Cannabis Consultations: Answering questions with more questions

 

The only thing clear about the legalization of cannabis is – there are more questions than answers. Since the Trudeau Liberals foisted responsibility of delivering the stash, provincial governments have been hunting for a flashlight to see through the policy smoke.

In Nova Scotia, Justice, Finance and Health and Wellness are co-leads on the file, but there are lots of other folks who have a stake in this including Business, Community Services and Education. The conflicting priorities and broad implication of this massive policy piece were clearly on display at the consultation session I attended this week.

From the medical community, there is deep concern about the accelerating proliferation of cannabis use among youth. For good reason. More and more evidence is piling up around the impact more potent forms of cannabis have on adolescents’ brains undergoing rapid and extensive development. Instances of schizophrenia among younger and younger cohorts have been growing significantly in the last 20 years, coincidentally tracking with the increase of both the use and the potency of the product.

The number of youth (22%) and young adults (26%) who used cannabis in 2013 was more than two and a half times that of adults 25 and older. But, let’s put that in context – 60% of Canadian youth between 15 and 19 drink alcohol. There was lots of discussion about how legalization, taxation, and control must put the binders on youth access to cannabis, but if our experience with alcohol is any indication, we should keep those expectations in check. I will admit however, that train has left the station.

It’s now up to the provinces to figure how to implement this policy pronouncement from on high and the public consultation has begun. MQO Research in doing a handful of facilitated roundtables and there’s an opportunity for online input at http://novascotia.ca/cannabis.

The questions posed in the online survey and at our roundtable session deal with the following; Age restrictions, where folks can or should be able to smoke it, how we deal with impaired drivers and what the delivery model should look like (who should sell it and how).

On the question of age, the medical community says the age for legal use should be around 25. While those arguments are science-based and clearly well-intentioned, I’ll refer back to the usage rates of alcohol with an existing restriction of 18 or 19. Once cannabis is a legal product, the likelihood that usage among youth will decrease, is a pipedream. In my opinion, and this is my opinion, societal acceptance of cannabis as a legal product will not discourage access and use among youth any more than it has discouraged access to alcohol or porn. Setting the legal age at 25 would be seen as laughable given current usage statistics. Restricting or reducing usage will depend exclusively on vigorous education campaigns and severe restrictions on marketing to kids and product oversight.

On the topic of where folks can smoke it, there is some consensus the province should stick with its smoke-free places legislation, but other questions emerge. There are those who feel users of medical cannabis should be able to smoke it at home. If that’s the case, how do differentiate between medical and recreational cannabis use and how do you balance the rights of those who own or coexist in apartment complexes and don’t want their properties to smell like a Negril nightclub. You get the sense there will be lots of work for lawyers in days ahead.

As for the impaired driving question, apparently, there is no answer. Strangely, the question posed was about the severity of penalties for driving while under the influence of cannabis. Police still don’t have a chemically based way of estimating what the drug is doing in the brain. A blood test exists that can detect some cannabis components, but there is no widely accepted, standardized amount in the breath or blood that gives police or courts or anyone else a good sense of who is impaired. So in light of no available tests reliable enough to determine the level of impairment among cannabis users, why are we talking about penalties? I’m sure Crown lawyers are really looking forward to this busy work. There is consensus, however, that getting drunk, getting high and then driving is a very poor idea indeed.

The fourth subject area dealt with how cannabis should it be sold in Nova Scotia? CFIB members in the province are evenly split on this issue. When asked in 2016; should government agencies (e.g. liquor commissions) be exclusively responsible for the retail sale of marijuana? 41% said YES, 41% said NO and 14% were UNSURE.

There are arguments for a public sector monopoly, except none of them are particularly compelling and not surprisingly, all center on command and control. A public sector monopoly, such as the model in Ontario and the recently announced direction in New Brunswick, seems simply to be the path of least resistance for politicians and bureaucrats. Why they believe the public sector delivery model of anything is the gold standard remains perplexing.

There are other questions with a public sector monopoly which need answers. Will public sector salaries/benefits and bricks and mortar costs add to the final cost to the consumer? Add this to the federal and provincial tax, are we leaving the door open for the underground economy to undercut and continue to thrive. What are the implications of being regulator and retailer? The decision has been already made not to co-locate sales with alcohol, so why would we build another bricks and mortar version of the NSLC or LNB? When New Brunswick rolled out their public sector monopoly this week, one staggering question was not even addressed…the cost.

The government should carefully examine the option of private sector retailers rather than simply defaulting to building another bureaucracy. Politicians also need to answer this larger question; should selling recreational cannabis be a core government service and can we afford spending precious tax dollars on building the required infrastructure to do so? Are there better options for generating external private sector investment with appropriate government oversight? My guess is there would be an entrepreneur or two willing to pony up some dough for the opportunity to sell legal pot. Just sayin’.

Then there’s the issue of online sales. This system, by most reports, has been working just fine for medicinal cannabis, however, there is resistance emerging as some folks feel children will now gain access to credit cards and somehow game the system. Note to skeptics, children are already buying weed. Having them input online credit information, wait for days or weeks and sign for packages at the door from bonded delivery agents will not make the process easier for them. (“Hey Mom, did that FedEx package for me arrive?”)

There were also puzzling omissions in the consultation. For example, there is little guidance for employers or employees on implications around occupational health and safety issues or work restrictions. Additionally, there has been no indication of how the provincial governments are creating any alignment of regulation either in the region or nationally. Does this mean we will end up with another massive patchwork of regulatory regimes?

As you can see, legalizing cannabis is creating many more questions than answers, and we haven’t even started with the edibles. Gummy bear anyone?

The Atlantic Provinces “special snowflake” syndrome.

special-snowflake

The term “special snowflake” is generally used as a term of derision in the service industry. It comes from the term parents may use for their singularly wonderful child being “special”, like a “snowflake”.

After being popularized in the 1999 movie Fight Club, the term has transmuted into a sneering reference to those who feel they are or-so-very unique, but generally fall into columns of all-too-common attributes.

Kind of like our provincial governments.

In many ways, Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland and Labrador are indeed unique. The geography is somewhat different, the weather is more severe in some areas and in some locales, we speak in unique and charming dialects.

Beyond that, all of us, all 2.4 million Atlantic Canadians, are dealing with pretty much the same thing. Our economies are primarily resource based, we are in debt up to our ears (personally and publicly) and for a population slightly smaller than downtown Toronto, we are grossly over-governed with far too many people living on the public dime.

22.6% of all jobs in Atlantic Canada are in the civilian public sector. That’s fully five points above the national average.

To add to this problem, the public service continues to grow while public sector unions complain about “austerity” when governments simply try to reduce the speed of spending growth. There has been only one year in this century that Nova Scotia has seen a drop in the percentage growth of program spending, while most years spending has far exceeded the benchmark of population growth and inflation.

Do you feel we are getting 3 billion dollars worth of better government than we did in 2007? I didn’t think so.

To govern us across this region we elect almost 200 federal and provincial politicians and if we are counting just the major census areas (not including small villages, towns, county and other governments) we elect a total of 137 municipal councilors. To manage just the municipal and provincial affairs of the region we are forking over in excess of 33 billion dollars to politicians and the public service.

If we were getting absolutely awesome service from our over-investment in politicians and the public service, perhaps we wouldn’t have reason to complain. If we were getting “World Class” public services, we could all look at our tax bills and rejoice at the universal higher standards of living here in Atlantic Canada.

Except we don’t because the vast majority of our citizens know our total tax burden is much too high and “government customer service” is the punchline to a joke.

For mostly parochial or political reasons, governments in Atlantic Canada have historically felt our uniqueness trumped all. Because our respective provinces were somehow unlike any other province in the region, it was necessary to have separate provincial regulations, laws, and labour standards reflecting our “specialness”.

Not so much. There is no longer any rational economic justification for the layers of unnecessary governance Atlantic Canadians must contend with. A recent APEC report clearly explains the problem and quantifies the burden, and it isn’t pretty.

However, a glimmer of hope has arisen in our region. Perhaps because of the tireless lobbying of group like CFIB, or maybe the stars lined up to provide four political parties of the same stripe in power at one given time, or perhaps just because of the urgent need to finally try to address the problem, we have a body to attack some of our ridiculous regional redundancies.

With Newfoundland and Labrador signing on in December to complete the quartet at the Joint Office of Regulatory Affairs, the region now has a central tool to start dismantling some of the unnecessary costs and confusion that comes with four sets of rules to do business.

While such an event may have only titillated the wonkiest of public policy aficionados, it could prove to be a pivotal moment in the political and economic evolution of our region.

If the four governments finally come to grip with reality and accept the tax load on our shrinking population to support our unnecessary layers of government is unsustainable and must be lowered,  if they can come together to find governance efficiencies between provinces and enact sensible regulatory and interprovincial trade policy, perhaps Atlantic Canada has a fighting a chance at being a special snowflake.

Of Trade and Liquor and Lawyers.

http://www.cbc.ca/news/canada/new-brunswick/gerard-comeau-border-alcohol-ruling-1.3554908
Gerard Comeau after a judge dismissed a charge of bringing too much alcohol into New Brunswick because it violated free trade provisions in the Constitution. (CBC NB)

A few years ago, Gerard Comeau, a retired steelworker from Tracadie, New Brunswick, went on a 185 kilometre booze run to Pointe-à-la-Croix, Quebec. Like countless other folks in New Brunswick, Gerard opted to make the two-hour drive to cross over the Restigouche River into the neighbouring province to pick up cheap booze which often sells at half the price of the same product in the New Brunswick Liquor Corporation (NB Liquor) outlet.

When Gerard brought his 14 cases of beer and three bottles of liquor back home that day, little did he know he was triggering a series of events which would place him in the company of our Fathers of Confederation. Sir John A. MacDonald and George Brown’s healthy taste for tipple notwithstanding, Gerard had something more in common with the framers of the Constitution: the desire to promote free trade. Gerard’s free trade efforts, however, led to him being charged with illegal importation of alcohol.

Three years later Mr. Comeau showed up for court. With the help of some constitutional experts and lawyers, Gerard argued that Section 134 of the New Brunswick Liquor Control Act is unconstitutional.

New Brunswick’s regulations, like Nova Scotia’s complex assortment of liquor laws, are empowered by a 1928 federal statute, the Importation of Intoxicating Liquors Act. It demands alcohol only move in or out of provinces with permission from its liquor control board. It was designed primarily to stop bootlegging as Prohibition was lifted at different times in different jurisdictions. It’s also a pretty handy law should a province want to enable a monopoly and jack up its prices without having to consider all that messy stuff like supply, demand and other market forces.

When they got together in Charlottetown, this isn’t quite how the founding fathers envisioned our free trading Dominion.

In his decision, Provincial Court Judge Ronald LeBlanc dusted off our history and ruled that New Brunswick’s restrictions on bringing alcohol into the province violate the Constitution’s free-trade provisions. LeBlanc cited Section 121 of the Constitution Act; “All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.”

Judge LeBlanc correctly recognized and emphasized free trade between the provinces was the intention of the signatories and a founding principle of Canada.

To find the turning point between the signing of the Constitution and when our free-trader Gerard was charged, we need to go back to the 1920s. During the height of the Prohibition era, the Supreme Court of Canada (SCOC) was asked to rule on an interprovincial trade dispute and, in the process, essentially gelded the free trade provisions in Section 121.

As the story goes, the Canada Temperance Act (CTA) governing the sale of liquor finally came into force in Alberta in 1921. In February of that year Gold Seal, a liquor retailer in Alberta, asked Dominion Express to deliver some liquor to customers outside of Alberta. Dominion Express refused because it felt that to do so would violate the federal CTA. So began Gold Seal Ltd. v. Alberta (Attorney General) which eventually made its way to the high court.

In the Gold Seal decision, the SCOC’s interpretation of Section 121 limited its application to prohibiting only interprovincial “customs duties.” For what some have advanced were purely political reasons the SCOC kicked Section 121, and with it the free trade intention of the Fathers of Confederation, to the curb.

Since then, successive politicians, courts, government officials, special interests and political constituencies in every province have used the Supreme Court’s ruling to successfully impose a myriad of trade schemes and regulations on everything from eggs, wheat and coffee creamers to truck parts and, of course, liquor.

However, the LeBlanc decision in the Comeau case has drawn back the curtain on a very important and equally inconvenient truth. Provincial liquor control regulations, which provide the foundation for our provincial liquor monopolies, including the NSLC, may not pass muster according to intention of the constitution.

Last Friday, the New Brunswick government announced it is seeking leave to appeal the Comeau ruling directly to the New Brunswick Court of Appeal. The federal Conservatives are also calling on the federal government to act as an intervener if the Court of Appeal agrees to hear it and are also asking the Trudeau government to refer the case to the Supreme Court to clarify Section 121.

So what does this all mean for entrepreneurs and small business in Nova Scotia? It could mean a great deal.

As a backdrop to all of this, the Premiers are embroiled in retooling the Agreement on Internal Trade (AIT). A deadline for an agreement passed March 31, 2016, but hope remains something will eventually get hammered out. There is some urgency as international trade agreements, such the Comprehensive Economic and Trade Agreement (CETA) with Europe and the Trans-Pacific Partnership (TPP) are coming into play. Why the urgency? Without change, under these new agreements, we may end up with foreign companies having greater access to opportunities in Canada than firms located in a neighbouring province or territory.

We’ve seen some regional progress on this front with the New West Partnership between B.C., Alberta, Saskatchewan and Manitoba and last year the Atlantic Premiers signed the Council of Atlantic Premiers’ (CAP) Red Tape Reduction Partnership and opened the Joint Office of Regulatory Affairs. All moves aimed at streamlining the flow of business between provinces.

In fact, just last month at a CAP meeting in Annapolis Royal, in an under-reported but nonetheless significant development, Premiers McNeil, Gallant, MacLauchlan and Ball agreed to advance three specific recommendations to reduce trade barriers brought forward by business groups led by the Canadian Federation of Independent Business, the Atlantic Chambers of Commerce and Canadian Manufacturers and Exporters.

So while the Premiers seem to collectively understand internal free trade is an urgent priority, the Comeau case could force the issue. If the case is referred to the SCOC and should that ruling be upheld, it will have profound implications for not only liquor regulations, but it might well call into question the constitutional validity of the tens of thousands of other interprovincial trade restrictions, prohibitions and conditions on business now in place; restrictions which are estimated to cost our national economy upwards of $14 billion every year.

It’s also encouraging the Atlantic Premiers are asking business for concrete recommendations to address regional trade problems. CFIB believes this is another step in the right direction. We encourage business owners to bring forward red tape and trade issues which require attention and we will be monitoring to ensure governments respond with solutions. If you do business in more than one province and you’re running into red tape between jurisdictions, CFIB wants to know about it.

With liquor regulations under the microscope, perhaps now is the best opportunity to assist our burgeoning local wine, craft beer and boutique distilleries. These small businesses are providing important economic growth opportunities, especially in rural areas. Eliminating archaic, Prohibition-era liquor regulations is something the Atlantic Premiers should get out in front of now.

This could have enormously positive impacts downstream in the accommodation, food and beverage and tourism industries. More and more entrepreneurs in Nova Scotia are risking their own capital and creating ventures in these sectors which are showing tremendous possibilities. Government needs to create the right environment for business and then get out of the way.

Eliminating cross-border restrictions on trade of alcohol products being manufactured throughout our region is a good place to start looking for solutions. It is one example of a broader need to remove barriers to business. Allowing more competition and freeing up the flow of commerce by eliminating restrictions on internal trade is an idea whose time has arrived.

Originally published in the Chronicle Herald, June 7, 2016

 

Rethinking the “bank of Nova Scotia”…a step in the right direction.

bank-of-nova-scotia-100 (2) 

As witnessed on Thursday by the Finance Minister Diana Whalen’s fiscal update, the government’s financial picture is troubling. The deficit is at $680 million for 2013-14, the net debt sits at an all-time high nudging 15 billion, total revenue down $340 million from last year and department spending has grown by $70 million.

 A declining, aging workforce is a rock; a tax regime imposing punishingly high rates on the population to maintain service levels is a hard place. Premier Stephen McNeil and his Finance Minister clearly are in-between with some tough choices ahead, but it’s time to make them.

Two weeks ago, Michel Samson, the Minister of Economic and Rural Development and Tourism quietly announced a realignment of responsibilities in the distribution of public money to the private sector.

Nova Scotia Business Inc. will now be handling business development and delivering assistance programs including the Capital Investment Rebate and the Small Business Development Program taking crucial decision making power off the cabinet table. 

Eligibility requirement will be more stringent to ensure there are adequate levels of private sector money out of the gate and funding will be tied to economic principle such as productivity improvements, competitiveness and innovation. These are all commendable and sensible moves by this government.

The positive news in this is the apparent de-politicization of decision making when public money is handed over to private business as investment. This should be welcomed as an important step in the right direction.

But there is a glaring irony. The headline stated “the private sector would lead economic growth” and subsequently announced the arms-length government agencies that would now be responsible for doling out public money in the form of loans, grants, payroll rebates and subsidies.

While this new structure under the guidance of NSBI is immeasurably more sensible than elected officials picking winners and losers at the cabinet table, it does not address the underlying problem of luring business growth through artificial, government subsidized competitive advantages.

Year after year, in CFIB pre-budget surveys, Nova Scotia small and medium size businesses have stated emphatically that assistance to business should be broad-based tax relief and elimination of unnecessary regulatory burden or red tape.

While this new direction is encouraging, it is treating a symptom, not the disease. Reliance on government hand-outs has grown not because business can’t survive on their own but because when one business is given an artificial, temporary, competitive advantage other businesses are naturally going to look to government for similar treatment.

If this government truly wants to address this addiction it must start the process of weaning businesses off government assistance programs and create a truly level playing field with incentives for the investment of more private capital, broad based tax relief and sensible, clear regulation.   

The tax and regulatory review being conducted now is a tremendous opportunity to effect meaningful change to the tax code to achieve these goals and set the province in a better direction. It will take courage and vision. The same courage and vision demonstrated by every entrepreneur starting up a small business.