If you by any chance follow the Oregon Department of Agriculture (“ODA”) on Twitter and you are interested in international business (especially the trade war with China), you will have noticed the ODA recently (and proudly) posted something both positive and negative for the hemp industry:
ODA’s #Cannabis Policy Coordinator, Sunny Summers & @OSUAgSci meet with researchers from China’s Heilongjiang Academy of Agricultural Sciences Institute of Industrial Crops to talk about how Oregon can ship hemp to China.
When I saw this, I cringed a bit, even though the benefits to the United States are clear: (1) Oregon marijuana farmers who recently produced a 2x surplus of marijuana can switch to growing hemp for export markets, as long as Oregon hemp farmers can grow hemp strains that fit the definition of hemp under the newly released USDA interim final rules; (2) other U.S. states with hemp surpluses will be able to piggyback on Oregon’s engagement with international export markets because the coveted “grown in U.S.A.” brand strategy applies to Washington, California, and Kentucky hemp just as much as it applies to Oregon; (3) disenfranchised farmers, especially those who have seen the demand for their tobacco crops diminish, can stay on the farm and keep the U.S. heartland thumping with crops and cash (see here); (4) exporting hemp means the U.S. moves closer toward addressing our trade imbalance with the rest of the world, including China; and (5) the U.S. can export its culture of quality and innovation in hemp to the rest of the world, which will continue to provide positive external benefits across many international industries and in our recently flagging international relations.
But there are potentially negative aspects with ODA engaging with Chinese researchers, which you know if you are a regular reader of this blog, because we frequently warn our readers to protect their intellectual property at all costs, whether you are at home or abroad (see here and here). Researchers with Chinese ties who work in the U.S. are being scrutinized more closely. In the past, they have often been heavily involved in U.S. graduate programs where a lot of R&D occurs. U.S. academic institutions are constantly wrestling with the following dynamics related to China: potentially losing tuition dollars from fewer mainland Chinese students; losing grant dollars (both from the U.S. and Chinese governments — for very different reasons); losing prestige in the U.S. for engaging too much with China; losing prestige internationally for failing to hire capable researchers who publish influential scholarly works; monetizing R&D projects; and protecting intellectual property stemming from R&D projects. Chinese academics’ largely unfettered, unmonitored, and unprecedented access to U.S. educational institutions has provided fertile ground for Chinese economic espionage. China has a publicly acknowledged program of acquiring U.S. intellectual property any way it can (at least it is publicly acknowledged and documented by U.S. authorities – see here and here), and that includes by making relationship inroads with government contacts, trade groups, educational institutions, and directly with U.S. businesses.
China already has a major presence on the global hemp stage, even though cannabis is illegal in China. (Fun fact: some of the earliest paper made in China was derived from hemp.) China’s two major hemp centers are the frosty Heilongjiang Province and the sultry Yunnan Province, and according to the South China Morning Post, as of 2018, half of all cannabis-related patents worldwide were owned by Chinese companies.
The geopolitical ramifications of engaging in international hemp business relationships are really inescapable, whether you are a U.S. hemp farmer who sells to the local market, the ODA trying to promote Oregon hemp and hemp products, a hemp trade group, or a multinational corporation engaging in a sustained and well-planned M&A program to enhance your market share in the global hemp marketplace. China and the U.S. continue to be at loggerheads over many aspects of bilateral and international trade, but even with the trade war raging at the national level, U.S. and China subnational groups continue to engage with each other, working to establish and enhance relationships that can outlast or at least mitigate the effects of the trade war. Oregon is simply doing what Utah did earlier this year when Utah welcomed over 85 Chinese government officials to discuss Utah-China business relations. It is fine if ODA wants to do the same, but our advice remains unchanged: be on your guard where China is involved. Use whatever applicable cliché you have: trust but verify; speak softly and carry a big stick; keep your friends close and your enemies closer; or tread lightly on thin ice. Just make sure you clearly understand all the potential angles your Chinese counterparts may be working. We will work to keep you in the know as U.S. businesses try to engage further with the international hemp community. Oh, and check us out on our multi-award winning Canna Law Blog for more legal aspects regarding international cannabis.