Efforts to rebuild a stronger export economy will be short-lived if the country doesn’t start addressing the cost of unfair trade practices by China, wood and steel processors say. A surge in export log prices – driven by demand from China – is part of a recurring issue that successive governments have failed to address, said Jon Tanner, chief executive of the Wood Processors and Manufacturers Association.
The group has been promoting greater use of timber construction to underpin renewed investment in domestic processing and create more jobs in the sector. But the high cost of logs here increases the cost of domestic construction products and makes them less competitive with imports. It also makes it virtually impossible to export timber products to China.
Tanner said the issue goes beyond just steel and timber. While agricultural protections are not outlawed by the World Trade Organisation, New Zealand farmers were still facing unfair competition against subsidies in Europe and the US, yet that topic is seldom discussed at a policy level
“All our problems start with trade and unequal competition so therefore we’ve got to get that right first,” Tanner told BusinessDesk.
New Zealand signed a free trade agreement with China in 2008 and has since seen two-way trade between the countries more than triple. Exports to China were worth $16.8 billion in the 12 months ended March 30, almost twice that of trade with Australia, our second largest market.
But in recent years NZ Steel has lodged three dumping claims related to Chinese steel products, while non-compliant building products imported from China have also attracted more attention from industry and officials.
In 2017, the Ministry of Business, Innovation and Employment funded a study to understand why Chinese importers were paying above international rates for New Zealand logs. The study, by Forest Economic Advisors, noted the “extremely significant” trade imbalance between the countries, with New Zealand’s log exports volumes being 35-times the volume of value-add timber products we shipped to China.
Chinese buyers were effectively setting the domestic log price for New Zealand mills and only the most efficient, modern New Zealand mill could be competitive exporting product to China, the study found.
Photo: Jon Tanner, Chief Executive of the Wood Processors and Manufacturers Association.