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Sutton Speech: Institute of Forestry, Auckland

Jim Sutton Speech: New Zealand Institute of Forestry, Auckland section, Auckland

Ladies and Gentlemen: the forestry industry has the ambition of becoming New Zealand's biggest exporter, eclipsing that of the dairy industry.

In the year ended June 2002, dairy exports were more than $5.8 billion and rising. Forestry exports a bit over $3.6 billion ? so there is a way to go.

Like other primary industries, forestry is subject to commodity cycles. At the moment, the cycle seems near the bottom. There is consequently a lot of anxiety about the future of the industry.

The Government however believes the industry has a positive future, and is working to ensure that potential is developed.

Our preferred way of working is as a partner with other stakeholders.

The Government needs effective and properly mandated partners with whom it can work. Your industry needs to maintain top quality representation in Wellington. Even with the best intentions in the world, governments simply can not be as effective at responding to the needs of an industry unless that industry's views and needs are being effectively and reliably communicated.

When it comes to addressing industry-good issues, the Government is also looking for partners who can bring ongoing and appropriate levels of resources to the table.

Access to government funding is usually contingent on funding commitments from industry as well. If it is not important enough for you to fund a particular project or activity, is it a worthy invesment for taxpayers' money?

The best bet we have of making a positive contribution ? of getting the best value for New Zealand ? is to invest in things industry is prepared to invest in itself.

I sense that right now the forest industry has its best chance in years to secure a commodity levy to fund its industry-good activities ? and there are plenty of them. Remember, that a commodity levy under the Commodity Levies Act must be voted on every five to six years, and levypayers must be provided with audited accounts annually. That provides very clear accountability to levy payers that their money is being spent to their best advantage.

I urge the forest sector to set aside whatever prejudices it might have about levies, to think about where it wants to go, to understand the reality that making progress means making investments, and to appreciate that increasingly public funds will only be available if they are complemented by private funds. Once you have done this ? then consider where you all stand on a commodity levy.

Right now the sector faces many challenges. Underlying all of them is the essential truth that the forestry sector (forest growing and wood processing) must be profitable at every level if we are to have a sustainable and growing industry. This means it must be internationally competitive.

Throughout this year, there will be ongoing work internationally on behalf of the forestry industry. Improved market access for forest products is a high priority for our trade negotiators, both within the Doha Round of multilateral negotiations and within bilateral negotiations.

Last month, I led a forestry trade mission to South Korea, China, and India, all key markets for our wood products.

I think it was an extremely useful mission, and I hope the other participants got as much out of it.

This was the most senior group of forestry representatives ever to travel overseas together and reflected the importance we in New Zealand attach to building our relationship with these key markets which, between them, take about 40% of New Zealand's exports of forestry products.

India is a developing market with immense potential for increased trade. Currently it is only a log market because of prohibitive tariff and non-tariff barriers on imports of value-added wood products. The steeply escalating tariffs make it hard to sell them anything but logs.

There is also their unfamiliarity with wood like our pine.

There, they use a lot of teak. In fact, all sorts of hardwood are called "teak" there.

India is a market at the very early stage of development for us. Our softwoods are something strange to them. They need to learn what grades of logs to buy, how to saw them, dry them, and treat them for best results. We saw people re-sawing D-grade cores imported from New Zealand, black with sapstain. It was a bit depressing to realize the likely consequences for the image of New Zealand radiata pine.

There is a huge educational effort needed to develop this very challenging market.

From there, we moved to an exciting market ? that of China. If India was a reality check, China was a tonic.

Wood export trade to China is increasing dramatically, e.g. in the two years up to September 2003 log exports to China have increased a whopping 217 percent to 1.9 million cubic metres.

China is a very important market for our timber exports. It is our fifth largest market for forestry and forestry products ? worth over $302 million in 2003. Again, logs are the main export, but we are working hard to change that.

In China, the mission aimed at promoting New Zealand pine as a large sustainable resource and a versatile timber which can be put to a number of uses. Well attended seminars were organised by Trade and Enterprise New Zealand to showcase the timber resource we have available, the uses our timber is put to both in New Zealand and overseas and the industry we have here specialising in handling and treating pine as well as training institutions which have expertise in educating users on how to work with Pinus radiata. A powerful - and I hope convincing - presentation was made by Chinese manufacturer Markor which has developed a very successful furniture manufacturing business based on pine and is selling increasing quantities of furniture both on the Chinese market and to the United States.

The mission followed close on the heels of the release of China's revised building code, allowing for timber to be used for construction purposes. For the first time, the code recognises Pinus radiata as being a suitable timber for this purpose and should in due course give a significant boost to our selling added value timber products into China.

Some issues still need to be worked through on how pine is referred to in the code ? and I took those up in calls I made on my Ministerial counterparts in Beijing - but with a burgeoning construction industry in China, it seems to me that opportunities for increasing our timber exports in the future will increase.

Korea is a well-developed market for our wood products. We need to build on that well-established log trade to increase the proportion of value-added forest products.

I believe that we will make steady progress there, across the wide spectrum of our industry.

Ladies and Gentlemen: there are a lot of issues within the forestry portfolio. I don't pretend that the Government has all the answers. However, I am confident that by working in partnership, the Government and industry can find solutions for many of these complex issues.

It is through co-operation that other industries have achieved significant growth, domestically and internationally. I encourage participants in this industry to fully investigate those options as well.

I think it possible that one of the lasting benefits of our Asian trade mission may arise from the fact that 20 commercial movers and shakers of the industry were together for two weeks, and thus able to consult intensively across the usual cross-sectoral boundaries on what might collectively be done to enhance the industry's future.

Thank you for your attention tonight, and I welcome any questions.

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