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Forest and wood products, National Convention Centre, ACT, 1 March 2000: address to Outlook 2000



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Wilson Tuckey Federal Minister for Forestry and Conservation

Address to Outlook 2000 -Forest and Wood Products

National Convention Centre, ACT, 1 March 2000

It is a pleasure to be with you here at Outlook 2000, a time when convention typically allows us to discuss emerging issues as opportunities or consider their approach with some trepidation.

Industry Sector Performance In my view, Australia's forest industries are well placed for further development. ABARE has reported an upturn in Australia's sawlog consumption, up 9 per cent in the September quarter 1999, driven by a strong resurgence in residential building.

Sawlog production was up by 12 per cent (that is 12 per cent for softwood and 12 per cent for hardwood sawlogs) exceeding 1 million cubic metres for the first time:

consumption of wood based panels rose by almost 10 per cent during the same period to a new record (414800 m3); ●

MDF consumption rose by 40 per cent; ● consumption of plywood rose by 4 per cent (production up 10 per cent) while particle board consumption rose by less than 1 per cent; ●

Australia's strong economy and higher world prices for sawnwood also boosted the value of forest product imports to a record quarterly level of $880 million; ●

The value of paper and paperboard imports rose by 20 per cent to $483 million for the quarter - imports of printing and writing papers rose by 30 per cent to reach the highest quarterly level since 1994; and

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the value of sawnwood imports rose by 4 per cent while the volume fell by 4 per cent. ● The bottom line for Australia's trading position is that in 1998/99 we exported forest products to the value of almost $1.3 billion while importing products to the value of over $3 billion, leaving a deficit approaching $2 billion.

Notwithstanding the rational explanations for this trade deficit, I stand by what I said at

Outlook 1999 about the $1.5 billion deficit — I thought it a national outrage that a country with the resource endowments of Australia is consistently running a huge trade deficit in forest and wood products.

I see the unusual situation of Australia having such a large trade deficit in the value of forest products — even though the actual volume of exports well exceeds imports — as a challenge for the Commonwealth, States and industry to take up in partnership.

I believe adding value to forest products is one of the most important ways in which we can maintain the health and vitality of many of our rural communities. I am not saying add value for its own sake - the challenge is to position our forest industries to add value on a competitive basis for replacing imported product and exporting to world markets.

We are taking up this challenge through two major initiatives:

the delivery of an Action Agenda for the Forest and Wood Products sector in partnership with industry, and ●

demonstrating at home and abroad that our forest products come from sustainably managed forests. ●

Completion of Regional Forest Agreements The process of value adding, whether a sawmill or pulpmill, requires very large sums of private capital. Such investment will not be forthcoming without resource security.

With the considerable effort devoted to the Regional Forest Agreements we have achieved the resource security and sustainable management that underpin industry development. It is essential that we conclude the process and move forward as is already happening in Tasmania and Victoria.

I make no apology for standing up for these industries and the communities that support them, particularly given the conflict and anguish they have had to endure. That is why we as a Government are absolutely committed to completing the remaining RFAs, securing a resource for timber communities, and then working with them to building a solid and certain future. We can do this and deliver on conservation!

The North East NSW RFA will be completed very soon and we are on track to complete the West and Gippsland regions in Victoria and the Southern region in NSW by the end of March. Resolution of the south east Queensland RFA, while possible, appears distant given the approach of the Queensland Government.

In moving forward it, appears to me that we need to work with the financial sector in reviewing its approach to enterprises associated with the forest industries in rural and regional Australia.

On the one hand it is entirely understandable that the financial sector has taken a cautious approach in the midst of uncertainty surrounding forest policy. On the other hand Australia's forest industries have a lot in their favour for investment — including relatively good cost competitiveness and political stability — factors which have no doubt been apparent to international institutions now making significant investments.

Resource Development While the RFAs are about providing certainty for conservation and businesses involved in

native forests, this government is also delivering additional resource through plantations and farm forestry.

Since taking office this Government has put in place the policies to promote the development of plantations and farm forestry, recognising the benefits that expansion will bring for regional development and in addressing national imperatives such as salinity and greenhouse.

The Commonwealth's economic policy settings are contributing strongly to that development and have been crucial in generating a resource that is capable of reversing our trade deficit.

Over the past 18 months the tax system has been redesigned to reduce business costs, including those of the forest sector. As part of the new tax system, industry will benefit through the removal of the Wholesale Tax system, a number of state taxes and reduced on road and rail transport costs. As well, the new tax system includes an equitable treatment of profits a pendre and a lower company tax rate.

Seeing the rapid development of plantations over the past four years, assisted by the concerted build up of the supporting infrastructure and the attraction of private investors to reforestation in farmland. This is feeding through into plantation establishment with:

the plantation expansion rate increasing from 25,000 hectares a year in the beginning of the 1990s, to around 50-60,000 hectares a year with expectations of an increase to 80,000 hectares annually; and

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reported new investment worth over $300 million in WA in 1999 alone. ● This development is driving the critical mass required to drive export growth and the resource for increased domestic processing. This represents major opportunity to expand Australia's plantation based industries, to reduce our reliance on imported timber and fibre and to promote regional industry development. I should add that this investment largely represents the transfer of capital from the city to the bush.

Vision 2020 Governments are questioning the strongly regulatory approach in forest policies and focussing on developing economic opportunities. Critical has been the partnership between Governments, industry and other key stakeholders in Vision 2020. Under Vision 2020 we have a plan which will see the removal of investment impediments further private investment. As part of the Vision 2020 are creating:

a policy and regulatory environment that doesn't discriminate against tree growing and provides security of the right to plant and harvest ●

increased technical and commercial information available to all growers ● recognition by investors and financial institutions that tree growing is a legitimate commercial activity. ●

I also want to encourage farm forestry activity as a real option for farmers. The Commonwealth recognises that plantations and farm forestry have a wider benefit and we have set out to equip our farmers with the tools to create wealth on farms, to contribute to regional development and to improve sustainability with conventional tree crops and new products and markets, particularly in non-traditional forestry regions.

Action Agenda

Having secured the 'supply side' side of the equation — our resource base -our top priorities are domestic processing and market development. That is what the Action Agenda is all about. I am convinced of our forest industries’ potential to become major internationally competitive growing, value adding and export industries.

The objective is to establish very clear goals and priorities under the Action Agenda for the Commonwealth, States, industry and other key players, as well as key milestones in addressing industry development. I am genuinely excited about the possibilities and look forward to bringing forward this Action Agenda, our collective blue print for the future, during April.

An expanding well-located plantation resource brings opportunities. I would like to draw on an example of dissolving pulp which Rob De Fégely of Jaakko Pöyry mentioned in the report to the Action Agenda Steering Committee The Need for Change - Positioning Australia's Forest Industry for the Changes / Opportunities for Tomorrow?.

Dissolving pulp is a specialty pulp grade that can be made from hardwood or softwood. It is one example of an attractive opportunity in the right circumstances, of possible interest to some of the plantation development groups in Western Australia.

the mills tend to be smaller scale than for kraft pulp mills ● there is no operating dissolving pulp mill in the Asia Pacific region and the region imports 1 million tonnes per annum of dissolving pulp for its textile industry ●

Western Australia is close to the two main consumers, India and Indonesia, although it would be ideal to have a local Australian industry to consume the output. ●

Sustainably managed forests In parallel with the Action Agenda, we are also taking initiatives to ensure that customers and consumers are confident that they are buying products from sustainably managed forests.

Australian forest managers have already implemented a high standard of forest management through thorough planning and professional harvesting practices.

To build on these practices, and to demonstrate the sustainability of Australia’s forest industries, we have pushed ahead with RFAs; the adoption of, or improvements to, Environmental Management Systems by State forest management agencies and industry; the implementation, and ongoing development of a framework of regional indicators of sustainable forest management; and the independent assessment by Australia’s CSIRO of plantation codes of practice to ensure they protect environmental and heritage values.

The Commonwealth and State forests Ministers are now embarking on the development of an Australian Forestry Standard that will allow our forest management and the products we produce to be independently audited and certified against an agreed standard of sustainable management.

This will involve an open and transparent process to which all stakeholders can contribute. It will allow Australian forest owners and managers to capitalise on the forest policy and management frameworks Australian governments have provided.

On the international front, there has been a plethora of standards and certification schemes, with national forestry standards now being developed or being implemented in a number of

countries such as Finland, the United Kingdom, Canada and Malaysia. As well, as some of you may know, the WWF sponsors certification through the Forest Stewardship Council.

Interestingly, European forest owners, of whom there are hundreds of thousands, are working together to develop a framework for mutual recognition of European forestry standards.

I am pleased that the Australian industry has established links with this initiative.

But what has concerned me is that these various standards and certification schemes could, if we’re not careful, end up confusing consumers and not providing the confidence that producers need. I have therefore initiated a process internationally, proposing that Governments get together on a voluntary basis to see if we can establish key requirements for certification schemes, which would bring all those standards together as an international identifier, a 'Woodmark' if you like. All cooperating countries could use this and it would be readily recognised by consumers - in a similar way to the Woolmark.

This is an ambitious proposition, but one where I believe Governments have a leadership role to play.

Greenhouse Sinks Greenhouse is emerging as a key issue for us all.

The Kyoto Protocol has the potential to offer economic opportunities for the forestry sector. I say "potential" because implementation of the Protocol is still being negotiated. Key decisions on implementations are anticipated at the Sixth Conference of Parties to the UN Framework Convention on Climate Change.

I am determined that Australia’s position in the negotiations reflect our long term national interest and I will be closely following the negotiations in terms of their implications for the forestry sector.

Key Kyoto provisions relevant to the forest sector are:

the requirement that developed contracting countries count both carbon sequestration (storage) and emissions from land use change and forestry activities (Article 3) ●

emissions trading (Article 17), permitting companies in developed countries to trade carbon credits gained from carbon sequestration programs ●

joint implementation(Article 6), which allows for cooperative projects (including carbon sinks) to be conducted between developed countries and for the two countries to share carbon credits

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clean development mechanism (Article 12), which allows developed countries to conduct projects in developing countries, with carbon credits from the project to go towards meeting the investing country’s emission targets.

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If implemented well, these provisions can promote investment in forests in a number of countries including Australia, while delivering major reductions in greenhouse gas emissions. Some of this investment has commenced — the TEPCO arrangement with State Forest of NSW being one. The development of a carbon emissions trading system also has the potential to provide much-needed funding towards forest management of private native forest.

The greenhouse juggernaut must not ignore the real benefits of trees.

I would also be looking to build capacity in biomass industries as there is a need to focus on new industries and focus on the opportunities to use conventional wood wastes and low grade material, whilst promoting greenhouse friendly industries.

Domestically we are moving quickly to the establishment of the Greenhouse Gas Abatement Program and the Greenhouse Challenge Program, which are going to fuel our capacity to develop workable and cross-sectoral activities.

Where there are opportunities, there are also threats. It is essential that trade in carbon does not distort trade in forest products. Decisions on the implementation of the Kyoto provisions must take into account their potential impact on forest and agricultural industries. As the Australian Government position in the greenhouse negotiations are taken, I will be closely examining options taking into account their implications for forest and agricultural industries and for regional Australia.

Conclusion In concluding, let me reiterate that off the back of bipartisan national policy reflected in the National Forest Policy Statement, we have actively addressed the issues of resource and conservation security through the RFA process and our plantations and farm forestry programs. The results are clear and demonstrable. We are now focussed on building on these achievements through industry and market development - the Action Agenda and our initiatives to demonstrate sustainable forest management will take this forward.

Internationally Australia's record of achievement in forest management is highly regarded. Yet as Minister for Forestry and Conservation, I have attracted some criticism within Australia over my strong stance in pursuing the existing policy approach. I do not resile from this approach, believing it is the only responsible action in terms of both good conservation and good industry outcomes, and critically secure and lasting outcomes for the people and communities in rural and regional Australia.

Thank you.