Wood processing a prime area of future potential
Rt Hon Winston Peters
Member of Parliament for Northland
New Zealand First Leader
8 OCTOBER 2015
New Zealand First Leader and Member of Parliament for Northland Rt Hon Winston Peters
Speech to the Wood Processors and Manufacturers’ Association
9 Riverside Drive,
5pm, 8th October
WOOD PROCESSING A PRIME AREA OF FUTURE POTENTIAL
Thank you the opportunity to address this regional meeting of the Wood Processors and Manufacturers’ Association.
Your Association represents a diverse group of enterprises in the wood sector that play an important role in the Northland economy as well as in New Zealand generally. Particular interest in your industry is warranted.
Your association should be commended for the work it is doing – including this series of regional events – in promoting better understanding and appreciation of the contribution the wood processing industry is making, and can make in the future, to the New Zealand economy.
The initiative that the Association has taken in engaging the New Zealand Institute of Economic Research (NZIER) to conduct an independent analysis of the contribution of the wood products industry in each region is very worthwhile.
Let us touch on a number of issues and areas where New Zealand First policy is particularly relevant to ensuring that New Zealand has a thriving and growing wood industry.
Trans Pacific Partnership
In many respects, Stevie Wonder’s lyrics, “Signed Sealed Delivered I'm Yours,” sums up the negotiating plank of this government.
New Zealand was promised a “Gold Standard TPPA” with no sign up unless “absolutely in the best interests of New Zealand”. That has turned into “we had to take it or leave it” and “the best deal we could have hoped for.”
All Mr Groser needs to complete this picture of him landing at Auckland Airport, walking down the air bridge and in front of waiting media, is to hold the TPP aloft uttering: “Trade for our Time.”
Two of our critical primary industries, red-meat, but dairy especially, have been sold out.
Yes Forestry is a supposed TPP winner but this government’s spin cycle is running so fast, Chinese-owned Fisher & Paykel will want to patent it as its next washing machine.
As you will know New Zealand and Australia are signatories to the ASEAN Free Trade Agreement which commenced in 2010.
Under the P4 Agreement and the ASEAN FTA especially, tariffs on key forestry products are already set for total elimination within the next five years.
Examples of products that have been eliminated include fibreboard and some paper for Indonesia and less processed wood products for the Philippines and forestry products into Brunei.
Examples of products that will see tariffs eliminated include plywood and major paper exports to the Philippines (2017). Newsprint for Malaysia (2020) and some paper and particle board for Viet Nam (where tariffs will be eliminated in 2020).
With all due respect to our negotiators, the prospect of selling wood products into Canada and the United States especially, is akin to selling snow to an Eskimo. With the shutdown of UK mining, we’d stand a better show of selling coals to Newcastle these days!
While the TPP is a nice to have, realistically, our trade in wood products is to Asia and South East Asia and not the Americas and in respect of ASEAN, tariffs were already on the path to elimination. With the exception of some finished wood products and paper, they are all but gone in the China FTA too.
This government desperately spins the TPP in a way that may fool the media but it will not fool you in industry.
The broad aim of NZ First’s economic policy is to build New Zealand’s economic base – and we see the wood products sector as playing an important role in an expanding economy.
In particular, we are keen to encourage the processing of raw materials in New Zealand rather than exporting them in the form of bulk commodities.
Northland is a very important region for the wood industry – with a very good product – producing around 4.2 million cubic metres of timber in the March 2015 year. (Dept of Primary Industries data.)
Statistics NZ overseas trade data shows that around 2.6 million cubic metres was exported as logs through Whangarei in the year to June 2015.
So there is ample scope for further development of wood processing and manufacturing in the Northland region.
For that to happen conditions have to be encouraging and supportive of investment in the industry.
One factor that is fundamental to all export sectors is the exchange rate.
Now of course the NZ dollar has come back significantly but for much of the past 7 years exporters have struggled with a chronically overvalued dollar.
NZ First has consistently argued for reform of the Reserve Bank Act to ensure that the manufacturing and exports sector is supported through a competitive exchange rate.
An outdated Reserve Bank Act fixated on inflation rather than promoting employment, manufacturing and exports has done enormous damage to the real economy and the provinces.
In our view the manufacturing sector is critical – that is why we joined with other political parties into a review of the manufacturing sector and the challenges it faces – a review National boycotted.
The current government’s indifference to the manufacturing sector should come as no surprise
It is abundantly clear from their policies in areas such as immigration, the foreign ownership of land and prime assets and housing that the Government does not have any strategic sense of where New Zealand’s long-term interests lie.
NZ First sees wood processing as one of the prime areas of future potential.
One thing has become crystal clear from the roller-coaster ride of global dairy prices.
Dairy has done a magnificent job keeping New Zealand above water but one sector cannot do it all alone. Dairy needs friends and that is about increasing the value from our full suite of primary exports.
For a secure and resilient future the New Zealand economy must have strength in depth.
And when you survey our economy wood processing is an obvious candidate for growth.
Wood processing has a good base from which to expand – it is already an important industry.
There is real potential to create a significantly bigger industry in Northland and elsewhere.
Realistically when we survey the New Zealand economy there are few other options with as much promise and potential.
New Zealand First wants to move up the value chain from raw logs to value-add wood products
Clearly this is a problem in the China FTA, since that agreement has no tariff reductions for some processed wood products; about 4% of our forestry exports. A sum that has to grow if we are to realise greater value from our forestry exports.
To help lead change we will use the tax system and that starts by deferring tax for investment in processing plant, equipment and machinery. We will also buttress this with accelerated depreciation too. Good news for your sector to invest.
Product development through Research and Development
It speaks volumes that Crown Research Institution funding for the likes of Scion has been frozen and the research spending in the biological economy has declined under this government.
Mr Joyce says he intends to raise government spending on R&D to 0.8% of gross domestic product with an “aspirational goal’ of 1%. That is anaemic. New Zealand First wants the government contribution to reach 2% within a decade.
New Zealand First will further seek to reintroduce an R&D tax credit to encourage stronger private investment in high-quality R&D. This has the objective of lifting private R&D from 0.6% of GDP to around 2%.
Taken together, this represents a near tripling of our nation’s current R&D investment and it is vital to secure the breakthroughs we can commercialise here in New Zealand.
Build a domestic pro-wood market
Wood is the best and most flexible construction technology we have. During the Northland by-election, members of your industry felt let down by government and for good reason.
The problems of Auckland house building are well documented and while your industry tooled up to supply wood for the expected boom, consents have barely moved. Minister Smith may beat his chest saying “The 8615 consents issued in the year to August this year is the highest since 2007,” but 60,000 net migrants entered our country; half of them went to Auckland. So where are Kiwis to live?
The government is weak on the need to build houses. It’s that simple. While National gerrymanders Auckland home owners with paper profits that make your eyes water, it is growing a property bubble that could implode the $221 billion now owed by households.
New Zealand First recognizes that government needs to start building. This will give your industry the confidence to invest. As the volumes needed increase, the price of materials diminish so in the end everyone wins.
Moreover, our policy of a Community Wage and not a benefit will increase the pool of labour that will be progressively upskilled.
Health & Safety
Within a year we will see amending legislation before Parliament for the hash Minister Woodhouse has made of his health & safety reforms.
It will be the Courts that will be left with the unenviable task of reconciling the amending legislation and Mr Wood house’s regulations.
This will be a period of marked uncertainty for all industries, forestry and processing included. Our view was to amend what we had instead of tearing it all down as National did. The PCBU (Person Conducting a Business or Undertaking) extends responsibility to supervisory staff and it will end in expensive litigation.
This is National’s doing and National’s doing alone. All we can chip in is a “we told you so” given our amendments were refused, including personal responsibility.
Last month, New Zealand First’s Biosecurity Spokesperson, Richard Prosser, wrote to the Auditor-General for an Inquiry into Biosecurity New Zealand.
This is of relevance given your industry’s sum of all fears; the mountain pine beetle, the fungus Fusarium circinatum and the organism Phytophthora pinifolia, which causes needle blight.
Our Biosecurity shield is too frequently punctured by a government keen on imports and tourists. In August, a quantity of quarantined maize was lost near Port Taranaki with MPI spin conflicting with eye-witness statements. In July, live black widow spiders on imported table grapes were found on a supermarket shelf while in January, red-backs were found on grapes in Auckland. We can add a shipment of 37,000 tonnes of Bulgarian maize contaminated with seeds of the pest plant Noogoora bur identified at the Te Puke Biosecurity Transitional Facility.
And sadly in February during the fruit fly incursion, New Zealand First discovered and recorded a Biosecurity Hotline that asked callers to leave a message or call back on the next business day!
Biosecurity is not taken seriously and we can only get by on good luck for a finite period of time.
Rural roads, rural rail and rural infrastructure
New Zealand First has a bold vision of everyone in training or work as part of our Kiwi new deal and the Community Wage. This is a scheme to harness those on benefits towards works of national significance.
In our mind the roads of national significance start from our plantations, our farms and our orchards.
A part of this will be a massive campaign to seal local roads, improve overall road quality and double-lane bridges where sensible. This is to make the lives of people safer by cutting dust as well as the roads safer to drive upon.
New Zealand has over 31,000 kilometres of unsealed roads and Northland comprises over 10% of this sum. We need to make it easier to get wood from forest to plants and ultimately, the ports.
In this respect there is a New Zealand First private member’s Bill awaiting introduction to the House that will grow Northport instead of the Ports of Auckland. Rail is another facet that we need to invest into; Northland particularly.
Then we get to the unreliability of cellular services and patchy broadband. It illustrates where the government’s heart lies and it’s not in rural New Zealand.
Simply put we need a massive improvement and yes it will need substantial investment but it is investment.
Replant, replace, replenish
New Zealand First is concerned at the high structural foreign ownership of New Zealand plantation forestry. Between 2002 and 2011, OIO forestry approvals were 1.78 million ha. While not all approvals translate into completions, it shows the scale.
New Zealand First is not opposed to foreign investment when it actually generates new productive capacity, facilities or assets. New Zealand King Salmon being a very good example of what we mean. The issue here is that foreign ownership has locked us into a cycle of first stage processing and that is never going to build a prosperous economy for New Zealanders. Again, New Zealand King Salmon provides an example of value-add.
To encourage greater New Zealand participation, New Zealand First proposes to make suspensory loans available to Joint Plantation Forestry Ventures, which will be repayable on harvest so that land is replanted.
This is also vital in respect of reducing nutrient loss to water.
New Zealand First will further support iwi agribusiness by analysing the best use for land.
And given New Zealand First’s Community Wage Scheme under our New Kiwi Deal, we will be in a position to bring those currently unemployed into your industry. This will feature wrap around services to help with literacy and numeracy skills too.
Your sectors role in climate change
While man-made climate change is real, New Zealand First opposes the Emissions Trading Scheme – in our view it is too complex and cumbersome, too easily gamed and manipulated – and has done little to actually reduce carbon emissions.
We do not see the ETS as having served the wood sector’s interests. It has not encouraged the forestry sector. The New Zealand forest base has decreased since 2008.
The December 2015 Conference on Climate to be held in Paris is the next major opportunity for the international community to make major progress on the issue. While we believe we have a sound policy approach to climate change based on sector specific plans to cut carbon emissions we will be reviewing our policy in the light of any international agreements reached at the Paris Conference.
Resource Management Act
Because it has the potential to impact the growth and future development of the wood processing and manufacturing sector some comment on the RMA is called for.
NZ First’s position on the RMA is clear.
We would not support a “bonfire of the RMA.” So we would not agree with a wholesale gutting of the RMA on the grounds that it is unnecessary and valueless.
But equally we do not treat the RMA as set in concrete – unalterable and fixed for all time. Our approach to the RMA is based on common sense.
The RMA should not be able to be used in a vexatious or frivolous way to impede or delay economically worthwhile projects that meet proper environmental standards.
There are those who view the wood sector negatively. This may be a result of a perception that it is a risky industry with a poor safety and pollution record.
NZ First does not share this view and we will support sensible and practical reform to the RMA
In conclusion wood processing may not yet have the glamour of viticulture and it has not had the ‘rock star’ treatment the dairy sector has enjoyed but we see it as a core contributor in terms of jobs, exports and regional development.
And, given the imperative to take climate change seriously, your sector has a major contribution to make.
So NZ First considers the wood processing and manufacturing sector in Northland, and elsewhere in New Zealand, has a great story to tell – and a great future.
And as shown today NZ First is backing wood – we want to see more trees planted and more processing in New Zealand.
Backing wood is a policy that will be benefit Northland – and New Zealand.