The Government's decision to deem forestry "non-essential" in the Covid-19 response cost the sector around $500 million in lost or delayed sales, say the chief executives of New Zealand export ports.
As a group, they've come out swinging against Shane Jones' proposed legislation to strengthen the domestic wood processing sector, saying Covid-19 is suggested as a reason for the Forestry (Regulation of Log Traders and Forestry Advisers) Amendment Bill - but the Bill, or parts of it, had been in train before the pandemic.
The group is also concerned about the "inappropriate power" the proposed law would give a minister of forests and officials.
"The group notes that the major impacts of Covid-19 on the forestry sector were entirely caused by decisions of the New Zealand Government to deem the sector "non-essential" except for the supply of inputs into essential industries (packaging and hygiene products). This either cost the sector or delayed sales of roughly $500 million."
The innocuous sounding Bill, introduced by Forestry Minister Jones and being rushed through Parliament, has caused alarm among forest owners and managers and their industry groups because of its lack of detail, and fear of what add-in regulations might be enabled later.
Essentially, the Bill's intent is to support the continuous, predictable and long term-supply of timber for domestic processing and export. It's a response to the concerns of Jones' party NZ First, and wood processors, about the amount of New Zealand plantation logs shipped to China for high prices.
The Bill, which has been welcomed by the Timber Industry Federation and the Wood Processors and Manufacturers Association, is now before the environment select committee, an odd host for it according to the Forest Owners Association.
The Bill was only introduced on May 14 and is before the select committee this week.
The ports' group is concerned at the rush.
"We are concerned at the very limited time that has been given to scrutinise and submit on this Bill. We see no reason for this urgency. While there is reference to the Regulatory Impact Assessment having been submitted on 27 February 2020, and a link is provided to where on the MPI website it might be found, we note with concern that the statement does not appear in this section of the MPI website. Indeed that section of the website does not appear to have been updated since November 2019. This is very poor practice and further reason why more time should be given to prepare submissions."
Asked why the hurry, Jones told the Herald "With the rising tide of unemployment due to Covid-19 I want us to move with alacrity".
The ports group submission says chief executives "fear there is a risk of unintended consequences".
"To ensure that there is no unintended consequence for the ports we suggest that the port companies be formally excluded from the coverage of the Bill. We are sure that the drafters do not intend for ports to be deemed log traders. Likewise, we are sure that Government would not be intending to allow the (proposed forestry) authority automatic access to ports or the right to impede the flow of logs to a port.
"Being intimately involved in international trade we have a concern that domestic regulation can potentially impact against us in international markets. The forestry industry is already susceptible to a range of non-tariff barriers in key markets. We would not want some of these markets to be using perceived breaches of the New Zealand regulatory regime as an excuse to reject New Zealand exports. The more regulation we have, and the more complex that it is, the more this risk is real."
The group has "strong concerns" about the powers of the forestry authority proposed by the Bill.
The intent seemed to be to have the authority intervene in decisions related to:
• land preparation, planting, forest management, harvest planning and site management;
• sale and purchase agreements for domestic transactions or exports;
• other sale and purchase requirements.
These powers were contained in Section 63ZZC (2) (a) (i),(iii) and (iv) of the Bill and the group submitted they be deleted.
"These are powers that one would expect from a centrally planned economy. It has been many years since New Zealand was such an economy. They have the potential to distort prices and remove decisions that would otherwise be exercised by forestry companies for commercial reasons. This is not a role for Government.
"These powers also have the potential to distort investment decisions in forestry. Forests are long-life assets which take 25 years at least to grow – sometimes up to 40 years. An important contributor to value is the option of deferring (or accelerating) harvest. In that time markets can change materially. The ability of forestry companies to seek to adapt to changes is a critical element of the investment thesis. A recent example is the reduction in pruning because the economics of pruning did not in many cases support the investment. The effect of the Bill is potentially to transfer this option value to domestic processors, in many cases more than 20 years after the forest investor has already taken the risk of committing their capital."
The Bill also gave a forestry minister and the government of the day inappropriate power, said the submission.
"We note that the Forestry Authority is the Ministry of Primary Industry or entities that might have the powers of the authority delegated to them (with approval from the Minister). This means that the authority is firmly controlled by the Minister and Government of the day. Essentially the powers are such that the Minister can take pricing and other decisions. This is inappropriate power.
"We question the consistency of this Bill with New Zealand's international trade agreements. The powers contained in the Bill have the potential to reduce the value of existing forests and could be the subject of challenge under investor state dispute settlement provisions. We suggest that the select committee request advice from the Ministry of Foreign Affairs and Trade on this matter."
The port company group said it was also worried about the implications of the Bill for several Treaty of Waitangi settlements.
"The absence of a regulatory impact assessment gives us no comfort on this matter."
The port company group is the chief executives of the ports of Northport, Auckland, Tauranga, Eastland, Napier, Taranaki, Centreport (Wellington), Marlborough, Nelson, Lyttelton, Timaru, Otago and Southport.