The Forest Owners' Association said last week that more exports of processed timber products from New Zealand looked good "on paper", but Forestry Minister Shane Jones' new bill would not achieve that.
Forest Owners president Phil Taylor said any legislation that diverted income from one part of a sector to another would distort the economy.
Jones' Forests (Regulation of Log Traders and Forestry Advisers) Amendment Bill was a "dangerous experiment in protectionism" he said, when NZ's government was warning other countries against it.
"Neither the basis nor the effects of the Bill have been researched at all, and it is being rushed through under urgency. A comparable policy to protect Australian car manufacturing has cost a fortune and ended in disaster."
Taylor said claims by New Zealand Wood Processors and Manufacturers Association chairman Brian Stanley that because other countries subsidised their timber industry, more timber should be processed in New Zealand sawmills - paid for by foresters - was misguided and dangerous.
"The international market in timber is way more subsidised and protected than the international log market," he said.
"Mr Stanley would take us out of a post-Covid and developing international log trade protection smouldering fire into a red-hot blast furnace of trade protectionism for timber products."