Speech by Ms Paula Lehtomäki, Minister for Foreign Trade and Development of Finland, at the CEPI Annual Meeting, 30 November 2006, Brussels

CEPI Annual Meeting
Thursday 30 November 2006, Brussels

Mr Chairman, Dear Participants, Ladies and Gentlemen,

It is a great pleasure for me to address this session of the CEPI Annual Meeting here today. Having lived most of my life next to the border between Finland and Russia, I must say forests are of a particular meaning to me personally: I can practically say that I have been raised in the middle of forests. Consequently, as a Finn, speaking about the significance of the forest industry seems very natural to me.

European paper industry and the whole European forest sector are faced with numerous challenges, but the rapidly changing world also offers a lot of opportunities. The overall driving forces in modern society – globalization, urbanization and demographic changes – also influence the forest-based sector in a number of ways.

In recent years, the current state and future of the European forest sector have been under serious consideration. There have been remarkable new strategies and initiatives. In the following, I wish to refer to, in particular, the European Union's 7th Framework Programme, the European Technology Platform for Forest-Based Sector, the EU Forest Action Plan, and the forthcoming Communication on the Competitiveness of the Forest Based Industries.

Ladies and Gentlemen,

The EU's 7th Framework Programme outlines the key areas of European research and financing in 2007–2013. The research budget totals over 50 billion euros. Applications for research funding are being invited, and the European forest-based sector considers it essential to be strongly involved in the first round of the application process.

Especially the Forest-Based Sector Technology Platform is going to make a significant contribution to reinforcing the groundwork for the sector's competitiveness in Europe. Research investments are needed to ensure the constant renewal and growth of the sector, which is the only way it can stay competitive.

This Technology Platform for Forest-Based Sector is an excellent concept for strengthening the competitiveness of the forest-based sector through joint R&D activities. The initiative is particularly valuable in that this approach is based on private-public partnerships. The Platform has brought together forest producers, industry, research institutions, and regulatory authorities on the European level.

I wish to congratulate the European forest-based sector for the special achievement that now, for the first time, the whole European forest value chain has worked together on a common research agenda. It is of great importance that, when drafting the agenda, a common Research & Development vision was created for the sector. The Platform has gone through an intensive preparatory phase to define its Vision until 2030 and the Strategic Research Agenda. Now it is time to turn these excellent plans into action.

Based on the common research agenda, national research programmes have been elaborated. Several member states have recently published their own plans, based on which the future research activities will be focused.

Thanks to the wide collaboration between the Member States, the industry, the researcher community, and the funding organisations, the Commission has put more emphasis on the forest-based sector than ever before. Consequently, there are more forest-related theme areas in the 7th framework programme than in the previous ones. Last week there was a seminar arranged by the Forest-Based Sector Technology Platform in Lahti, Finland. Some 450 participants from the Member States and outside discussed the future research ideas for two days. The next meeting will be arranged in Germany next year.

Ladies and Gentlemen,

Competitiveness of the forest sector is also a high priority in the EU Forest Action Plan published in June. One of the four main objectives of the Forest Action Plan is "to improve long-term competitiveness". The other three main objectives are: to improve and protect the environment; to contribute to the quality of life, and to foster coordination and communication.

The EU Forest Action Plan is founded on eighteen key actions, which the Commission and Member States intend to implement jointly during a period of five years (from 2007 till 2011). Key Action 1 calls the Commission to carry out a study on the effects of globalisation on the competitiveness of EU forestry. The action aims to identify the main factors influencing the trends in the EU forest sector and to underpin discussions on further action to be taken.

The role of the forest sector in contributing to the security of raw material supply in the EU is also stressed. It is important to ensure the acceptability of final cuttings and forest management measures among the public, as well. Wood should continue to be viewed as one of the basic raw materials whose processing yields important income to the actors involved, as well as products and services for our daily lives. The forest and wood-based sectors provide valuable goods, comfort, hygiene, security, and information that enhance the society as a whole.

During the Finnish Presidency, the Council Conclusions on the EU Forest Action Plan were adopted in the October Agriculture Council. According to the conclusions, Commission and the Member States are invited, for example, to promote wood as renewable raw material, to increase the use of forest biomass in energy production, to continue the efforts to combat trade in illegally logged timber and exchange ideas and experiences about national public procurement criteria for timber. The implementation of the EU Forest Action Plan is about to start in the beginning of next year.

Ladies and Gentlemen,

We look forward with great interest to the Communication on strengthening of the framework conditions for the forest-based industries, which is currently under preparation in Directorate-General Enterprise. The Communication will look at the situation of the EU forest-based and related industries and the new challenges that these industries are facing, and it will propose actions to meet the challenges. The current considerations have a direct link to the Forest Action Plan.

These strategies and initiatives indicate that the European forest sector has fully acknowledged the need for a serious and comprehensive consideration of its future and the challenges involved – and that it is ready to face them! The importance of Research and Technological Development is emphasised in all these strategy documents.

Research and Technological Development has a primary role to play in boosting competitiveness and fostering innovation, economic growth and employment.

To maintain the competitiveness of European forestry and forest-based industry we must optimize the various steps and links of the forest – wood chain from growing the trees to delivering and recycling the wood- and fibre-based end products. The paper industry is also facing considerable challenges, such as the strong development of the IT sector and increasing use of other materials, as well as new requirements from the society: mitigation of and adaptation to climate change, pressure to save natural resources, as well as the shift in energy sources, which includes the use of wood for energy.

The sparing use of natural resources and increased eco-efficiency are important goals. Forest sector, which is founded on the sustainable use of natural resources – especially renewable ones –, is an excellent example of a sector where Europe has true potential to spearhead the development.

Climate change is certainly one of the greatest challenges, and a serious threat to us all. Recent studies have shown that climate change will have very serious impacts on the global economy as well. The evidence is clear: the benefits of urgent and strong actions would considerably outweigh the cost. This was also clearly indicated in the British Research (Stern review) on the Economics of Climate Change published recently.

However, actions to limit greenhouse gas emissions have impacts on the competitiveness of enterprises. These costs should not be charged on the European enterprises only. The carbon market should be global. In the future, the climate agreements should recompense for efficient activities where the emissions are kept low.

I hope that this necessity will turn into a virtue and a competitive advantage. There will be great demand for European expertise in environmental technology and the energy-efficient applications of our forest companies in the efforts to find solutions in tackling climate-related problems.

We should also keep in mind that the high investments in environmental protection have already helped to create around two million jobs in the European eco-industry. This eco-industry, which accounts for about one-third of the global market, is already highly competitive, especially in the efficient use of fossil fuel energy and technologies for renewable energy use.

One relatively new task is the verification of the legality and sustainability of the raw material and production process. It is our common goal to prevent illegal logging, because this has detrimental impacts on forests and people who depend on forests, as well as on the entire wood market, and the public image of the forest-based industries. A new set of market-based tools has been prepared for this work.

Wood tracing systems developed by the forest industry, together with the various certification schemes and voluntary codes of conduct, can be seen as a major step forward in combating against the import of illegal wood harvested in an unsustainable wood. What is important in this work is to realise that each producer country is different and systems designed to verify the legality and sustainability must reflect the circumstances in that specific producer country.

Ladies and Gentlemen,

The concept of sustainability evolves in time. This is why views on what is sustainable differ to some extent between different countries. However, within Europe, these differences should not become obstacles to trade, for example, when providing guidelines for the public procurement.

On the other hand, the forest industry – all of you here today – have been adjusting to changes for decades. Many of these are no longer seen as challenges; instead, they have become part of the daily routines. One example is recycling. Today in Finland as much as 90 per cent of the waste and by-products of the pulp and paper industry can be recycled and utilised again.

Similarly, some years ago globalisation and global trade were still perceived as threats. Today, national economies and also forest industries have adapted to operating in the global context. It is increasingly realised that an ever larger share of the competitiveness of an industry stems from success in global markets.

We have started reflecting and acting on these so-called external aspects of competitiveness within the EU's trade policy – where the Commission is the driving force.

For the forest-based industry, for example, this means that in order to be able to make the best use of the European technological edge that you have acquired, the EU trade policy should contribute to making your important export markets more lucrative. This is not only in terms of decreasing or disappearing tariffs but – as regards to the elimination of non-tariff barriers – also transparent and fair competition rules and effective IPR protection, among other things.

While the EU hopes that the DDA negotiations in the WTO framework could be re-started in the near future, parallel efforts are needed in the form of targeted free-trade arrangements with the EU's important trade and investment partners - such as ASEAN, India and South Korea. With its relevance for competitiveness, trade policy is increasingly elementary in contributing to job creation and well-being in our societies.

From the Finnish perspective, wood has always been highly valued as an important renewable natural material. Wood and forests were decisive in converting Finland from a poor agrarian society into one of the top industrial nations of the modern world. Even if the share of the forest sector in the national economy has decreased, we can still say that Finland lives from its forests.

The significance of forests for the Finns goes far beyond the economic aspects. They are part of our identity and the history of our survival through the centuries. All this has also called for significant research inputs in the forest sector and renewable utilisation of wood resources.

Ladies and Gentlemen,

Forest sector – and especially its hard core, the paper industry – are currently facing a great structural transformation in Europe and in the whole world. This is due to the reorganisation process which affects the world's industrial production, purchasing power of regions, structure of consumption, and company ownership. We are witnessing the appearance of a new kind of division of labour between countries and regions. This transition will lead to a revaluation of the comparative and competitive advantages of different countries and enterprises.

To be competitive globally, one has to be global. This principle is clearly reflected in the European industry's investment decisions. Occasionally, these efforts may envounter unexpected problems. A good and topical example of these ongoing changes as well as of the challenges in this industry is the Finnish company Botnia, one of the leading forest companies in the world, which is investing in a major forest industry plant in Uruguay. The investment, totalling 1.1 billion USD, is the largest greenfield investment made by a Finnish company abroad. For Uruguay, it represents the largest industrial investment in the country's entire history.

As you may know, the Botnia project has been an object for big controversy stemming from Argentina and involving Uruguay and the company itself. Even the Finnish Government – as the host Government of the Botnia Headquarters – has been given a role in this spectacle.

The studies that have been made of the project demonstrate that the Botnia mill compares favourably with the best available technology and the best environmental practice for mills in Europe and North America. Thus, the IFC decided on November 21 to provide a loan as well as guarantees to this project.

With this very clear signal at hand I sincerely hope that the turmoil around the Botnia project will finally start to wane. The obstacles experienced in the project demonstrate, however, the multitude and complexity of issues that need to be considered, when investing and expanding outside of Europe. In addition to economic and industrial issues, also socio-economic, cultural and political issues need to be given increasing emphasis.

Ladies and Gentlemen,

Paper has proven one of the most stable and versatile products, which has adjusted to the changes in the world through centuries. Apart from having a distinguished past, paper and paper products are also going to have an interesting future. It is utmost likely that we will continue to develop new wood-based products while renewing the traditional uses. One good example of this is smart papers and packaging which combine renewable fiber raw material and information technology.

Also, smart applications will open up enormous potential. In the future the packaging could tell you, for instance, if the product inside is still in good condition. It could also be used to trace the product's movement through the entire logistics chain. New innovations are created on the interfaces with other sector and technologies.

In the future, research in the forest-based sector will focus strongly on areas where the sector can improve its competitiveness and increase the well-being of the society. Innovative products need to be developed for changing markets and to meet consumer expectations.

The overriding challenge facing us is to maintain and improve the competitiveness of the forest-based industry which is a net contributor to the EU’s trade balance. Know-how and technology will certainly constitute the main competitive advantages of Europe on the global market, and they will be increasingly significant in the future. There are many challenges, but also an abundance of opportunities.

I firmly believe that European forests, forestry, and the forest and paper industry as a knowledge-based sector will stay viable and competitive. This sector will continue to make a valuable and ever-increasing contribution to the growth and employment in Europe, and the well-being of its citizens – all this in a sustainable way.

Thank you.