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What are we doing to ensure forestry doesn't follow Ford?

By Ross Hampton - posted Tuesday, 4 June 2013


The Government moved quickly to offer financial support to our fellow Australians after Ford's recent announcement. It might do equally well to consider some calibrated and creative intervention at the top of other cliffs rather than awaiting other trade exposed industries to fall off. The forest products industry is a profound case in point, where a sensible dose of prevention can, and should, easily outweigh the costly cure.

This is not to advocate anything like tariff barriers or other simplistic devices - which kill innovation. But even some of the driest economic purists acknowledge it is sensible for a nation to tweak policy settings to help their industries transition to a new operating environment. The long term cost to the economy of losing whole sectors, or capacity, is far greater than the short term cost of straying from the purely rational script.

Forestry and forest products need that sort of thinking now. The comment I heard recently on radio that forestry is a 'sunset industry', is rubbish. But I do have to admit it could be true in years to come if we continue to ignore our local businesses while our competitors, with all sorts of assistance, vacuum up our markets.

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It goes without saying that forestry, and the things we make from trees, still fill our lives - as they have for hundreds of years. From house framing, flooring, windows and wall cladding to furniture and of course paper, tissue and packaging products almost without number.

And the future for all those things is bright. The oft-reported decline in newsprint in developed nations is dwarfed by the massive uptake of all sorts of other timber and paper products – led by China and India. In 2011 the Asia Pacific region saw a 40% growth in the paper products market. The respected UK analyst group AMEC predicts that global demand for paper and packaging will soar from 400 million tonnes to almost 600 million tonnes in twenty years. In total, forestry products is a $600 billion industry which has doubled in size over the past 6 years.

And they are just the markets for products we all know.

Savvy entrepreneurs are already commercialising hundreds of innovative new uses and mixes of forest products. You can now choose glued laminated timber stronger than steel or pre-fabricated cross laminated timber which allows buildings to go up like a giant Lego kit. I even have on my desk a water bottle which looks like malleable plastic but which has been moulded from a tree (nano-crystalline cellulose to be exact).

And then there's energy. All over the world they are throwing up plants that convert the energy embodied in all sorts of organic waste (including forestry and saw milling offcuts) into power, heat and fuel. It is estimated that biomass, as it is called, represents a new energy market 90% the size of the energy currently consumed by the OECD energy market!

Why is the world turning so sharply toward forestry and forest products? Because in an environmentally pressured global environment that places a premium on the renewable resource, overlaid with a growing determination to dial back carbon consumption, timber is without peer. Although some man-made materials can match some of timber and papers' qualities, none of them even come close to a tree when it comes to sustainability.

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Trees are solar powered. They store carbon. The products made from trees store carbon. If parts of a tree are burnt for power it replaces much more carbon intensive energy. Trees are replanted and they regrow. When properly managed trees are the quintessential renewable resource.

So internationally speaking it is far from sunset - it looks more like a new golden age dawning. The question is how does it look from home shores?

Unfortunately the answer is not so rosy.

Australia once had a forestry sector the envy of the world. Thanks to abundant resources, cheap power, access to markets and innovative and pioneering managers and workers, Australia once boasted comparative advantage in spades. For more than a century the industry was the backbone of many regional centres from North Queensland to south west Western Australia. Australian wood built our homes and produced the world's best paper.

But those advantages have been whittled away and now we are paying the price.

In 2013 we see an industry shrunk to a quarter its size of fifty years ago. Hundreds of smaller mills have closed. Thousands have been forced out of work in our towns.

And yet it is not as if Australians have stopped buying forest products. It may come as a surprise, but in fact last year we spent $4.2 billion dollars on overseas made timber and paper. In the same period we exported only about $2 billion worth.

The high Australian dollar shoulders some of the blame for this dramatic shift, but in truth our policy makers have, by and large, sat on the sidelines and watched it happen. And before the rationalists leap in to pronounce that the retrenched forestry workers can simply shift to mining, it is important to note the less obvious costs of such passivity to our nation. We are allowing to wither the capacity, the capital and the established markets which are vital if the industry is to be capable of surging to meet the well-defined global post- GFC demand.

Other countries have unashamedly fought to ensure their timber industries transition from heritage status to this new future. In Canada, for example, the government has backed a bold drive to unlock new products by co-investing in a $90 million dollar forestry innovation institute. In Japan, the introduction of a feed-in tariff program that rewards renewable energy has enabled Nippon Paper to construct a power generation plant which will run entirely on woody biomass. In Norway the authorities have instituted a "wood first" policy for government buildings. If you invest in a forest in the United Kingdom your timber sales are free from income tax in recognition of the long term nature of your commitment.

And in Australia? Here we have ignored the scientifically constructed regional forest agreements (RFAs) which took into account biodiversity and threatened species and established a network of forest conservation reserves and working forests. Those working forests constituted only about 6 per cent of the total forest area. (It is worth noting that forestry operators actually only harvest a tiny proportion of that 6 per cent. If the total forest area is represented by the MCG, the area harvested in any year is less than the centre circle.)

Instead we have re-labelled thousands of hectares of managed forest, including in some cases plantations, as 'reserve'. This effectively sealed the fate of many regional mills that could no longer see available resource over the horizon.

In addition we were so spooked by the poor execution of the managed investment schemes that we have abandoned the field and we are not planting sufficient long rotation trees that require equally patient investment.

Our government departments seem content to consume vast quantities of overseas paper from dubious sources rather than our own (even when the Australian variety is recycled and fully accredited and underpins regional jobs).

We have thrown up every barrier imaginable before those who would try to build a pulp and paper producing mill here to drive our own resource use further up the value chain.

We even failed to provide renewable energy certificates for native forest biomass as a green energy source - despite bipartisan agreement that we could achieve 7 per cent of our 2020 renewable energy target this way without cutting down a single additional tree!

We are at a key moment in time.

Australia has a proud 200 year history as a forestry pioneer. I believe we can look forward to another 200 years. But only if we acknowledge that, as a major regional employer and the obvious choice in a carbon constrained future, the industry deserves policy attention to transition from its heritage status to the new world. It is an absolute certainty that forest products will play a big part in the lives of our children and their children. It really is up to all of us to ensure that there will still be paper, packaging, timber and timber products on their shelves proudly displaying "Australian made".

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Article edited by Neil Thomas.
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About the Author

Ross Hampton was appointed CEO of the Australian Forest Products Association in May 2013. He is a veteran of the policy and political scene having worked, at various times, as a reporter, adviser and policy advocate for the last twenty-five years in Australia and overseas. He has a long exposure and association with the issues confronting the Forest and Forest Products sector including water policy, climate change policy, trade policy, industrial relations policy and environment protection.

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