James TURNER IUFRO Division 5 Conference Forest Products Marketing & Business Management

Growing Wood Product Exports via Market Access: New Zealand Exports to USA, Japan and China James Turner, Frances Maplesden, Susan Bates and Andres Katz Scion, Trade and Economic Development Group, 49 Sala St, Rotorua, New Zealand

Aim of Work To understand potential changes in New Zealand’s value-added export market environment, the technical barriers and opportunities likely to arise, and the responses required to enable export growth

Overview  Background – Why?  Methods – How?  Results – What?  Conclusions – So what?

Background

Opportunity  Adding value & jobs – timber to carpentry

Adding value New Zealand primary and secondary wood product exports

Opportunity  Adding value & jobs – timber to carpentry  Growing opportunity

Growing Opportunity Global primary and secondary wood product trade

Opportunity  Adding value & jobs – timber to carpentry  Growing opportunity  Product differentiation ­Unrivalled brand, quality, service

Threat  Trade barriers ­Tariffs – tariff escalation

Wood Product Tariff Escalation Average Tariff (%) CountryRaw materials Semi- manufactured Finished products China Thailand Australia

Threat  Trade barriers ­Tariffs – tariff escalation ­Trade disputes – China bedroom furniture ­Non-tariff trade barriers

Non-tariff Barriers - Definition Government laws, regulations, policies and/ or practices which either protect domestically produced products from the full weight of foreign competition or which artificially stimulate exports of particular domestic products

Trade Barriers - Examples  Social & political ­Processing subsidies ­Quantity controls  Health & safety ­Phytosanitary regulations ­Restrictive testing and inspection  Environmental ­Harvest restrictions ­Certification

Research Questions  Are NTBs a significant barrier to New Zealand value-added exports?  What strategies can be used to overcome these barriers?

Methods

Value-added Markets  Builder’s carpentry & joinery ­Wooden doors  Mouldings & millwork  Wooden furniture  Prefabricated buildings  China  Japan  United States

Methods Exporter Survey Current barriers Costs Economic Impact Assessment Important barriers STEEP Future barriers Strategies

Exporter Survey  13 one-on-one interviews ­prefabricated houses ­wooden doors  Why not exporting?  Factors affecting export growth

STEEP Analysis  Social, technological, economic, environmental, political  Trends ­predetermined ­uncertainties  Expert workshops

STEEP Analysis  Determine future non-tariff barrier trends by ­Identifying important trends and drivers ­Assessing implications for trade barriers

Economic Impact Assessment  Global Forest Products Model  Non-tariff measures ­Subsidies – export & production ­Shipping costs ­Manufacturing costs  SPWP – imports & exports

Global Forest Products Model  Forecasts ­Prices ­Demand ­Supply ­Trade  Competitive equilibrium  18 wood products  180 countries linked by trade

Results

Exporter Survey Current barriers Costs Economic Impact Assessment Important barriers STEEP Future barriers Strategies

Survey – Prefab Houses  Japan – engineering certificates  China – lack of IP protection – lack of acceptance – treatment of radiata  USA – open & transparent  Management time costly ­> $1 million over 5 years ­small firm size ­market development

Survey – Doors  Japan – no significant barriers  USA – fire rating requirements  Lack of scale  Market development

Exporter Survey CountryProductNon-tariff barrierNTB Cost (%) NTB Cost (US$/ t) JapanPrefab housingEngineering certificate7.0 – Fire code3.0 – – 118 Design values Bureaucracy1.03 ChinaPrefab housingIP protection1.0 – – 47 Timber treatment1.535 USADoorsFire rating3.041

Results Exporter Survey Current barriers Costs Economic Impact Assessment Important barriers STEEP Future barriers Strategies

STEEP Analysis China:  Environmental degradation  regulations - recycling, energy, air quality  Water - reliance on imported land-intensive products  fewer barriers for forestry products  IP protection might be tightened  Biggest challenge - impending labour shortage  reduced protection  New Zealand has comfortable relationship with China  easier to negotiate trade deals

STEEP Analysis USA:  Democrats likely to be more protectionist  less likelihood of trade agreement with NZ  US lobby groups  countervailing duties - bedroom furniture

Results Exporter Survey Current barriers Costs Economic Impact Assessment Important barriers STEEP Future barriers Strategies

Economic Impact CountryProductNon-tariff barrierExport Change (US$ million) Total Export Change (%) JapanPrefab housingEng certificate90 – – 2.9 Fire code – 0.2 Design values Bureaucracy00.0 ChinaPrefab housingIP protection10.0 Timber treatment10.0 USADoorsFire rating130.1 JapanPrefab housingMarket dev N Prefab housingMD and NTBs

Economic Impact  Modest impact of current NTBs on value-added products ­small proportion of total exports ­small part of production costs  Combining market development and market access beneficial

Conclusions

 Are NTBs significant barrier? NO and YES ­value-added exports small ­combined with market development barriers are significant  What strategies? ­clear market development strategy

Questions?