1994 VOL 5 NO 4

Copyright© IJDP Ltd.

RECENT CHANGES IN THE DUTCH CANNABIS TRADE: THE CASE FOR REGULATED DOMESTIC PRODUCTION

Mario Lap and Ernest Drucker discuss the consequences of the Dutch undercover operation involving imported cannabis.

After nearly 20 years of government regulation of domestic cannabis markets in the Netherlands, a period in which cannabis use was successfully integrated into Dutch society and the number of users stabilised, organised crime and large-scale exports are coming to dominate the trade. The extent to which this has happened came to light earlier this year when Dutch Justice Minister Ernst Hirsch-Ballin was forced to resign following a huge undercover operation involving 25 000 kilograms of imported cannabis. First the drugs disappeared from official custody in the course of the operation (which, it is reported, had also planned to acquire 5000 kilos of pure cocaine) and then surfaced in the UK.

But what appeared initially to be a massive blunder of narcotics enforcement was, in reality, a commentary upon the scale and significance of the illicit drug economy that has grown up around cannabis in the Netherlands over the last few years. The details of this development reveal important limitations to Dutch cannabis policy reforms and suggest that the next step in the process of normalising cannabis consumption in the Netherlands should be the legal production of the drug.

BACKGROUND

The 1972 report of the , 'the working group on narcotic substances', led to the decriminalisation of cannabis under which prohibition of cannabis remained in the criminal code but personal use was no longer prosecuted. This plan brought a clear-cut distinction between drug users and traffickers, and between illegal drugs with so-called 'unacceptable' health risks (e.g. heroin, cocaine) andcannabis products. The philosophy behind this was called the 'separation of drug markets'. It aimed to avoid contacts by young cannabis consumers with the 'hard drug scene' and the crime/violence that often accompanied it. TheNetherlands permitted the retail g trade of cannabis products in about 1500 local 'kof-e feeshops' under specific conditions - i.e. no advertising, no hard drugs, no disturbance of public order, no sale to minors (under 18), and no sale of quantities larger than 30 grams (i.e. about 1 oz) per customer. Enforcement of these guidelines fell to local 'Triangle Committees' - composed of the Mayor, Chief of Police, and District Attorney of each city.

This tolerant policy towards the retail trade and use of cannabis for recreational purposes ( in effect since 1976) has, without question, had a positive influence in the Netherlands. The number of users of cannabis products seems relatively stable, the number of problematic hard drug users has declined steadily, and the soft and hard drug markets are separated to a considerable extent. The public at large view cannabis in a relaxed and tolerant way and the discovery of a young cannabis user does not lead to stigma, psychiatric treatment (as is still practised in many European countries) or prosecution. In case of problematic use anyone has ready access to diverse and comprehensive treatment facilities based in the public health sector. ( By contrast, in the USA, several hundred thousand people are arrested for cannabis each year and over 100 000 are currently behind bars. )

The domestic Dutch market (which includes some foreign 'drug tourists' ) is a well-established commercial structure based on the koffeeshop system. It is supplied by many small to mid-size local producers plus a number of larger importers. Although tolerating the retail trade of hashish and marijuana in the koffeeshops, no similar system has ever been applied towards the production, inspection or wholesale trade of cannabis in the Netherlands - indeed these are vigorously prosecuted.

The sale of soft drugs in these koffeeshops includes hashish (cannabis product) and marijuana (dried parts of the cannabis plant). Cannabis is produced in various countriess but as a result of the labour intensive nature of hashish production and high labour costs in the Netherlands, hashish is hardly ever produced from locally grown cannabis. The so-called 'Nederweed', high-potency marijuana grown in the Netherlands, is produced both on a small scale by local entrepreneurs and on a larger scale in a semi-professional way. So far there has been little evidence of organised crime in the koffeeshop operations and even less of violence associated with the domestic trade.

But, clearly, there was some organised crime in the supply chain. Intensified judicial attention to the supply sources of koffeeshops inevitably pushes them towards more criminal circles and disturbs the local supply patterns based on smaller-scale domestic operators. A large number of koffeeshops have resisted this drift towards a more criminal existence. The proprietors of those koffeeshops would prefer a normal legal status with corresponding taxation and contributions, but the current legislation prohibits this. Although the irrationality of this situation is realised by most, the Dutch lawmakers hesitate to act - using international treaties, pressure andpoliticsas a justification for static inertia.

TABLE 1: Seizures of cannabis products in 1993

Source: CRI, p.51

TABLE 2: Seizures of cannabis plants in the Netherlands

Source for Tables 1 and 2: 1993 Report on Narcotic Drugs of the Central Investigation Services of the National Policies (the Hague) (15e Jaargang, Maart, 1994.

PRODUCTION WHOLESALE TRADE AND NEDERWEED

Before dealing with the Dutch cannabis market as a whole and the suggestion of a licensing system for production and domestic distribution, some attention has to be paid to the current context of production and the wholesale trade of cannabis products in the Netherlands. The economics of the illicit Dutch cannabis trade are the key to understanding the shape of this market. To start with the wholesale price of the drug in Amsterdam fell 40% in the autumn of 1993, suggesting significant new production and available supply out-stripping a relatively constant local demand. For many years the Dutch imported both cannabis and hashish but, by 1993, domestic production of cannabis accounted for at least 50% of the local market. This was accompanied by a burgeoning export market reflecting new demands for high quality ( 10-20% tetrahy-drocannabinol or THC content) Nederweed - domestically produced in ever larger quantities over the last few years.

Simultaneously (first in February 1994) there have been large-scale seizures of cannabis at ports of entry in England (three seizures) as well as a steady flow into Germany, France and Belgium. These seizures were of 'commercial quantities' ( shipments of 1000-2000 kilos) and not purchases by local user networks or the sharing of small quantities for personal consumption (Table 1). The Dutch wholesale export trade ( i.e. smuggling) of Nederweed is, to a large extent, controlled by organised crime.

Although still smaller than those bound for the Netherlands, these seizures within the Netherlands were of 'commercial quantities' - averaging 982 kilos for marijuana and 287 kilos for hashish (Table 2 ).

This pattern can be seen over the period 1991-1993 in the growth of the number of cannabis plants seized in the Netherlands.

Of course these seizures represent only a small fraction of the trade - certainly less than 10% of the total.

For comparison the drug seizure figure for New York City is 1%, where the US Coast Guard have enough personnel to examine only 1% of the more than 1 million containers that enter each year. A similar situation obtains in Rotterdam, Europe's largest container port, with perhaps 3 million containers entering per year. We believe that a more probable 'capture rate' for Dutch-grown cannabis exported from the Netherlands is less than 5%. However, for our conservative calculation of the size of this trade as a whole, we take the range of seizures as 5-10% of the export total, which yields an estimate of 500 000 to 1 million kilos per year of cannabis. This is the minimum range of the scale of export of Dutch cannabis.

By contrast, the Dutch domestic market is much smaller. About 600 000 regular users ( in a population of 15 000 000) each use an estimated 2 grams of marijuana per week - for a total domestic market of just 60 000-70 000 kilos per year. Of this about 10% may be associated with foreigners visiting the Nether lands. Thus, even by the most conservative estimates, the export trade is at least 10 times larger than the domestic trade.

Accordingly the scale of the economies of these distinct cannabis trades differs radically. The domes tic trade totals about US$400 million per year where as the exportmarket isworthat least US$2500 million per year. Another measure of this difference can be seen in the level of sales and annual cash volume of a typical Dutch koffeeshop. In the Netherlands, lS00 koffeeshops share a market of 600 000 users consuming 60 000-70 000 kilos per year - i.e. about 40-45 kilos of cannabis and US$300 000 per koffeeshop/year. By comparison the average single export seizure was 1000 kilos, and about 1000-2000 such shipments per year appear to constitute the current export trade. Thus the average export transaction is 25 times larger than a whole year's business for a typical koffeeshop. Put another way, one export shipment equals 25 kof feeshops and one wholesale transaction produces as much revenue (and even more profit) than a year's worth of repeated exposure to prosecution associated with supplying 25 koffeeshops on a weekly basis. Clear Iy a higher level and, necessarily, more 'organised' commercial and criminal enterprise is involved in the export trade, and the 'smart money' moves inexorably towards larger-scale export transactions.

In this context of concentrated profits and large scale transactions in an illicit market, the growth of violence in and around the Dutch cannabis trade is c not surprising. It takes on added significance, how ever, when seen as an integral part of the new structure of the Dutch drug trade in general, rather than as a nasty byproduct of the cannabis trade per se (e.g. the r murder of Mr Brunsma - a hash mega dealer involved r in the 25 000 kilo undercover case ) . The violent inci r dents associated with this trade include a rise in drug - related homicides and the newly prominent role and e violence of organised crime within the Netherlands. e This evolution illustrates the inherent difficulties L, with attempts to establish effective drug regulatory ts mechanisms on anything less than a regional basis, e and the inadequacy of restricting decriminalisation and regulation to 'retail' drug sales alone. In the case of h Dutch cannabis, the scale of domestic production and n the export trade have already so far outstripped the i- local markets demand that the domestic market (and its rules) have become unrepresentative of the overall trade.

As this type of trade has grown and organised criminal groups prospered-capital available for other drug- related ventures in the Netherlands and abroad also increase; it is as though the criminal drug syndicates in the cannabis trade were given new lines of credit. Dutch-based criminal financing of the manufacture and distribution of other drugs (such as Ecstasy and amphetamines) in economically desperate eastern Europe has also grown. Distribution of these drugs through channels now well founded in the Netherlands has consolidated an international commercial network (always there for buying cannabis) but now capable of financing production and distribution of other illicit drugs for the huge regional markets of Europe. In this context, although the need to extend some aspects of Dutch drug policy abroad is clear, the separation of markets in the Netherlands may no longer be possible without further changes in policy.

CONTENTS AN D STRUCTURE OF PROPOSED LAW

A legislative solution to establish adequate supervision and control of both the production and supply of cannabis products in the Netherlands has been proposed. Cannabis, a substance with 'acceptable health risks', is especially suitable for regulation resembling the Alcohol Act as well as administrative supervision . Public order and public health form the basis for such regimes (already in place for alcohol).

Under this new law:

1. It won't be necessary for cannabis consumers to acquire cannabis from illegal sources.

2. The illegal importation and production of cannabis will become unprofitable.

3. Cannabis production for domestic markets will be changed into an industry in which many peo-ple can have respectable jobs.

4. Relief of the judicial system will be accomplished by means of a decrease in pressure concerning the policing, trial and punishment of drug cases involving cannabis.

5. Quality supervision will be established to prevent the supply of inferior cannabis products.

6. A tax structure, as for other goods and services, will be established.

7. Clearer and better functioning supervision and control of selling points will be achieved than is currently possible by means of the Triangle Committees.

8. A withdrawal of the domestic Dutch cannabis market and its players from the criminal sphere will be achieved.

9. Obligatory cooperation by selhng points with preventive information concerning the possible dangers of very frequent or excessive use of cannabis products can be accomplished and education for more sensible use patterns made.

The proposed regulation has a strong resemblance to the current Dutch alcohol catering system (i.e. bars), but in this law the production of cannabis is addressed as well. This choice was made because of the desire for regulation of the nature of premises where cannabis is sold as well as commercially produced.

The Dutch Ministry of Health, Welfare and Sports seems best suited to take responsibility for the execution of this act - a department of this ministry (Alcohol, Drugs and Tobacco) is already in place. [Note: a minimum THC content is specified so that the production of cannabis for non-recreational purposes (e.g. hemp?) is left out of this proposal.] A national hallmark will be required for selling points issued by the town government stating that the cannabis sold is under the control of the National Cannabis Agency.

This way public order, urban planning and the general character of a town can be respected.

A licence for a production enterprise will be issued by an inspector thereby safeguarding the interests of both consumers and public health. Any production of more than ten cannabis plants will be considered 'commercial production' thereby enabling home production for personal consumption (up to 10 plants) to be excluded from the regulation. The exportation and importation of cannabis or cannabisproducts without a licence issued by the ministry will remain punishable with a prison sentence of up to 6 years.

Requirements for packaging concerning cannabis is included in the proposal so that consumers will be aware of the strength or quality of the cannabis offered. A minimum age of 18 years is proposed for the selling points (based on the new Dutch Civil Code legally defining 18 year olds as adults) .

INTERNATIONAL PERSPECTIVE

Paragraph 285 of the Report of the International Narcotics Control Board of 1993 (United Nations Publication ISBN 92-1-148091-4) states that:

'The Board is confident that the government of the Netherlands will take the necessary measures to limit the cultivation of cannabis and the expansion of so-called coffeeshops, in which a person may purchase up to 30 grams of cannabis products '

Foreign governments and international drug organisations shouldbe aware of the current Dutch policy with respect to cannabis and the negative effects of criminalisation of cannabis on public health and the social position of users. This justifies the regulation of the current practice in the Netherlands. The Dutch cannabis policy is a corner-stone of overall Dutch drug policy aimed at decreasing the number of new hard drug users by a separation of markets. Therefore the regulation (as proposed) should be acceptable by the international narcotic authorities as long as the Dutch government combats and punishes illicit exportation.

In the context of the main narcotic treaty (the Single Convention of New York 1971 ), we believe that the Board expects the Dutch Government to regulate, i.e. Iimit, but not ban the production and sale of cannabis in the Netherlands. It is understood that the Board expects the Dutch government to do so in compliance with the Single Convention by means of a government agency or bureau taking control over these activities (section 28 juncto 23 Single Convention on Narcotic Drugs, 1961 and official Commentary of 1973 ) . It is exactly this that is being proposed in this new law. As the main objectives of this Convention are to fight addiction and illegal trade, allowing 'medical and scientific use of drugs' (Section 4 Single Convention), there is room for a policy emphasising what is best for public health in the Netherlands, as the Dutch constitution (section 22) demands of Dutch government.

FUTURE PROSPECTS

This Dutch proposal (now being considered in the Netherlands) for the legal production and for local distribution of cannabis products must therefore be seen as a grand strategy for harm reduction extended to the political economy of the region. The recent Supreme Court rulings in Germany (depenalising importation of cannabis for personal use) may even provide a legal basis for bilateral negotiation of export arrangements and models ( or test cases ) for extending the rational regulatory control of cannabis throughout Europe.

ACKNOWLEDGEMENTS

This work is sponsored by the Foundation for Drug Policy and Human Rights, Amsterdam.

Mario Lap, The Netherlands Institute for Alcohol and Drugs, Utrecht, The Netherlands,

and

Ernest Drucker, Montefiore Medical Center/Albert Einstein College of Medicine, New York City, USA.