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Jim Sutton speech to Forest Industry Council

Forest Industry Council and Forest Owners meeting - Whangarei

Ladies and Gentlemen: It is fitting that the conference meets this year in Northland.

This region is in the vanguard of forestry growth in New Zealand. Northland's harvest for the year to March 2001 (the latest figures available) was slightly over 1.2 million cubic metres, which in turn was slightly under the 1.4 million forecast as being available in that year under the base cut scenario in the National Exotic Forest Description Wood Supply Forecasts. These forecasts indicate that the amount of wood available will increase to around 4 million cubic metres sometime between now and 2009. Exactly when depends on which scenario you use.

That is a huge increase, no matter how you look at it. And those of you involved with the industry in Northland, and those involved with Northland's communities, will know all too well the opportunities and challenges that brings.

And seizing opportunities and meeting challenges are what these two industry organisations are good at. FOA and FIC are well-known in government circles for promoting your interests and requirements.

It seems that no matter what part of the private sector he moves to, I am always going to be dealing with Stephen Jacobi!

For me, the forestry portfolio is familiar ground. I was forestry minister in 1990, and shadowed the portfolio in opposition till 1999.

There are similarities in the issues we faced then and now too.

Back in the 1990s, the issue of New Zealand signing up to the Montreal Process was a hot topic in forestry circles. The worry from industry was that the reporting requirements under the Process would be yet another onerous burden on business. But New Zealand did sign up, life moved on, and now it is possible that many of you do not know what the Montreal Process is. So much for it being an onerous burden.

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Briefly, the Montreal Process is about sustainability.

Back then, that was seen as a difficult thing ? forestry, like the rest of primary production, was all about making two trees ? or two cubic metres of wood - grow where only one had previously. Nowadays, we work to ensure that we and future generations can keep growing trees in ways that cause as little adverse impact on our environment as possible.

I believe that the Kyoto Protocol will go the same way.

At last month's World Summit in Johannesburg Russia announced its intention to ratify the Kyoto Protocol "in the very near future". That means the protocol will be in force "in the very near future". It is increasingly likely that Canada too will ratify.

While Australia and the US now stand alone as developed countries not taking active steps to ratify the Protocol, both countries are taking their own measures, at the federal and state levels, to address climate change.

Entry into force of the Protocol will trigger some major global developments. The question for all of us - but you in particular - is what strategies and actions will we put in place to mitigate the risks and identify then exploit the opportunities.

I think that the New Zealand forestry sector has tremendous opportunities to be part of the answer to climate change, not only in New Zealand but also around the world.

For example some of you may become specialists in bioenergy generation in New Zealand and around the world. Others may exploit their expertise in energy efficiency and process evaluation. Still others may focus on replacing concrete and steel with engineered wood products in the building industry. While the forest growers amongst you might exploit your specialist knowledge to establish new forests around the world, taking advantage of potential forest sinks.

Just what you make of these opportunities is over to you.

We recognise such major changes can not be done all at once. That is why the Government has proposed a policy package that allows a sensible transition to a lower emitting economy. We also recognise that the circumstances of individual companies will be different, so solutions will be tailored individually where necessary.

We will also take a proactive role. Where appropriate, the Government will support initiatives like the development and adoption of new renewable energy or energy saving technologies.

>From the Government's perspective, we accept that climate change is real and that it is contributed to by human activities.

New Zealand's prosperity is heavily dependent on our climate. The Government is therefore committed to taking action to address the risks posed by climate change. We consider it is in New Zealand's national interests - including the interests of future generations - to take that action as part of a global effort, namely the Kyoto Protocol.

I believe that the momentum for action on climate change is now inexorable. I also believe that the Protocol will come into force sooner rather than later, and that New Zealand should and will be part of this global effort. The protocol and climate change more generally will create risks and opportunities for all the forestry interests in this room.

One way that Government is acting as a constructive partner to industry in this and other matters is via the Wood Process Strategy.

The Wood Processing Strategy has been successful in bringing a whole-of-government approach to the issues, so much so that many other sectors are lining up to use the model to develop their own strategies. Stage One of the WPS has been completed and the results presented in a very good report, so I won't go over that. The format of Stage Two is being worked on and will be announced in due course.

One of my continuing portfolios is Minister for Trade Negotiations, and I know that work in this area is of great interest to your industry. With fairly stable domestic wood consumption, the extra wood I spoke of will have to be exported, if markets are available.

Purchases of New Zealand wood products are surging ahead in the Chinese, Korean, and US markets. Provisional figures for the year to June 2002 show that Korea is up 19% on the previous year, the United States 22% and China a massive 74% to $386 million ? still only half the Japanese market, but closing fast.

So, with this kind of "good news" why do we continue working on trade access issues?

The simple answer to that is tariff escalation. The further we move up the value chain with our export products, the higher the tariff and non-tariff trade barriers we face. While the WTO process aims to remove or reduce tariff and non-tariff barriers, this approach is more medium- to long-term in nature. In the short term, technical barriers to trade, or TBTs, also need working on, repeatedly and urgently.

Some of these TBTs relate to acceptance of New Zealand radiata pine in the building standards and codes of our Asian markets, particularly China, Korea and Japan. International lobbying especially by North America is resulting in draft standards being developed that suit their building systems and tree species, but make it difficult for other countries, thus providing North American exporters with a marketing advantage. So work aimed at overcoming these effects must be given appropriate priority and funding to ensure that impediments to the use of New Zealand pine are not factored into these new codes.

Trade New Zealand has been active for many years in support of the wood products sector, exemplifying the principles of partnership between the industry and government. I had the opportunity of opening a major seminar presented by a group of 17 sawmillers in Shanghai in March of this year. They were a formidable group and demonstrated the power that can be developed when companies work together, especially in large and difficult new markets. It is particularly pleasing to note that this group is currently implementing a comprehensive programme following-up on that introduction of NZ pine to the huge and expanding market in East China. The group now has its sights set on other regional markets in China. It is essential that this work continues to ensure that New Zealand is well placed to take advantage of these large markets, who could easily absorb increased volumes of wood products from Northland, the East Coast and elsewhere.

Customers around the world, and particularly in Europe and North America, are increasingly looking for assurances that the products they buy meet certain standards. The most common way of providing that is through a certification and labelling process. This is true for wood products as for many others. We are approaching a situation where certification is no longer an issue of attracting a "green premium" but more one of being able to access markets ? another cost of doing business.

Here in New Zealand, a National Initiatives Working Group is working within Forest Stewardship Council criteria to develop national standards against which forest management can be measured when applying for FSC certification. Like many inclusive and consensual processes the path is far from smooth. But progress is being made and I look forward to hearing the outcomes.

Gaining market access and developing markets for our added value products will be to no avail if we don't have the wood processing capacity on-shore to make the products. We certainly don't want to be in a situation of creating a demand we can't fill.

With some notable exceptions, publicly announced investment intentions over the last couple of years have been a bit slow.

But I applaud all those investors who have stepped up and increased wood processing capacity, or intend to do so in the near future.

Here in Northland Carter Holt Harvey and Juken Nissho have made significant investments, as have other players such as Rosvall Sawmilling. With the amount of wood available, there is significant potential for even greater investment.

Ladies and Gentlemen: I think I have spoken for long enough, but I know that there are still many areas of interest yet to be covered. I am sure that we will be having many more discussions during the next three years.

Thank you.

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