Building on competitive advantage

This is a an article from Ross Hampton, CEO Australian Forest Products Association. It s about comparative advantage and that the experiences of the Mitsubishi/Ford/Holden story should teach us a lesson and is well worth a read

Ross says "in the end, comparative advantage rules. There is only so long a dam wall built of government cheques can hold back global tides of lower-cost competition.

As a nation, hadn't we better start to be more pragmatic about backing our best horses? Shouldn't we be asking ourselves: Where do we have an advantage which we can leverage?

One of those horses worth betting the house on is found in our native and plantation forests - and the multitude of businesses which use that wood and fibre for everything from fine flooring to newsprint.

We have abundant land and sunshine and, in many places, water. That should mean in forest and forest products we have a comparative advantage in spades. The key, though, is to turn that comparative advantage into competitive advantage.

And the fastest, most likely, success path to that breakthrough is research and development.

Which is why ever since the election the forest, wood and paper product industries, right up the value chain, have been bending the ear of every Cabinet Minister, arguing for a one-off investment in the Budget to allow the 200,000 Australians who work in or around our industries to imagine a brighter future.

The ask is for federal muscle and funding to bring industry, state governments and academia together in one co-ordinated R&D effort to turbocharge our national output. We call the proposal the new National Institute for Forest Products Innovation.

The Australian Forest Products Association (AFPA) has just done an analysis of the impact a well-funded and co-ordinated R&D effort could have in country Australia, where forest industries are keystone businesses. The returns could be in excess of 9000 new jobs in our regions.

For those living in one of our big cities, 9000 new jobs may not seem so dramatic. However, in the small towns relying heavily on forest industries - such as Gympie, Grafton, Oberon, Mt Gambier, Tumut, Morwell, Launceston, Albany and dozens more - several hundred new jobs can mean the difference between prosperity and decay.

Forestry and forest industries have weathered some difficult years. The combined crunch of shrinking resource availability, the massively high dollar and the global financial crisis meant many in the industry simply tightened belts and tried to survive.

Now, however, there is light on the horizon. Growth is perhaps returning and, touch wood, the dollar is lower.

Our competitor nations such as New Zealand and Canada have already moved fast to build large, nationally-funded research and development organisations. They are securing poll position as global demand takes off for the renewable, recyclable and carbon-storing products which we gain from trees.

In Australia, believe it or not, we have done the opposite. Our research effort has shrunk from about $100 million to $30 million in five years. The number of researchers has plummeted from some 730 to 250.

Paper, tissues, timber and wood-based products of all kinds are entering a new growth phase. Cross-laminated timbers are proving stronger and cheaper for high-rise construction than steel. Nano-crystalline cellulose (from wood fibre) is replacing plastic in everything from car dashboards to cosmetics. These are markets worth potentially billions in export dollars.

Australia stands at a threshold. We must equip our own industries to make this jump into the new global demand cycle or risk diminishing scale and see more and more imports replacing Aussie products and Aussie jobs.

The May Budget will show whether the Abbott Government is serious about research and development in the sector and committed to the future of our forest and forest product industries".

Ross Hampton is the CEO of the Australian Forest Products Association