Werner's Blog — Opinion, Analysis, Commentary
How big is the cross-border marijuana trade?

Today I talked to journalist Cheryl Chan from The Province about the size of the cross-border marijuana trade. The quick answer is: we don't have good data on it. We now it is large, but exactly how large is impossible to say. In practice, we rely entirely on proxy measures such as police seizures, estimating demand in various places and figuring out where the supply may be coming from, and more esoteric measures such as electricity theft (which is often linked to grow-ups, who need a certain amount of energy to grow a certain amount of crop). Even the most plausible estimates have very wide margins of error. Sometimes it iss only possible to identify trends (changes over time) rather than the actual level.

It is reasonable to assume that the majority of marijuana output in BC goes to other places in Canada and the United States. Of course, marijuana is still a prohibited substance as far as international trade is concerned despite legalization in Washington State and Colorado. Thus there is only illegal smuggling—and thus no trade statistics. The states that have legalized recreational marijuana must grow their own supply locally. Conceptually, legalization will replace illegal production with legal production, and thus will diminish the demand for illegal product from sources such as BC. These BC growers may be partially deprived of a market and may try to sell their product at lower prices locally. There are some indications that the street price of marijuana has been falling in BCover long time periods, as reported in the Vancouver Sun on March 28 (The coming marijuana crash). But not much data is available for the recent months. By some anecdotal evidence street prices have not changed much since liberalization took place in two US states. Washington State and Colorado may not account for the largest chunk of illicit trade of BC growers. Rather, Washington state may be more of a way point for places such as California. Also, growing supply of medical marijuana in Canada will dampen demand for the illegal (recreational) sort. I expect that there will be continuing downward pressure on prices over the next years.

Posted on Wednesday, June 25, 2014 at 15:45 — #Trade | #Health
© 2024  Prof. Werner Antweiler, University of British Columbia.
[Sauder School of Business] [The University of British Columbia]