The term “disruption” in business has become so overused that it has become an empty cliche, but it is warranted in the case of pot legalization, said Andrew Meeson, deputy business editor at the Toronto Star.
“It’s hard to think of an area in Canada that hasn’t been shaken up: not just commerce (from criminal act to booming startup to takeover target in the blink of an eye), but also policing, health care, justice, politics. Even culture (just ask Tommy Chong),” he said.
“If that doesn’t make it the business story of the year, I don’t know what would.”
In an annual poll of the country’s newsrooms conducted by The Canadian Press, business editors and reporters across the country chose cannabis legalization in a landslide, with 60 per cent of the votes cast.
The terse negotiations between Canada, U.S. and Mexico towards a new North American Free Trade Agreement was a distant second with 30 per cent of votes.
Canada’s pipeline conundrum, with the Trans Mountain pipeline expansion now in limbo after a court overturned its regulatory approval in August and a U.S. court throwing out the Keystone XL pipeline’s presidential permit in November, came in third out of eight possible candidates with 10 per cent of the vote.
“Pipelines would have won, hands down if it weren’t for the creation of an entirely new industry in Canada,” said David Blair, a business columnist with CBC Radio. “Rarely, if ever, do journalists get to cover the opening of a new market, especially one that is as controversial as cannabis.”
The world was watching when the country made history with the first legal sale of non-medicinal pot just after midnight on Oct. 17 in Newfoundland and Labrador, due to its time zone being 30 minutes ahead of the rest of Canada.
It marked the beginning of what the New York Times dubbed Canada’s “national experiment,” and the culmination of months, if not years, of preparation by legislators and law enforcement officials at all levels and in each province, territory, and municipality.
While Oct. 17 represented an extension from the initial target set for July, and licensed producers ramped up production in the lead-up, long lines of customers were met with widespread product shortages online and in the relatively few bricks-and-mortar stores that were ready on day one.
Still, many Canadians were simply elated to be able to buy government-sanctioned pot after nearly 100 years of prohibition.
“My new dealer is the prime minister!” said Canadian fiddler and pop star Ashley MacIsaac, who in 2001 had been arrested for possession in Saskatchewan.
But cannabis mania had been bubbling for months before legalization, with retail investors rushing to invest in the latest pot company to list its stock. Cannabis company valuations in the lead up to Oct. 17 soared and some of the banks’ online direct investment platforms were bombarded with unprecedented trading volumes.
At one point producer Tilray Inc.’s stock on the Nasdaq exchange in September hit a peak of US$300, giving the Nanaimo, B.C.-company a market value higher than established Canadian conglomerates such as Loblaw Companies Ltd. and Rogers Communications Inc.
Pot will be cited for years to come as many Canadians’ first experiences with investing, said Pete Evans, senior business writer for CBC News.
“Cannabis mania deserves some credit — and maybe blame — for ushering an entire new generation of primarily young people into making their first stock market investments ever,” he said.
A flurry of merger and acquisition activity in the sector, even before legalization, fuelled investor interest as well.
Aurora Cannabis Inc. was on an acquisition spree this year, buying rival CanniMed Therapeutics for $1.1 billion after a terse takeover battle and later MedReleaf for $3.2 billion.
Alcohol giant Constellation Brands in August announced it was upping its investment in pot producer Canopy Growth Corp. — in the largest strategic investment in the pot space to date — to increase its ownership stake to 38 per cent. The Corona beer-producer also received warrants that, if exercised, would up its stake to more than 50 per cent.
And earlier this month, Big Tobacco came calling, as the number of countries that legalized cannabis for medical use continues to grow.
Marlboro maker Altria Group Inc. said it planned to invest $2.4 billion in pot producer Cronos Group Inc. for 45-per-cent ownership, with an option to increase that stake in the future.
The Altria-Cronos deal gave the overall sector a slight lift, but pot stocks have largely come off their highs after legalization as reality set in and concerns mounted about lofty valuations.
Canadian marijuana companies have found themselves in the crosshairs of short-sellers, as well.
Aphria Inc. earlier this month saw its stock value more than cut in half over three days after two short-sellers targeted the Leamington, Ont.-based cannabis producer with a raft of allegations, including that its recent international acquisitions were “largely worthless.” Aphria has called the allegations “inaccurate and misleading” and is confident in the deal in question, but has appointed an independent committee to review their claims.
Meanwhile, recreational pot supply shortages continue to linger. Several cannabis producers in part blamed supply chain issues for contributing to the shortage and have said they are aiming to increase their production, but it will likely take more time fresh product to hit the market.
Quebec’s cannabis corporation stores continue to be closed from Monday to Wednesday as a result. And in Ontario, where the only legal way for residents to buy adult-use pot is through the government-run online portal, the provincial government said it will hand out a limited number of retail licenses due to the shortages.
The Ontario government initially said it would not cap the number of licenses, but now says it will only be able to issue 25 licenses by April via a lottery system. This deals a blow to a slew of companies who have been putting down deposits to secure prime real estate locations in the country’s most populous province in anticipation of obtaining a license.
“Seemingly overnight, activity that always existed on the margins of society has come into the centre,” said Evans.
“It’s been fascinating to watch the growing pains that have ensued… It will be interesting to see in the coming months and years how and if the reality lives up to expectations for the industry.”
Armina Ligaya, The Canadian Press
PM worries China could target more Canadian goods as fears about soybeans rise
OTTAWA — Prime Minister Justin Trudeau says he’s worried an ongoing diplomatic dispute could see China target imports of other Canadian agricultural products as concerns grow about soybean shipments in particular.
One industry leader said Thursday that, without a clear explanation, Canadian soybean exports to China plunged suddenly from 3.2 million tons over the final four months of 2018 to just 3,700 tons through the first four months of this year.
Relations between Canada and China have deteriorated since the December arrest in Vancouver of Huawei senior executive Meng Wanzhou at the behest of the United States.
China was outraged by Meng’s arrest and has since detained two Canadians on allegations of espionage and sentenced two other Canadians to death for drug-related convictions.
Chinese authorities have also blocked imports of Canadian canola seeds, alleging they found pests in shipments, and have increased inspections and paperwork related to pork.
“When it comes to China, obviously, our top concern is the release of Canadians who are detained in an arbitrary way by the Chinese for political reasons,” Trudeau said in French on Thursday during a visit to France, where he marked the 75th anniversary of D-Day. “We are also concerned by their actions on canola and the potential of other actions on other products.”
Trudeau told reporters that he will see if it’s “appropriate or desirable” to have a conversation directly with Chinese President Xi Jinping about a number of bilateral difficulties later this month at the G20 summit in Japan.
Later Thursday, Agriculture Minister Marie-Claude Bibeau told a parliamentary committee that she’s heard concerns about shipments of Canadian soybeans to China.
Ron Davidson, executive director of Soy Canada, said in an interview that China’s purchases of Canadian soybeans collapsed at the end of last year following a run of very strong exports.
“It’s not a slowdown — it’s a virtual halt,” said Davidson, whose members have reported the drop to Bibeau. “We can see what’s happening, but we aren’t certain why.”
He said it’s not unusual to see soybean exports decrease during winter months, but the speed, magnitude and timing of the crash this time around has alarmed the industry.
Davidson said he’s received reports of Canadian soybean containers held up in Chinese ports for longer than usual as authorities there conduct additional tests. It’s possible, he added, that the drop is partly due to an increased reliance by China on soybeans from other parts of the world.
Soybeans are Canada’s third-most valuable agricultural export after canola and wheat, he said.
Any prolonged crackdown by Canada’s second-biggest trading partner on shipments of key products like soybeans and canola could deliver a blow to the national economy.
New data released Thursday from Statistics Canada showed overall exports of canola fell 14.7 per cent in April after China started turning away Canadian canola seed.
Conservative Leader Andrew Scheer’s spokesman said it’s not enough for Trudeau to be concerned because he’s not a casual observer when it comes to the dispute with China.
“He needs to actually do something,” Brock Harrison wrote in an email Thursday.
“Mr. Scheer has on several occasions urged him to take concrete steps to respond to China’s actions against Canada and send a message that Canada won’t be pushed around. He has refused to act.”
The federal government says it has tried unsuccessfully to send a delegation of inspectors to China to examine Chinese evidence of pests in canola shipments. Canada has also been unable to schedule high-level engagements on the matter despite multiple efforts.
Bibeau told MPs Thursday that Canadian scientists finally had a conversation Wednesday night with Chinese customs officials about their canola concerns.
“They agreed to have more sustained discussions, telephone conferences on the subject — and they did not close the door to the delegation,” she said. “We are still asking for that, but the conversation has been re-activated and yesterday we could feel that we were at a different level … This is encouraging.”
Earlier this week, China’s ambassador to Canada said in an interview that Chinese officials investigated Canadian canola based on regulatory and scientific principles, and provided “concrete” documents to Canada to justify their concerns.
Lu Shaye added that the relevant Chinese departments no longer maintained contact with their Canadian counterparts, suggesting the matter was closed.
—Follow @AndyBlatchford on Twitter
Andy Blatchford, The Canadian Press
China-Canada differences go beyond Beijing’s critical, outgoing envoy: Carr
OTTAWA — Canada’s trade minister is downplaying the forthcoming departure of China’s outspoken envoy to Ottawa, saying differences between the countries stretch beyond anything at the ambassador’s level.
In an interview Wednesday, Jim Carr said the federal government is awaiting China’s decision on its replacement for outgoing ambassador Lu Shaye, who has had harsh words for Canada during a tenure that began in 2017.
“I don’t think that personalities are what would be at the centre of the issue here,” Carr said when asked about Lu’s past criticisms.
“The job of the ambassador is to express the view of his government. I would only assume that whatever is being spoken by the Chinese ambassador to Canada has the full support of the government, so this is an issue that goes beyond the ambassadorial level.”
Sources say Lu, who appeared to be more comfortable speaking French than English, will leave his Ottawa post in the coming weeks for a new position in Paris. Lu, 54, has also served as China’s ambassador to Senegal and as a counsellor for its foreign service in France, according to a biography on the embassy’s website.
His departure comes at a time, as Lu himself described in an interview Tuesday, of “serious difficulties” between the two countries.
Canada’s relationship with its second-biggest trading partner has deteriorated rapidly since the December arrest of a senior Huawei executive in Vancouver following an extradition request by the United States.
China was outraged by the arrest of Meng Wanzhou and has since detained two Canadians on allegations of espionage, sentenced two Canadians to death for drug-related convictions and blocked key agricultural shipments such as canola.
Lu has used strong words when talking about the relationship — for example, he has called Meng’s arrest the “backstabbing” of a friend and evidence of white supremacism.
He also warned of unspecified “repercussions” if the federal government bars Huawei from selling equipment to build a next-generation 5G wireless network in Canada.
Lu was critical of Canada before Meng’s arrest. Soon after arriving in Canada, Lu said he was struck by the negative view of China that he saw taking shape. In a 2017 interview, he blamed the Canadian media for disseminating a negative portrait of his country that depicted it as an abuser of human rights and of lacking democracy.
He said Canadian politicians sometimes had to “bow before media.”
In Lu’s interview Tuesday with The Canadian Press, he said China was not to blame for the ongoing dispute.
“But the Chinese government is waiting to make a joint effort with the Canadian side and meet each other halfway,” he said without specifying the necessary steps toward a resolution.
When asked about the possibility of freeing Michael Kovrig and Michael Spavor — the Canadians detained in China on espionage charges — Lu said their fates are in the hands of Chinese authorities. On China’s rejection of Canadian canola imports over Chinese allegations of pests, he considers the matter closed.
Carr said the Liberal government still hopes to solve the bilateral differences by engaging China on many levels, not just through an ambassador.
“We will reach out to whomever is in that place and make the same arguments to him or her that we’re making now,” Carr said before leaving for Japan on a trade mission to find new markets for Canadian products, including canola.
Carr said Canada is still keen to send government inspectors to China to explore evidence of pests in the canola shipments. But, he added, China has not invited Canadian experts to do so, and there has been no high-level engagement on the matter despite Canada’s efforts.
This week, China increased inspections of Canadian pork products over its concerns about smuggling and African swine fever — an illness that can be devastating among pigs. It came in addition to previously stated Chinese complaints over the labelling of Canadian pork.
Asked Wednesday if the inspections were a sign the dispute had reached a new level, Agriculture Minister Marie-Claude Bibeau declined to speculate and said: “I don’t want to escalate the situation.”
Word of Lu’s departure comes at a time when Canada does not have an ambassador in Beijing. Last winter, Prime Minister Justin Trudeau fired Canada’s ambassador, John McCallum, for going off-script in the government’s efforts to win the release of Kovrig and Spavor. Before his posting to Beijing, McCallum was a longtime Liberal MP and cabinet minister.
Former Canadian diplomat Colin Robertson, who is now vice-president of the Canadian Global Affairs Institute, said Lu’s departure presents an opportunity to reset the relationship.
“We need to find a way to engage,” he said. “Not having ambassadors who are reliable or trusted is a major handicap.”
Lu did a good job of publicly reflecting the Chinese government’s positions and “seemed to take relish in putting it to us,” Robertson added.
“His words aggravated the situation. Behind closed doors ambassadors are also expected to find solutions and try to nuance divisions. Here I see no evidence of serious effort by Lu Shaye.”
Andy Blatchford and Mike Blanchfield, The Canadian Press
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