government to maintain the current advertising ban under Section 17 while simultaneously preventing counter-productive competition with black market producers.
Subsidies could also allow the Liberal government to more rapidly meet its campaign goal of keeping profits out of criminals’ hands. They would have the same effect as dumping the price of cannabis, and allowing legal producers to expand their market share. For example, by providing a $2-3 per gram subsidy, the government would enable legal producers to sell cannabis at roughly $7-8 per gram. Over time, the price could return to around $10 once most of the black market would have been eliminated.
A cannabis subsidy would hit two birds with one stone. First, it would eliminate legal producers’ concern that they may not be able to effectively compete with black market producers. Second, by subsidizing legal producers, the government would increase retailers’ market competitiveness, thereby hushing demands for the ability to promote cannabis products. And by maintaining the ban on promotion, the risk that youth may be drawn to consume marijuana any more than they are now remains low. This would meet both of the Trudeau government’s campaign goals for the legalization of marijuana, a platform which Canadians supported on Oct. 19, 2015.
Meeting legal suppliers halfway and partially lifting Section 17’s current blanket ban on promotion might allay their call for looser control—a legitimate claim that ought to be addressed in a democratic society. However, this would be nothing more than a temporary remedy to the advertising dilemma, failing to solve the issue in the long run. Opening the door to advertising may create a dangerous slippery slope: Marijuana companies might respect government regulation in the first few months after cannabis has been legalized, but would eventually begin to push the boundaries of these newly established laws. After all, the cannabis industry remains just that—an industry. Unsurprisingly, it is driven by profit—a reality the Task Force on Cannabis Legalization and Regulation noted in its final report to the government—making it likely that cannabis producers will keep lobbying for deregulation unless Parliament addresses their concerns through subsidies.
Federal subsidies target the legal marijuana advertisement dilemma in a creative way—getting to the root of the problem, rather than putting in place a quick-fix and an insufficient solution.