Added-value hits confidence crisis in the wool industry

Press, 19 December 1986, Page 24

Added-value hits confidence crisis in the wool industry

Adding value to primary products before export, for so long an article of faith in New Zealand, is taking a hammering in the wool industry from the fluctuating dollar value, the end of export incentives and the reduction of tariff barriers to imported competition. One of New Zealand’s most successful “addedvalue” entrepreneurs, Mr Tony Timpson, of Cavalier Carpets, said in Christchurch recently that manufacturing was being forced offshore and he was “bloody annoyed.” He was addressing the annual conference of the Textile Institute. He felt the Government had gone soft on encouragement of adding value and that it was getting very hard to successfully and profitably export finished products in the textile industry. Exports of such products had declined by at least one third in recent months. With local manufacturers now the fourthlargest purchaser at auction of New Zealand wool, over 60 per cent of wool scoured before export and 10 per cent with added value beyond scouring, it is clearly important to wool growers that the climate for manufacturers is a healthy one.

The Minister of Overseas Trade, Mr Moore, has been but the most vocal of several ministers, even before they became the Government, to push added-value very hard. Have they stopped doing so?

The Minister of Trade and Industry, Mr Caygill, protested that the Government was still firmly committed to creating the climate in which adding value was a profitable thing for the company and the country.

The Government was not so much identifying opportunities and providing (“picking

the winners”) but examining the ways in which it might provide the climate for the best decisions by private industry. This was not necessarily because the Government couldn’t pick the winners, but that it was lousy at quitting losers. When things went bad in an industry, private enterprise was much better at moving out than the Government, which tended to have sociological and political reasons for persisting. Mr Caygill called it a “fundamental error” for the Government to single out industries for taxpayer investment. Professor David Cullwick, professor of marketing at Victoria University, had told the conference that the sharemarket was discounting New Zealand manufacturing companies, particularly those in woollen manufactures, while boosting the prices of investment and property companies. Declining export performances were a reason for this prejudice, he suggested, because export growth for many valueadded wool products had clearly stalled. Professor Cullwick said value-added exports had a major role in the future provided they were based on innovative products and services which were competitive in international markets and not products which we hoped were competitive just because we made them. In the woollen carpet industry, the most exciting growth prospect is the United States, where even a lift of one of two per cent in wool carpet usage would take most of our crossbreds.

Mr Timpson has attacked that market in a novel way, by opening carpet retail stores and by-passing the traditional distribution and decorating chain which /js a

feature of carpet sales there. “In 1972 we made a prototype loom in a garage and at night dreamed of selling around the world,” he said. “Today we export over $lOO million in scoured wool and carpets to many countries.” He urged a much closer partnership between the grower and the manufacturer, but not one in which the grower was still wedded to the auction system! At least enough wool should be contracted outside the auction system to enable New Zealand to lift its percentage of value added manufactures from one-tenth of the clip to one-quarter. New Zealand’s participation in the International Wool Secretariat, costing $5O million a year, was also side-swiped by Mr Timpson. It was money going toward promoting the sales of countries that were not members of 1.W.5., he said. Instead that sort of money should be targeted specifically at promoting finished products with New Zealand wool. The industry could all work together towards substantially boosting the amount of wool processed beyond scouring and selling the finished products in specialist market niches, he said. “If the United States uses half the world’s carpet then we should be selling half our wool there. “Why have we not achieved this already? “Simply because we throw our goods on to a commodity auction market and hope. “We have the technology, the expertise in manufacture, and we are the only country with a total vested interest in carpet wool, but we lack co-ordinated marketing of the fibre.” Mr Timpson also sug-

gested to the Government that it abolish income tax on profits earned from exports, an incentive he said did not contravene GATT rules but would boost investment, employment and innovation.