The THAI Scenario

New Zealand’s economic analysts have been working overtime to estimate the value of legalizing cannabis to New Zealand’s economy.

These eye-popping estimates, combined with the potential passage of October 17th’s recreational-use cannabis referendum, have attracted the attention of New Zealand’s investors and policy-makers.

However, not one of those analysts’ reports accounted for the near-certainty that low-priced, high-quality medical cannabis would be imported into New Zealand from Thailand by the end of 2022. This oversight has skewed New Zealand’s cannabis debate away from reality, with important implications for all New Zealanders.

This blarticle outlines the Thai High-quality, Affordable Import” (THAI) Scenario and invites New Zealand’s analysts, cited above, to update their reports—before New Zealand’s cannabis referendum—to include the THAI Scenario, in order to properly inform that vote.

Here are the key questions for New Zealand’s analysts to answer regarding the THAI Scenario:

  1. How low will its price be?
  2. How high will its quality be?
  3. What is the chance that the THAI Scenario will happen before the end of 2022?
  4. What is the chance that Kiwi-made medical cannabis will be out-competed in the THAI Scenario?
  5. What is the chance that Kiwi-made recreational cannabis will be out-competed in the THAI Scenario?
  6. To what extent would the THAI Scenario help New Zealand’s Government achieve its legalization goals?
  7. How would the THAI Scenario affect the value of New Zealand’s cannabis industry and its potential tax revenues?

I have every confidence that these professional analysts will bring more objective, scientific resources to bear on these questions than I, a non-economist, can. Nonetheless, I will kick off the discussion of the THAI Scenario by giving my answer to each of the above-listed questions.

Please note that I am speaking only for myself, as Vice President of Marketing for the Thai Cannabis Corporation, not for anyone else in my company and certainly not for the Kingdom of Thailand or its people, whom I do not have the honour of representing.

1. How low will its price be?

My answer: Approximately $2/g of cured flower (or extracted equivalent) at retail. This is 1/10th the price assumed by New Zealand’s analysts (AgriBusiness Group, p. 24-25; BERL, p. 34). However, it is the same as the regulated retail price in Uruguay. I expect that my company will be comfortably profitable at that price.

2. How high will its quality be?

My answer: Higher than Kiwi-grown. The subjective quality of Thailand’s cannabis is legendary; we have the same access to all of the world’s modern cannabis strains and cannabis-related technologies that New Zealand’s cannabis companies do; and Thailand’s low costs enable us to invest the hand labour that is needed for optimal growing, curing, trimming, etc. My company’s Director Of Agriculture, Don Land, is recognized as the most expert commercial cannabis grower in Thailand, with a decade of experience in Thailand and more than two decades in the USA.

In addition to subjective quality, there’s objective compliance. Thailand has an abundance of GMP & PIC/S-compliant pharmaceutical manufacturers, as New Zealand does. In addition, Dr. Viroj Sumyai—the President of my company—was the Assistant Secretary-General of Thailand’s Food and Drug Administration, and later the President of the UN’s International Narcotics Control Board (INCB), which enforces the UN’s Single Convention on Narcotic Drugs. No one in New Zealand’s cannabis industry or bureaucracy has equivalent experience with the production of, international regulation of, and international trade in, controlled substances such as cannabis.

Therefore, in both subjective quality and objective compliance, my company’s medical cannabis is likely to be of better quality than Kiwi-grown…at 1/10th the price.

3. What is the chance that the THAI Scenario will happen before the end of 2022?

My answer: 95%. It is a near-certainty. I expect New Zealand to be my company’s first export market, under the terms of the NZ-Thailand Closer Economic Partnership.

4. What is the chance that Kiwi-made medical cannabis will be out-competed in the THAI Scenario?

My answer: 95%. I offer two lines of argument. First, look at the product that is most like medical cannabis in its production and regulation: opioid pain medication. How much of the opioid pain medication consumed in New Zealand is made from Kiwi-farmed opium poppies? None: it’s all imported. For the same reasons, medical cannabis could all be imported, too.

Second, because New Zealand prohibits the advertising of medical cannabis products, its consumers must necessarily focus primarily on price.

Regarding the export market: I will leave it to New Zealand’s analysts to explain (a) what advantages New Zealand’s medical cannabis industry would offer to potential buyers of its exports, and (b) the extent to which these advantages are likely to overcome New Zealand’s disadvantages in price and compliance.

5. What is the chance that Kiwi-made recreational cannabis will be out-competed in the THAI Scenario?

My answer: 80%.  Under international law (which both Thailand and New Zealand have committed to follow), cannabis flower must not be grown, processed, traded, or used for recreational purposes.  Therefore, my company will be producing cannabis only for medical use, not recreational use, and all of my company’s exports to New Zealand will be for medical use, not recreational use. Also, let me observe that under New Zealand’s medical cannabis scheme, vaporizing flower is legal, but smoking it is not. Therefore, the THAI Scenario involves a competition between smoking or vaping low-quality Kiwi-grown recreational flower (legal or not) and vaping high-quality imported medical cannabis (as legally prescribed) at 1/10th the cost.

There has been a shift from smoking to vaping in other legalized jurisdictions, where the purchase cost of smoking and vaping is roughly equivalent. One might reasonably expect that a 10:1 purchase-cost differential to sharply accelerate this trend in New Zealand.

However, the purchase cost is not the whole story. A  2015 report from the UK’s government stated unambiguously that “e-cigarettes are 95% less harmful to your health than normal cigarettes.” That report is focused on tobacco, but the central issue of combustion vs. vaporization is the same for cannabis. This fact could encourage New Zealand’s doctors to legally prescribe vaping medical cannabis to daily smokers of recreational cannabis, to reduce the medical harms caused by smoking vs. vaping. That would reduce recreational sales by 80% (because daily users consume 80% of all cannabis sold), shrinking New Zealand’s recreational cannabis market—legal or illegal—to an uneconomically-small size.

For the above reasons, I expect that low-priced, high-quality medical cannabis imported from Thailand would substantially out-compete Kiwi-made recreational cannabis products.

6. To what extent would the THAI Scenario help New Zealand’s Government achieve its legalization goals?

My answer: Entirely.

Importantly, the THAI Scenario achieves the Government’s objectives without illegally dishonoring New Zealand’s sovereign commitment to uphold international law, as a willing signatory to the UN Single Convention on Narcotic Drugs.

If New Zealand could simply ignore this international law by legalizing the recreational use of cannabis, as proposed in the October 17th referendum, then why couldn’t other nations simply ignore other international laws by raiding New Zealand’s fisheries, nuking its waters, pirating its ships, and denying it fair trade? Why should New Zealand risk weakening the international laws on which its prosperity relies, when the THAI Scenario can accomplish the Government’s goals without these risks—and do so legally and honourably?

7. How would the THAI Scenario affect the revenue of New Zealand’s cannabis industry and its potential tax revenue?

My answer: It would reduce the future revenues of New Zealand’s cannabis industry, and the taxes derived from them, by more than 90% from the currently-available estimates of New Zealand’s analysts.

Conclusion

When the NZ-Thailand Closer Economic Partnership came into effect in 2005, most of Thailand’s consumers and food manufacturers found that they preferred New Zealand’s low-priced, high-quality dairy products over Thailand’s higher-priced, lower-quality dairy products. As a result, many of Thailand’s dairy farmers had to leave the dairy industry.

Under the THAI Scenario, most Kiwis are likely to prefer Thailand’s low-priced, high-quality medical cannabis, causing many Kiwis to leave the cannabis industry. The two cases are exactly the same (except that New Zealand’s legal cannabis industry is entirely new, whereas Thailand’s dairy industry is more than a century old).

Through such free trade, we all get low-price, high-quality dairy and medical cannabis. Ultimately, everybody wins.

I look forward to reviewing the analysts’ updated reports.


This blarticle, published at noon on 24 September 2020 Thailand time (5pm New Zealand time), stimulated the following media coverage: