By Andrew Shore and James Jochum
Shocking to many is the fact that Canada is consistently one of America’s top trading partners and currently our second largest behind China. Moreover, Canada is the world’s largest purchaser of all U.S. exports and the largest purchaser of American agricultural products. As of April, 18.3 percent of U.S. exports went to Canada, positioning it far ahead of Mexico, our next largest export market. Germany is our 5th overall top trading partner and our 6th largest export market and Australia, while not in the top 15 for overall trade or imports, does provide us with our 4th largest trading surplus.
All of these countries have something in common – varying degrees of a legal cannabis industry that will eventually provide new revenue streams to those forward thinking enough to see the robust economic opportunity and hammer out a trade agreement. Canada has legalized the adult use of cannabis, making it a major untapped market opportunity for legal growers who I can only assume will lobby their home governments for a trade agreement giving them market access. While cannabis is illegal in Germany, there are exceptions to the Narcotics Law that give prosecutors discretion for possession of “small amounts” for adult consumption and medical use became legal in 2017. Some territories in Australia allow adult use while medicinal is permitted nationwide.
The U.S. Congress is given the sole authority to “regulate commerce with foreign nations” and make treaties with foreign governments under Article I of the Constitution. No state can authorize its growers to export to foreign markets without the consent of Congress. While the industry works towards passage of the STATES Act, those who believe cannabis should reside squarely within our borders can rest assured that there would be no abrogation of federal authority over international trade matters under the legislation.
It’s important, though, to understand that other nations may ultimately engage in the cannabis trade and numerous issues surrounding that effort will take time and talent to develop. The major industrialized nations have entire bureaucracies dedicated to handling negotiations and enforcement of trade agreements.
The United States Trade Representative (USTR) is our Presidents’ counsel in these matters and is backed up by an entire department of political and career deputies with geographic and sector expertise. The European Union handles such matters through the Directorate General for Trade (DG-Trade) while the Canadian Trade Commissioner Service is their lead.
Trade agreements form either on a bilateral or multilateral basis. The North American Free Trade Agreement (NAFTA) for instance, is a multilateral agreement between the United States, Mexico and Canada for the purpose of lowering and opening up a variety of services. The United States has bilateral (one-on-one) treaties with 20 countries. These agreements take years to develop and as they implicate numerous sectors including services, intellectual property and goods. Once the agreement is negotiated Congress must approve it and the President signs it.
As countries begin the process of negotiating an agreement there are a multitude of special interests that begin to pursue their parochial goals. These are all in competition with each and the discussion can be very binary. Apple growers may win on one side where car manufacturers are the offset for the other. While most nations have attempted to make the process more transparent, it remains extremely opaque and out of the reach of less well-to-do industries. There is generally public forum, called stakeholder meetings, that allow industries to air their views and concerns, but the real work is done behind closed doors among people who know the system and how to work it.
Implementing and enforcing the agreement will again bring in numerous stakeholders each vying to ensure preferential treatment for their industry. Violating a trade agreement can result in harsh penalties – especially in the multilateral context. The United States illegally locked the country of Antigua and Barbuda out from offering its’ remote gambling services. The World Trade Organization (WTO), a body that includes 164 countries who have agreed to free exchange of thousands of goods and services decided that the U.S. owed $21 million a year to Antigua in lost trade. Seemingly a paltry sum until you consider that the amount accrues in perpetuity until the U.S. resolves the dispute.
Cannabis is certainly not part of the underlying WTO agreement now and, to reiterate, the STATES Act would have no bearing on it being part of any trade deal currently in force. This merely articulates the consequences for engaging in an agreement that has not been carefully planned and executed. Opponents will attempt to use every tool at their disposal to stop trade in cannabis and build in any number of trap doors for those who make even the most minor misstep.
That said, the global cannabis market is growing. Countries are adopting a wide range of legal regimes and trade is an issue that must be contemplated sooner, rather than later, given the amount of runway required to build these international agreements.
About The Authors
Jim Jochum, Partner with Jochum Shore & Trossevin PC (JST), co-founded the highly-regarded, boutique law firm in 2007. For more than 20 years, Jim has worked in and lobbied before the U.S. Congress and Administration, and has worked closely with Members of Congress and Senators to design and execute effective political strategies. A hands-on leader, he has been involved in lobbying initiatives, political campaigns and various legal challenges in the U.S. and in a number of international markets.
Jim has extensive experience in the international arena, guiding a wide range of multinational clients through the U.S. political and regulatory process. Clients retain Jim for his expertise and judgment on complex matters, such as trade remedy litigation, policy development and advocacy on U.S. export controls and sanctions, the negotiation and implementation of international trade agreements and national security (CFIUS) matters.
Prior to entering private practice, Jim enjoyed a distinguished public sector career in which he served in senior positions in both the Bush Administration and on Capitol Hill. Jim was appointed by President Bush and confirmed by the U.S. Senate to two senior trade positions, Assistant Secretary of Commerce for Import Administration and Assistant Secretary of Commerce for Export Administration.
Jim also has experience as a Senior Congressional staff member for two U.S. senators. For five years, he served as International Trade Counsel and Legislative Director for U.S. Senator Chuck Grassley (R-IA), the current chairman of the Senate Judiciary Committee. Jim served as the lead international trade counsel on the Senate Banking Committee, under the chairmanship of Senator Phil Gramm (R-TX).
Jim is a recognized thought leader on issues that intersect international economics and national security. He is a published author and currently serves as adjunct professor at both Georgetown University and American University. A graduate of the University of Iowa School of Law, he holds a Bachelor of Arts degree in Political Science from the University of Iowa. James is a member of the District of Columbia and Wisconsin Bars.
He and his wife, Rita, live with their daughter in Oakton, Virginia.
Andrew Shore is a founding partner of Jochum Shore & Trossevin. Previously, he was a Partner in the Washington, DC office of Mayer Brown LLP. As the Chief of Staff for the House Republican Conference, Mr. Shore was one of the senior advisors to the Congressional Leadership, a position that earned him accolades on the Hill and has led to regular quotes and appearances in the media since moving to the private sector.
He has parlayed his experience as the Policy and Coalitions Director at the House Republican Conference into having a hand in several major private sector coalitions. Mr. Shore built and leads the Owners’ Rights Initiative which is a coalition of Internet resale platforms, libraries, retailers and others protecting your ability to resell or give away the goods you own. He was one of the main advisors to the Digital Fourth Coalition seeking to ensure personal privacy for electronic communications against unwarranted government intrusion. He was the chief legislative strategist for NetCoalition in the campaign to defeat the so-called SOPA and PIPA Internet regulation bills. There he helped a small group of tech companies wage a political campaign against the massively funded movie, music and luxury goods manufacturers.
Mr. Shore does not shy away from high profile clients. He represented the Antigua Online Gaming Association in their landmark dispute against the United States to open the door to cross-border internet gambling. He currently represents the New Federalism Fund in their efforts to protect state cannabis laws and fix the outdated banking and tax laws impeding the industry. They were among the first Republicans in the cannabis advocacy space.
He has traveled and lectured in Serbia on behalf of the International Republican Institute assisting political operatives and elected officials in the development of communications and grassroots tools.
Mr. Shore spends an extensive amount of time with innovators working on behalf of companies like Snapchat, Google and eBay. His passion project is the journey to fund a prize competition to build an artificial kidney. Working with the American Society of Nephrology, he raised awareness of the total lack of early stage treatment for people with kidney disease and the $35 billion dollars spent in Medicare for people in renal failure. Every day brings them closer to the launch of the competition that will radically alter the healthcare landscape.
He is a graduate of the George Mason University School of Law, and holds a Bachelor of Arts degree from the University of Kansas. He is a member of the District of Columbia, Supreme Court and Court of International Trade Bars’. For three years he was Chairman of the Board of Directors of the Friends of the National Zoo. He was recognized as a top Congressional staffer by Roll Call and The Hill. During a brief hiatus from politics, he launched the tech startup HillZoo.com.
A native of Glencoe, Illinois, and an honorary Texan, he and his wife, Cindi have two children and currently reside in Arlington, Virginia.
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