The Effects of Marijuana Industry on Canada’s Economy

Introduction

Canada is the 2nd largest country in the world. They have an experienced labourforce, good political stability and high standard of living for its citizens. Also, the nation possesses a well-developed transportation network and an abundance of natural materials. The nation’s GDP is about 1.7 trillion in 2017 and their inflation rate is about 2% in 2019, while the unemployment rate of the country is 5.7% in 2018, which is a very small percentage considering that Canada is such a sizable country.

Canada’s economy is characterized as free-market and thriving with a wide range of businesses from small enterprises to multinational corporations. The country’s started out as an export based economy with agricultural products such as grain, as well as natural resources such as minerals, gas and oil. Then, Canada’s secondary industry blossomed to the point where their mauntucating industry is one of the best in the globe. Apart from that, their tertiary industry also evolved swiftly and transfigured Canada into from a manufacturing based economy to a more tertiary oriented one. The US is Canada’s top trading partner. The USMCA, which was signed in 2018 is a replacement of the previous agreement NAFTA. Canada’s farmers would benefit from this deal as they are able to gain access to US milk producers.

Legalizing cannabis, also known as pot, weed and marijana, is one of the campaign promises by prime minister Justin Tredeau back in 2005. He proclaimed that the purpose is to limit access marijuana to children and remove profits from criminals. They will establish new laws to penalize drug dealer, motorists and foreign sellers. They will also set up a new task force and a new network to control the distribution and disposals with a federal tax attached.

In the past, marijuana was only legal for medical purposes since 2001. After 96 years of fighting, the legalization finally came. This made marijuana also legal for recreational purposes. Medical marjuanan can be used to treat muscle spasms, nausea, chronic illness and seizure disorders. It can either be smoked, vaporized, taken in liquid or eaten in the from of a cookie as well as candy. Therefore the legalization is definitely a big event in Canadian’s eyes as they can now use it for entertainment.

The effects

First of all, the legalization of cannabis will have a constructive impact on Canada’s economy. According to TD bank, legalization of marijuana would boost Canada’s real GDP and it could bring as much as 8 billion to the nation’s economy. The supply of cannabis is always very stable. Most marjuanan used in Canada are made domestically, just 8% of its total consumption is imported. On top of that, the pot industry are projected to be bigger than tobacco industry in Canada. It also helps to create jobs and increase the employment rate.

Experts predicted that it will be a big business. The based market value for recreational cannabis ranged between 5-9 billion. Consumer spending on legalized marijuana are expected to be around 800 million to 1 billion in 2017. Experts predicted that it will become a big business. Also, cannabis stocks were best-performing stock in 2017, valued to around 5 billion. After legalizing, the demand for cannabis would rise and it also helps to attract investments. (Refer to appendix A) Consequently, Canadian companies can take advantage of this and compete internationally.

Currently, Canada’s fiscal policy is focusing on lowering government debt and simplify compliance as well as administration costs. However, they would need to impose extra taxation on marijuana buyers. Their fiscal policy will require adjustments to be more contradictory to control the sudden rise in the demand for marjiana as well as to maintain a certain level of business investments in the cannabis industry and consumer spending.

While for their monetary policy, currently, their main goal is to maintain a stable inflation-control target and a flexible exchange rate. In this case, adjustments are also needed to make the policy become more contracionary as a way to combat the possible inflation caused by the sudden boom in the purchase and money spend on cannabis to stabilize the economy. They could also try to increase the interest rate a bit to avoid the overborrowing of money that could be spent solely on the marijuana business.

In terms of taxation, there will be an excise tax of 1% per gram of marijuana or 10% of the final retail price. And the revenue of pot sales is divided between Ottawa with 25% and other provinces with remaining 75%. Also, provincial and federal taxes will be applied on top of the excise tax as the sales tax varies from province to province. Moreover, there is a limit of a maximum possession 30 grams pot and usage in vehicles are banned. There will be both public and mixed pot sales across Canada with prices ranges from $6 to $13. (Refer to appendix E)

Secondly, the legalization of cannabis certainly bring benefits to the government. The sales will gain extra tax revenue from legalized pots. The parliament budget office predicted that the nation will gain around 350 million to 960 million through taxation. As a result, foreign investments will now be available in the pot industry which would possibly become part of the economy.

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Thirdly, in terms of employment, a newly cannabis industry would grant a lot of job opportunities for Canadians. Cannabis-based jobs have tripled last year and the interest for those jobs have quadradred. In the future, it is estimated that pot legalization would benefit the labour market. For example, transportation corporations and agriculture manufacturing companies. Nevertheless, the supply of marjiuana would be unable to satisfy the sudden ecualtion in demand. Subsequently, some of the users might need to go underground again. Therefore it’s going to be a challenging transition period for Canada and only time will tell how much the economy would benefit from it.

Fourthly, it’s certainly a good sight for businesses in the long run. A dozen of pot manufacturers were added to TSX Venture exchange as well as Canada security exchange listings. 51 enterprises have received permission to start growing cannabis plants. Blommberg predicted that the production of marijuenaa would grow by ten times. Consequently, it would encourage more businesses to set up as their future expectations for profits escalated.

Furthermore, citizens could escape from getting marjiuana custody charges. Although the charges regarding to pot have declined in recent years (Refer to appendix C), the legalization is still undoubtedly benefit for citizens. Subsequently, this can prevent them from getting caught into legal troubles.

Last but not least, the World Health Organization(WTO) is suggesting to reclassify cannabis under international treaties which could encourage more nations to revoke their prohibiting laws, even though the legalization is for non-medical use and it still technically contradict to the international conventions. They are planning to remove whole-plant marijuana from the Schedule IV, the prohibitive category of the 1961 Drug Convention that was signed by many countries worldwide. The actual effect of this change is sort of limited, countries won’t be allowed to legalize cannabis and still be able to keep close compliance with international treaties, however, their political indication are difficult to predict. This demonstrated WTO’s misunderstanding about the harmful effects of marjiana and its medical benefits for decades. As in recent years countries such as Canada are starting to reform their majuanwe policies. Consequently, this could help Canada a lot in trading with countries that have already legalized matjuenena, such as Mexico, Argentina, Spain, the Netherlands and Switzerland. As a result, they might also experience a lower tariffs or quota when trading with those countries due to this new move by WTO.

In-depth analysis on legalized marijuana

Even though the legalization is a jubilation for most Canadians, the supply is not as optimistic as it seems. According to MTL blog, Just 2 weeks after legalization, shaved begin to be found empty at stores. Certain stores in Quebec have to stop operating for 3 days in order to prolong its draigin stock and stability. Also, global news stated that shortage could last for years and it will be time consuming for suppliers to produce another pile of marjuana. Moreover, Marketwatch pointed out that the process of setting up a nationwide scale legal marijuana supply chain is complicated and therefore many retailers have limited quantity available to sell. The drug is legal now but it’s just unavailable. The absence in licensing also keeping the supplies low. 175 cities in Canada now are licensed to sell or manufacture cannabis. However, there are just 25 licenses being delivered in Ontario, Canada’s most populous province. Therefore this fully demonstrated the supply issues.

Also, the context of majruana have proposed a challenge to lawmaking. Police in Quebec have revealed that they are unsure of enforcing laws that regulate the transportation of pot in vehicles. As a result, they arrest all the drivers despite some of them followed the law properly. Moreover, unlike alcohol, there is no road test available for cannabis.(Refer to appendix D) Although they would issue fines and arrest those who the officers think are offended drivers. This method has a lot of room for misjudgement and inaccuracy. Sometimes the police would require the suspect to undertake a blood test at the police station. However, it’s not sustainable and it time consuming, and resources to carry out the tests. As a result, if there is no clear guidelines and instrument to enforce laws after legalization, the police force would be left on their own and the problem will exist for years.

Moreover, the amount of black market transactions have raised even after legalization. This is mainly due to inadequate supply, poor accessibility and consumer's discontentment. For the legalization to be successful, the government and suppliers have to work together to address the demands of consumers which now they are not able and willing to do so. The current pricing of pot is strong, about $190 per ounce. The price in the black market is 40% cheaper than government-licenced wholesalers. (Refer to appendix B) Subsequently, there are still motivation for buyers to pursue marjuana from the black market.

Apart from that, the country has to address the consequences for people who are imprisoned for custody crimes that have became legal. Canada is eagerly helping citizens who have already served their time. However, those who still remains in prison need assistance as well. Some of them might being charged due to the illegal use of cannabis. But after the legalization, some of their crimes would no longer be a crime anymore now. As a result, this also represents that they should have the right to be free from prison and the government need to offer aid to those type of criminals.

Furthermore, The laws demand corporation to adopt transparent packages and fixed colours, styles as well as size. These requirements have been challenging for suppliers to precisely measure how products varies and suggest the best doses to buyers. Although these laws are made to avert corporation from marketing their goods to children, it made it burdensome for consumers to distinguish poorly stigmatized products with the ones they truly need.

Additionally, They have put an excellent effort in constructing a program which aids to crush out illegitimate competitions and unlicensed pharmaceutical dealers. Nonetheless, they won’t leave the market without competition. Unlicensed pharmaceutical dealers in Canada countered the legalization with low prices to maintain their competitiveness. Subsequently, the country needs to address this as soon as possible.

Conclusion

The declaration of the legalization have been smooth and it has created excitement across the nation. After legalization, the US started to invest their money on Canadian cannabis suppliers, wholesaler and pot planting technologies. Corporations in Canada are starting to invest in the states market and hope to licence some of their products. Therefore they could establish a profitable export market for various nations that have already legalized marijuana. Moreover, through the legalization of marjiuana, Canada widely recognized that fighting with residents who aren’t harming others or committing butal actions isn’t worth it so granting the freedom to possess cannabis instead of restraining them is the government's mindset when deciding to legalise it or not. However, there is a bright future with the establishment of the new cannabis industry and market for Canada. When the industry become mature and developed, it would benefit Canada in every way possible.