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Rural and Regional Affairs and Transport Legislation Committee
16/05/2011
Illegal Logging Prohibition Bill 2011

BEAGLEHOLE, Ms Charlotte, First Secretary, New Zealand High Commission

DUNNE, His Excellency Major General Martyn (Retired), High Commissioner for New Zealand

[15:31]

CHAIR: I welcome the New Zealand High Commissioner and the representative from the High Commission. You have lodged a submission with the committee which we have numbered 23. Would you like to make any amendments or additions to that submission?

High Commissioner Dunne : No, we are happy with it as it stands.

CHAIR: In that case, Your Excellency, I invite you to make a brief opening statement, should you wish, before we go to questions.

High Commissioner Dunne : Thank you, Chair. My comments will be very brief. I think that generally we concur with and have the same objectives that you have in your proposed legislation. We too do not support illegal logging or the use of illegal timber as well. However, certainly from a New Zealand perspective, we tend not to regulate in every sense. That does not mean to say that we do not, as I have already said, concur with the objective of this particular legislation.

We do have some concerns that with the passing of the legislation there could be an increase in costs. Sometimes with regulation they naturally enough have added costs that go with them. But we are of course committed to working together in this area to ensure that the scourge, I dare say, of illegal logging, particularly in the Pacific area, is stopped and that timber is not used.

If I could just go back to the point about incurring costs I would make the point that, in 2010 alone, timber exports, largely under CER, amounted to about NZ$824 million which passed across your borders. In terms of the use of exported timber, we export a huge amount of timber from New Zealand and all of it, apart from a very, very small amount, is not indigenous timber but timber that is grown for markets such as soft pine for use in building and a variety of furniture uses as well. The forestry sector in New Zealand operates to some of the world's highest environmental standards. Forest companies that bypass the costs of legal compliance represent unfair competition. We closely follow the measures put in place by countries to prevent trade in illegally logged timber products, and of course that includes Australia.

In terms of forestry trade, illegally harvested wood depresses global timber prices, causing a loss of revenue for the forestry industry. We believe, however, that New Zealand is a very low risk in this particular area of illegal logging or timber that could be passed on. Accordingly, it is important for New Zealand to work to ensure that the bill does not impose, as I have already said, unnecessary costs on low-risk exporting countries like us. The Australian approach is important as the possibility of New Zealand linking in and adopting the scheme could still be looked at in the future. What I am saying is, while we do tend to have less of a preponderance of regulations, that does not rule out, if we were to see that there was an increase that needed to be stopped, us putting in place regulations. That largely concludes, apart from our submission, my opening comments.

CHAIR: Thank you. Are there any questions?

Senator COLBECK: Welcome. Your submission talks about the fact that there is no specific regulation that sits around harvesting of forests whether they be plantation or indigenous in New Zealand and then also talks about a low-risk declaration process that might be utilised between our two countries as part of a process of verifying legality. What processes and systems of verification do you have in place that would satisfy the core requirements of demonstrating that something is legally harvested?

High Commissioner Dunne : There is largely a voluntary process that exists. It involves timber retailers and organisations such as Greenpeace New Zealand. Collectively, they have made a voluntary decision to stop the importation and sale of timber, for instance, from Indonesia, which is largely around kwila for decking and furniture use. That will be effective from 1 September this year. The membership of that group is about 80 per cent of those involved in the importation and sale of tropical timber products.

As far as timber that is exported to Australia it very much relies on the incentive not to export or re-export, in this case, illegally logged timber. That does not mean to say there would not be some. There may well be a very small amount—mind you I am not talking here about passing it on from Indonesia, it may even be from our own indigenous timber—but generally it relies on people being well aware, or made aware that it is unacceptable to re-export or export timber that is illegally logged. There are very tight controls in New Zealand, I might add, on indigenous timber. You cannot cut timber willy-nilly. Trees have to be selected individually to be felled and milled for use and export.

Senator COLBECK: I was more specifically looking at the locally harvested material to start with which you have just covered. The plantation material would be a matter of—I think we have just been discussing that with Greenpeace and other private forest growers here—verification of access and ownership. They would be key points of any process to certify legality. At a local level is there a process that has to occur around harvesting that says you can go ahead with this coupe? Is there some sort of planning process that underpins the overall harvest?

Ms Beaglehole : It comes under our Resource Management Act. We do have some additional information but perhaps we can come back to you in writing on that because the actual steps are quite complicated and go to local council operations.

Senator COLBECK: You did talk about product coming through in New Zealand. It is an issue I think under the CER where a product manufactured in New Zealand provides an access. There are issues around our labelling codes that the provider is streamed through from New Zealand and issues have been raised in respect of some other commodities. In the context of product being manufactured from imported product into New Zealand and I do note the work that you have done in relation to the kwila—I read that in your submission—how would you see that side of things being managed as part of this process?

High Commissioner Dunne : It is a very good point. Under the CER there is a very important arrangement—which I am sure you are aware of—known as Trans-Tasman Mutual Recognition Arrangement. This enables goods in one country to be legally sold in the other without having to meet further sales related requirements. From our legal analysis in New Zealand it would appear that the Illegal Logging Prohibition Bill is outside the coverage of the TTMRA and therefore that New Zealand's trade and forestry products to Australia would be affected. In other words, prohibited imports are excluded under the TTMRA. So from a legal perspective, they would not be able to be exported because under the CER they are excluded. That would not just apply to timber obviously, but it could apply to anything—such as pharmaceuticals—if that was such an issue.

Senator COLBECK: That is an important clarification. So you then come back to a verification process or a demonstration of legality or otherwise that has to be provided as part of any process that we might put into place. How does that engage with those sorts of things? Does it impose a requirement for a due diligence process on behalf of any New Zealand manufacturer that might be going to provide something into the Australian market to ensure that they have their verification of legality as far as their material supply streams?

High Commissioner Dunne : In my most recent role in customs and in other border requirements, I would assume that anybody who was trying to export anything to Australia that did not meet Australian legislation would not get off the wharf. If it did it would be seized and forfeited to the Crown. I would think this would be a very good example of where it would apply.

Senator COLBECK: You mentioned in your submission the work you have been doing in relation to kwila out of Indonesia. What has been the interaction you have had with Indonesia as part of that process?

Ms Beaglehole : We have kept them updated with what we are doing. So we have kept them very well informed of all the moves that the industry is making.

Senator COLBECK: Is that having an impact on the way they are managing their market? Part of the discussion that we have had here is that we do something here and the market reacts to it, which causes a market, regulatory or some sort of reaction in the source country. Capacity building is part of what we would like to see occur as a result of what we do. Are you seeing those sorts of reactions?

Ms Beaglehole : In relation to the announcement that the New Zealand Imported Tropical Timber Group made, that announcement was made in mid-April and comes into effect in early September. So I think it is probably early days.

High Commissioner Dunne : But it will account for, I think I mentioned, 80 per cent of that imported timber.

Senator COLBECK: I suppose this is getting a little bit specific, but what does the kwila go into in New Zealand? What are the uses?

High Commissioner Dunne : It tends to be used primarily—I stand corrected in this—for decks on houses et cetera. A little bit of it goes into furniture but most of the furniture companies now, which are in the group that Charlotte mentioned, have a verification symbol on their furniture to say that it has been certified as legally logged.

Senator COLBECK: You made mention of the industry certifier process and expressed concern that it does not end up being an anti-competitive mechanism. I suppose we have been expressing a view about the need for the industry certifier process, but do you have a view about having some other form of verification—whether it be through certification from the country of origin or something else? If we were to go ahead with that would you be concerned that we ensure that there was not any capacity for a certification process of any nature to be used as an artificial trade barrier?

High Commissioner Dunne : Yes. That is the sort of hidden agenda, and some of these things can become an artificial trade barrier, so that all of a sudden there is no timber. I am not suggesting that is going to be the case because, as we have already mentioned, large volumes of plantation timber come in here. But generally, by putting in place regulation—it does not matter what it is—you come up against this argument of public/private good. Who pays for the certification? And generally, from the industry, whether it be a manufactured good or a raw product, there is always a discussion about, 'To actually manage this process, there is a cost.' And the manufacturers or providers generally start to argue about, 'This is a public good to ensure that it does not come into Australia; therefore the crown should pay.' So the crown will then argue, 'There is a private good; so there is a cost recovery component that goes into it.' Inevitably—and you see that about anything that crosses the border—most things we do to raise revenue, be it rates on properties or whatever, become a burden. What we would be very concerned about, with such a low risk to Australia in timber imports, is that those costs, the cost recovery component, would make it prohibitive for exports into Australia.

Senator O'BRIEN: Are any of the native New Zealand timbers exported as board rather than as finished product?

High Commissioner Dunne : No, not that I am aware of. It is so rare and well protected. As Charlotte said, it comes under the Resource Management Act. To fell native timber, as we call it, is a problematic process. It is felled and you can buy it, but it is generally for finishing and not for, for instance, veneers. You can get some veneers but I am not aware that it is actually exported in veneer just because of the quantity of it.

Senator O'BRIEN: And what about products made from those timbers?

High Commissioner Dunne : That are exported?

Senator O'BRIEN: Yes.

High Commissioner Dunne : There may well be; I am not sure. We should actually see if we can give you a bit more information on that. There would be some, for instance, for the boatbuilding industry. There may well be some finished timbers that are legally logged, such as kauri finish, which could be either New Zealand kauri or Pacific kauri from the islands. Some of that may well be used, but I would imagine it is a very, very, very small amount—if there is any at all.

Senator O'BRIEN: Perhaps you could get that information. I was going to follow up with a question about New Zealand government certification in all cases of such export—would that be a possibility? Perhaps you could take that on notice as well.

High Commissioner Dunne : Yes.

Senator O'BRIEN: The bulk of the industry obviously is softwood. Are there any other non-native exotic species grown in New Zealand for commercial purposes?

High Commissioner Dunne : No, not that I am aware of. I do not think we could claim to own eucalypt. There is some eucalypt but it is generally used for pulp, mixed in with pine, of course.

Senator O'BRIEN: So you use eucalypt for pulp and export the pulp?

High Commissioner Dunne : No. Well, I think it is used as a catalyst in some pulp mixture, but it would be grown as a plantation timber.

Senator O'BRIEN: But you would export that?

High Commissioner Dunne : Yes. The pulp would go as either the raw timber—not eucalypt; the pine would go. But some of it could be used in the pulp industry.

Senator O'BRIEN: And certain papers use both mixtures as they do in Australia.

High Commissioner Dunne : Yes, exactly. But they would be, as I said, plantation timber, not native.

Senator O'BRIEN: Presumably, plantation timbers are, in the overwhelming majority of cases, legally grown and harvested?

High Commissioner Dunne : Yes, absolutely.

Senator O'BRIEN: Would there be any cases in New Zealand where they were not?

High Commissioner Dunne : No, I do not think there would be. All the plantation industry is a bit like: they grow the timber; it is sold off the block. There is something like 22 million cubic metres of plantation timber that is grown for harvest. It is a massive amount. And most of it is, in fact, exported as raw product, as logs.

Senator O'BRIEN: What is the destination of that?

High Commissioner Dunne : A lot to Asia: China, Japan, Korea and a variety of other countries. Finished timber is also milled for the building industry and it goes as far afield as North America.

Senator O'BRIEN: From the point of view of a third country that imported your product and then exported the finished product back to Australia, establishing the provenance of the timber from New Zealand would not be difficult?

High Commissioner Dunne : I would not have thought so. Not at all.

CHAIR: Is the majority of that timber, paper or furniture?

High Commissioner Dunne : Most of it would be turned into a variety of things. Some would be turned into paper, some into boxing and some into timber framing for houses. The standard of Pinus radiata has improved immensely over the past 20 years. It is used more widely in housing. Some of it would be turned into furniture, but that would be a fairly small amount I think.

CHAIR: Thank you for your evidence.