MPs move to prevent forestry price controls

Forestry and Regional Economic Development Minister Shane Jones. Photo / Getty Images

The forestry sector has had a small victory over its minister with Parliament's environment committee limiting the potential for a new industry regulator to interfere in commercial agreements between growers and log buyers.

New legislation intended to establish a register of log traders and forestry advisers is heading back to Parliament after being rushed through a truncated select committee process under Budget urgency. Forestry Minister Shane Jones claimed the measures were required to improve the quality of advice to small woodlot owners and improve the ability of local processors to compete against export log buyers.

One of the most contentious aspects of the Forests (Regulation of Log traders and Forestry Advisers) Amendment Bill was a clause that would allow a new Forestry Authority to set practice standards on everything from land preparation to harvest planning, emissions trading and even sales and purchase agreements for domestic or exports sales.

Many of the hundreds of submitters on the bill had been concerned the government may use those powers to set a volume quota, or a cap on log prices, for domestic processing - potentially breaching World Trade Organisation rules.

Commercial arrangements protected

In its report back to Parliament, the committee has recommended an amendment spelling out that any such rules must not impose conditions or requirements that are "properly a matter for commercial agreement between parties.

That and other amendments make it "clear that price controls would not be able to be imposed by rules," the committee said in its majority report. "In light of this, the committee is confident that this bill is compliant with New Zealand's international obligations."

Forestry and wood processing comprise the country's third-largest export earner. But despite years of talk from successive governments, domestic processing capacity has not kept pace with the growing harvest profile. Older, smaller mills have also closed as Chinese demand has pushed up log prices and 'big box' hardware chains have come to dominate domestic timber purchasing.

The committee heard that New Zealand is one of the few countries in the world that doesn't subsidise domestic sawmilling or allocate log volume to it. Greater volumes of European logs and wood products are also making their way into NZ's traditional markets in Australia, Asia and the west coast of the US.

While highly critical of the proposed legislation, Forest Owners Association president Phil Taylor said the bill had at least encouraged debate about the future of the NZ industry and the importance of local processing in that.

But he said that discussion had to be broader than just an argument about the costs of one input – logs.

'Wood-first'

For processing to develop there had to be greater demand, and the government's stalled "wood-first" policy for public construction could be a big part of that, he said.

There also needed to be greater examination of the type of products that could be produced here and how to capture the most value from them, right across the supply chain, Taylor said prior to release of the committee's report.

Many of the committee's recommendations fix obvious flaws in the bill – such as spelling out that trucking firms and port companies are not captured by the draft legislation's loose definition of log trading.

The committee also recommended an exemption from registration for individuals trading less than 2,000 cubic metres of logs a year.

More material requirements were an explicit obligation on the Forestry Authority to ensure that its decision-making on registration, disputes and complaints complied with natural justice.

The new body would also not be allowed to make regulations unless the minister was satisfied they were necessary to meet the legislation's objectives and that there had been sufficient consultation with affected parties, including iwi, industry bodies and trade unions.

- BusinessDesk