Israel Making the Case for Federal Legality in America
Israel has historically been a world a leader in innovation, science, and technology. Cannabis is part of that history. Israel has been on the forefront of cannabis research, being the first country to isolate THC in 1964. And today Israel has passed Germany as the world’s leading importer of medical cannabis flower, importing over 6 metric tons (13,200 lbs) in 2020 so far. The United States should look at this as an inspiration for economic opportunity and a way to help its trade deficit.
The international medical cannabis trade market has been increasing over the years as it has become legal in more and more nations. The United States first started importing medical cannabis in 2018. Just one year later the US imported nearly $900 million in just medical cannabis oil. The entire medical cannabis oil export market in 2019 was $2.9 billion. While not an overwhelming market today, the trend is encouraging.
The reason why America has been importing cannabis is because the DEA must certify cultivators for medical grade cannabis for research. Believe it or not, the DEA has historically been slow to issue cultivation and manufacturing licenses. The DEA recently recognized the dearth of cultivators and product relative to demand and increased its annual production quota by 575% in 2020 from from its 2017 quota. It is also issuing hundreds of more cultivation licenses.
This brought to light an interesting question: why does America have a trade deficit in an area we have a global competitive advantage? America has considerable agrarian space and greater expertise than most nations in cannabis cultivation and manufacturing. America's sprawling and diverse environments provide some of the best cannabis cultivation conditions in the world. America’s indoor cultivation experience from over 20 years of medical cannabis legalization gives us a considerable head start. America is an early mover in cannabis, and has an advantage in manufacturing oils and other form factors.
Yet, China is the world leader in medical cannabis oil exports, followed by India. And America has the largest trade deficit of any nation in the world trading in medical cannabis.
Federal illegality explains this odd situation. In order to legally cultivate, manufacture, or export medical cannabis, an operator must be federally certified. Because the federal government has traditionally viewed cannabis as a law enforcement issue, it has exerted tight control over certification. This control led to fewer facilities and cultivators being certified than could meet only the United States market demand. This artificial scarcity secondarily cut the legs out from under the industry stopping it from becoming a dominant exporter.
Much of this debate is forward looking. The entire annual medical cannabis trade market is just a fraction of a percentage of the United States annual trade, and even a fraction of monthly international commerce for a state like California. But cannabis is trending towards being an over $100 billion global market, something that should excite and unite businesses, investors, and government.
Policy makers should subscribe to the advice of the Great One, Wayne Gretzky, who attributed his success in hockey to always skating to where the puck was going. The international cannabis trade market is growing globally and will be significant in a matter of years. The government should create policies that encourage U.S. trade power by legalizing cannabis and creating trade friendly policy. The DEA has a role to play in this today, and should further its authorization of certified cultivators and continue to increase its orders for domestic medical flower production.
Cannabis is an exciting and emerging industry. The opportunities and alley to compete today are wide open, and we should act with urgency to take advantage of it. And today, we can thank our friend Israel for starting to shine a light this opportunity.
