Legalisation: the chance to right wrongs

New Zealand has a golden opportunity to observe many other jurisdictions that have legalised or decriminalised cannabis and learn from their mistakes. Tess Nichol finds righting wrongs and closing gaps are best done alongside decriminalisation right at the outset.

If New Zealand votes to legalise cannabis in 2020’s binding referendum, we will have a unique opportunity on our hands. Creating a licit market from scratch means the government can legislate for particular outcomes, before the gates are open and the proverbial horse has bolted.

As it relates to harm caused by drug laws, this means there is an opportunity to legislate and regulate a legal cannabis market so that communities who have suffered under prohibition benefit economically and socially from the licit market.

A Drug Foundation survey of Kiwis in July last year showed 49 per cent indicated they would vote to legalise the sale of cannabis in the referendum, two percentage points higher than those who said they would vote against legalisation. These results indicate there is a good chance New Zealand could legalise cannabis sales in the near future.

This would mean following in the footsteps of Canada,where the government legalised recreational cannabis use in October last year, and a number of states in the US including Massachusetts, Washington and California, where legislation has been rolled out to legalise both medical and, more recently, recreational use. New Zealand can therefore look to these countries to see which models are working, and where we could improve in our own legislation should our government find itself in the position to do so, following the referendum.

The infant cannabis industry

Manu Caddie, Managing Director of the Hikurangi Cannabis Company in Ruatōria, reckons legalisation is likely, as long as the referendum question is worded well.

“They’ll probably get it about right for the majority of New Zealanders to be able to say, ‘Let’s give it a go, prohibition hasn’t worked and we need to try something else.’ That’s my read of the mood.”

Hikurangi is purely focused on medicinal cannabis use, but Caddie is well placed to discuss how to achieve equity if recreational use is made legal, as Hikurangi has already considered issues such as whether or not to hire people with criminal records for low-level drug offences (they do).

Drug reform experts and industry insiders agree. Legalisation is a chance to repair harm to communities that have disproportionately suffered from what is often referred to as the “War on Drugs”, that is, the policing of drug offences that has tended to occur in areas of high deprivation with majority racial minority populations. In New Zealand, that has often meant areas with a high Māori population.

A legal cannabis market has the potential to generate huge amounts of revenue in New Zealand, not just for the government through taxation but also for owners of private industry that grows and sells cannabis products. Already, the US market alone is worth some NZ$17 billion and growing. One report has estimated the legal cannabis market could be worth as much as US$146.4 billion globally by 2025 – but who will enjoy the lion’s share of that profit?

Drug reform advocates from Canada and the United States say equitable economic outcomes from cannabis legalisation are a moral imperative, given the fact that most countries follow the same pattern where poor, racialised and otherwise marginalised people suffer most when drugs are illegal. They all recommend what amounts to a three-pronged approach to achieving equity: first, the records of people with low-level drug convictions should be wiped clean; second, those who have suffered through association with the illicit market (whether directly or through living in heavily policed areas) should be actively encouraged to join the licit market; and finally, a portion of tax revenue from cannabis sales should be reinvested in areas that have been disproportionately affected by the War on Drugs.

Advocates have also cautioned that it is better to approach legalisation at a measured pace in order to anticipate and avoid as many problems as possible, as it’s harder to go back and fix mistakes than it is to make changes while the law is still being drafted.
“Have patience,” cautions Oscar Velasco, one of the few Latino business owners in Washington state’s cannabis industry. 

“Really take the time to define what the structure [of legalisation] is going to be. The advantage New Zealand has is [that] they can be the wise person that learns from others’ mistakes. Do your due diligence, research, have conversations with people who have developed industries in other parts of the world.” 

In New Zealand, drug policing has disproportionately affected Māori, particularly in high deprivation areas. Currently, 40 percent of people serving prison time for drug offences are Māori, despite only accounting for about 15 percent of the total population.
Māori are also more likely to suffer other drug harm, such as substance-use disorder, than the rest of our population. Legalisation offers an opportunity to help those with substance-use problems rather than criminalise that behaviour.

Criminalisation plays a big part in discussions about legalising cannabis. Toronto University professor and drug reform advocate Akwasi Owusu-Bempah says the Canadian Government has not indicated it’s willing to expunge criminal records for low-level drug offences, nor reduce felony convictions to misdemeanours.

“We really need to see expungement of criminal records of people who have been convicted of offences that are no longer illegal. Our government has said it will consider pardons. [But] the criminal record still exists; it just indicates that person has been pardoned for an offence.” Importantly, it could be reversed. 

“If another government should come in and decide legalisation was the wrong move, the criminal record could be reinstated, or if the person commits another criminal offence or if the person was deemed to be not of good character, and that’s rather subjective.”

Expungement is beneficial on both a practical level (criminal convictions can stop people from getting jobs they apply for or bar them from certain forms of government assistance such as housing), but it is also important philosophically. 

“Expungement is the government admitting it was wrong and totally wiping clear any trace of that record.”

Owusu-Bempah says this and other missed opportunities have occurred because, in his opinion, the Canadian Government legalised recreational cannabis use with an eye to profit from licit sales and wasn’t so concerned about setting equity measures in place from the get go — something New Zealand should learn from.

“Although the government has had a few nods to the consequences of criminalisation, I don’t think that’s played a major role in their decision to legalise. I don’t think it was the fact maybe half a million Canadians have criminal records for cannabis possession.

“Your indigenous people get screwed like ours do, so I would hope this is one opportunity where they don’t get left further behind.”

Caddie says expungement should be a key issue in the legalisation debate, even though he acknowledges most Kiwis won’t be voting on the legalisation as a justice issue.

“I think it’s something we should be pushing for from the start, and it could be part of the legislation. What that looks like in practice, I guess there’ll be a continuum of severity in the convictions and potentially some will be able to be and others won’t be — maybe possession and small-level cultivation could, but large-scale dealing wouldn’t be eligible.”

Californian advocates Deborah Peterson Small and Rodney Holcombe also spoke of the importance of expungement and removing or keeping people out of the criminal justice system as a first step towards equity, as California did when it legalised recreational cannabis use in 2016, a law that came into effect on 1 January 2018.

Small, who has been working in drug reform advocacy for the best part of 20 years, says expungement “makes a big difference in people’s lives”.

“California is the only state in the US that has specifically provided for record expungement.” As soon as the law was passed, anyone with a cannabis conviction could immediately apply to have their record expunged or their charges reduced from a felony to a misdemeanour. 

And under the new law, no one under the age of 18 can be criminalised for marijuana offences.

Holcombe says keeping youth out of the criminal justice system has a huge impact on safeguarding young people’s futures and is a step he hopes to see replicated in other states as legalisation spreads.

"So removing that from the criminal system all together has been a really huge step and one in the right direction.”

Terrible irony

Keeping youth out of the criminal system is also important when you consider criminal penalties for illegal activity involving cannabis possession or distribution can become more severe after legalisation. Owusu-Bempah says in Canada, it would now be technically possible for an 18-year-old non-resident to be deported for passing a 17-year-old a joint at a party because penalties regarding supplying cannabis to youth have increased in severity. He worries that existing disparities risk becoming further entrenched after legalisation if the consequences of heavier penalties aren’t properly thought through. For example, the new law requires residents in Ontario to buy licit cannabis online using a credit card. “If you’re poor and you don’t have access to a credit card, that automatically means you can’t buy it legally and have to continue with the black market.” 

Small adds that the poor can’t afford to pay for cannabis if its price has been over-inflated through extremely heavy taxation (sometimes as much as 40 percent of the retail price of licit cannabis in California is made up of various taxes) and so the government’s desire for raising tax revenue has to be tempered with acknowledging that high prices might push poorer consumers of cannabis back into the illicit market, thereby keeping their behaviour criminalised.

A terrible irony is, of course, that criminal convictions for drug offences can often impact people’s employment opportunities — and without due diligence in the legalisation process, this could extend to job opportunities in the legal cannabis market.

All advocates spoken to agree drug convictions should not automatically be a barrier to entry into the licit market and have suggested that in fact it is worth considering whether to give people with cannabis convictions first dibs on employment opportunities. Small points out that if you exclude people who were engaged in the illicit market, they may not have many options left to earn income. “To the degree you have certain communities relying on people in these markets, once you legalise it you don’t want to push them out of business and into more dangerous kinds of occupations.”

The cannabis job market

Drug reform advocates say there needs to be a serious discussion about who is allowed to work in the industry and whether certain people, i.e. those with cannabis-related convictions, should be incentivised or prioritised for industry employment. 

It is also important to take into account those who may not have ever been directly associated with the illegal cannabis market, but who have suffered from living in areas that were heavily policed as part of the War on Drugs. If your life was impacted by the War on Drugs, you should be given more opportunity than others to enter the legal market should you want to, Owusu-Bempah says.

Small suggested an incentive for already established businesses to partner with or preferentially hire people from communities who have been badly affected by the War on Drugs could be to introduce a scheme similar to something like fair trade, where businesses would be allowed to label their products so consumers would know they were buying product that gave back to marginalised communities.

In Oakland, California, half the total number of licences to grow and distribute cannabis are reserved for priority or equity licenses, which has attempted to tackle this issue with some success. Those who qualify for a priority licence are those who earn less than 80 percent of the city’s average income, have been charged with a cannabis conviction in Oakland over the past 20 years or have spent a decade living in a neighbourhood with disproportionately high rates of cannabis arrests.

Early last year, Massachusetts rolled out a similar state-wide equity programme with the aim of redressing inequalities caused by the War on Drugs.

Holcombe, who comes from Oakland, says this is something he believes the jurisdiction has got right, but that it perhaps doesn’t go far enough.

"... to provide priority liceninsing, loans for start-up costs to get their businesses off the ground — there’s a lot of support being given to folks who have prior convictions or who have been adversely impacted, which is great.”

However he acknowledged how difficult it could be for those without access to capital to get into business, and thought not enough had been done to even the playing field.

“They just don’t have the capital — and in California, for example, things may cost up to a million dollars. You have a storefront you need to purchase, you have all of the licensing fees, you have to pay attorneys and consultants, so that compounds all those things and you’re really making it so prohibitively expensive for so many people that you’re not really achieving what we set out to achieve.

“There’s certainly more that needs to be done to ensure that it’s a representative industry, and right now, it doesn’t look to be the case at all. It’s mostly very wealthy white men engaging in the industry, so we need to think of ways to encourage folks who are in the industry to hire more people who are of colour, who are women, who are veterans or disabled. I think that’s a huge push that needs to happen.”

Corporate cannabis

In Canada too, big businesses have largely dominated the market. Owusu-Bempah thinks the government missed an opportunity by not introducing equity licensing schemes from the get-go.

Oscar Velasco lives in Washington state, which legalised recreational cannabis use in 2012 — one of the first places in the United States to do so. Originally from Mexico City, he’s one of the few Latino business owners in the market, which informs his opinions about the importance of equity.

“There are massive inequities in society in general for groups that are a colonised group and disenfranchised groups that exist in our society. This industry really does provide a mirror to that stratification of inequality in the marketplace,” Valesco says.

To counter this, governments should devise schemes where smaller players are given access to both the capital and the knowledge that would allow them to enter the market.

“What you could do in lieu of handicapping those who already have capital, is provide a subsidy to those who do not. So effectively they would subsidise the business start up. It’s not only about physical resources that are at play here, there are also theoretical resources – are the people in the market, are they business people already, do they have that experience?”

Success can be embedded in social standing – someone born in an area with good schools, to a family that owns a successful business or with enough money to send them to college to get a business degree already has an advantage over others, often the very people who have suffered under the War on Drugs.

"– You provide education, you provide money.”

Although Hikurangi is focused on producing cannabis for medicinal use, which was legalised in December last year, Caddie said he has heard of others preparing themselves to jump on opportunities should recreational use become legal too.

“Some of our crew in Ruatōria are definitely looking to set themselves up for a legal environment, and they want to do things right. It’s like here’s our chance to finally use something we’re good at to have a legitimate income and a decent job. They’re super keen to be part of a legitimate industry, and it’s one of the few areas particularly for Māori where they can use their skills and have an advantage over the rest of the country.”

To help them achieve that, Caddie suggests New Zealand looks to emulate priority licensing schemes and provision of start-up capital.

It is also worth considering limiting the number of licences allowed in the licit cannabis market, Valesco says. Washington state has had a licit market long enough that he is now starting to notice the effects of a saturated market: prices for cannabis are dropping and bigger companies are better able to weather this, while smaller companies seem to be folding. 

Caddie has also raised concerns about supply outstripping demand if we don’t regulate both the number of imports allowed into New Zealand and the number of growing permits given out.

“That’s a way of making sure it doesn’t get monopolised and centralised all growing under one massive greenhouse. If we go for the craft cannabis approach, then there’s more opportunities for particularly Māori land owners or whänau to agree to have one or two or a group of whänau members to agree to grow on Māori-owned land.” Limiting how many plants can be grown in any one part of the country would mean rural and low-income areas in high-deprivation parts of the country are more likely to benefit, he says.

Weed and the taxman

When it comes to taxing legal cannabis, the key is to get the balance right. As Small says, taxing licit cannabis too heavily pushes poor people back into the illicit market, but tax revenue from legal sales is a huge incentive for legalisation, both for the government and for those in the communities who have been harmed by strong-armed drug policing.

Owusu-Bempah and Small say a portion of tax revenue from cannabis sales should be reinvested in areas that were harmed by the War on Drugs, to fund programmes such as after-school care or job skills training or to build things such as community centres.

“I would like to see legal cannabis used to actively promote the health and wellbeing that have historically been harmed,” Owusu-Bempah says. He believes some states in the US are modelling these issues better than Canada in the early stages of legalisation.

He wants to see “the reinvestment of tax revenue from the sale of licit cannabis into those very communities who were harmed by the War on Drugs. We spent a lot of money policing communities, and that’s had a detrimental impact on the health of those communities. These are all things we’re not doing [in Canada].” Funding for job skills programmes, community centres and after-school care facilities were examples of civic-minded projects revenue could be used for.

Small points out that areas with a heavy Police presence aren’t desirable places to live or work and tend not to thrive.

“Communities that are heavily policed tend to have less business, have less invested in them because they’re considered not that profitable.”

In recognition of this, California last year passed a Bill earmarking a certain percentage of tax revenue from the licit cannabis market to put back into those communities.“That fund is estimated to be US$10 million in the first year, US$20 million in the second year and so forth.

And out of that money, at least 50 percent has to be spent in community-based non-profit community organisations to support education, drug treatment, mental health issues, etcetera.”

In Portland, Oregon, US$150,000 from cannabis tax revenues was set aside to reinvest in minority-owned cannabis businesses, operated by people from the communities disproportionately impacted by prohibition.

Reparations

Valesco and Owusu-Bempah both mention the term ‘reparations’, and both acknowledge the term can be a politically charged one but say it’s worth taking into account when defining what outcomes you want to achieve with legalisation.

“You have had this drug war that has evidently disenfranchised primarily indigenous and peoples of colour in whatever jurisdiction you’re talking about, and fundamentally you’re making a shift saying, ‘Hey guess what, we’ve changed our minds and this behaviour that’s been undertaken by people for decades, it’s fine and legal’,” Valesco says. “If this is normal, legal and encouraged behaviour, then all of the people who have been harmed by making this behaviour illegal have suffered [unnecessarily].”

Valesco believes Washington has benefited from the formulation of strong and vocal trade associations, which has meant stakeholders in the industry have had ample chance to have their say and influence regulations post-legalisation.

Caddie has suggested similar groups could be useful in New Zealand, in particular so that those who may not have the funds individually to access legal help when it comes to issues like intellectual property patents have support to make sure they are treated fairly.

“If there was an entity whose primary objective was to look after the interests of particularly breeders and growers. They’ve taken significant risks for themselves and their families growing over the years and there’s been a real cost for many of them — many have done prison time or had their income taken away, the Police have confiscated the crop — so they’re looking for some opportunity to have a legitimate income on an ongoing basis.

“We’re worried about unscrupulous companies ripping people off by offering to characterise what they’ve got and then saying actually ‘nah, it’s not that great’ or giving them a token remuneration.” 

Growers associations or trusts could be an answer, especially as many who have been involved in the illicit market are distrustful of authorities and unwilling to put their names on legal documents. A trust has the potential to provide legal protection while using a trustee as an intermediary.

Caddie wants good outcomes for everyone, which means building equity into the framework for legalisation.

“We do want to inform development and make sure it’s the best regime for everyone concerned, and keep the public safe and healthy and provide opportunities for those who have been disadvantaged by prohibition.

“I don’t think it’s something we need to rush into, and the beauty of being behind a few other places, we can look and learn.”