A new report has accused a forestry bill going through Parliament of increasing costs for the forestry business and reducing the value of the New Zealand economy.
It also warned that the bill could conflict with trading agreements that New Zealand had signed with other countries.
The Forests (Regulation of Log Traders and Forestry Advisers) Amendment Bill, which aims to ensure logs are sent to local processors instead of being exported raw, was introduced just after the Budget and has already been through a select committee.
Forestry Minister Shane Jones had accused "log mongers" of selling Northland logs en masse to China, leaving not enough available for local sawmills to do their job, a move that would harm employment opportunities.
However, critics of the bill have called it cumbersome and expensive, and it would require many people in the log trade to become registered.
These criticisms have now been supported in a new report by the New Zealand Institute of Economic Research (NZIER), commissioned by the Forest Owners Association.
It estimated the scheme would curb New Zealand's GDP by between $16.5 million and $30.9m, and said any sawmilling jobs created would cost more than twice the amount of money people could earn from doing those jobs.
"Yes, jobs are created in the short term, but at a huge cost," the report read.
"Rather than diverting log supply to create employment for wood processing workers, it would be simpler to give those people the average wage in the wood processing sector."
"The key issue is that this Bill has the potential to transfer value from one internationally competitive part of the industry to a less competitive part of the industry.
"This is likely to introduce significant costs and have an adverse impact on the forestry industry over time. It is likely to create arbitrary 'winners' and 'losers' based on regulation, rather than market efficiency, effectiveness, and innovation."
The scheme was a throwback to an earlier age when bureaucrats tried to regulate trade, and was incompatible with 10 international trade agreements signed since the Closer Economic Relations agreements in 1983, the report said.
"New Zealand relies on a rules-based international system - already under stress due to the behaviour of the United States," the report read.
"Flouting international rules and turning inward will undermine New Zealand's international credibility and potentially our trade relationships."
The bill would also perform badly in its goal of promoting value-added exports, rather than unprocessed exports, the report said, with a bureaucrat's version of value-add often turning into a producer's version of cost-add.
The NZIER report cited an experiment in British Columbia similar to that proposed for New Zealand, which led to an increase in sawmill closures and 5000 workers being laid off after the largest private forest suspended wood harvesting.