While New Zealand might be the best in the world at growing natural products, selling them as raw commodities was ''selling ourselves short'', he said.
Mr Cunliffe recently announced new forestry and wool processing policies which he said would help move the industry from volume to value.
Asked what those policies would mean for the likes of Southern Cross Forest Products, Mr Cunliffe said Labour would make sure there was secure wood supply for New Zealand-based processing.
It also wanted to make it easier and more economical for processors to invest in new plant equipment they needed to reach scale and efficiencies to allow them to compete internationally.
To encourage investment, tax deferrals would be provided in the form of accelerated depreciation.
Mr Cunliffe said he was very concerned about Southern Cross Forest Products, where 400 jobs were at stake after its bank placed it in receivership earlier this month because of $58 million of debt. Receivers hoped to sell it as a going concern.
Otago and Southland was a very important forestry production sector and was ideally suited to supply the Canterbury rebuild, he said.
He was ''sick of hearing stories'' of New Zealand logs being sent to China and then New Zealand timber being imported back for the rebuild when it ''should be sent up the road''.
''It's insane,'' he said.
The Chinese knew exactly what they were doing; they wanted to get New Zealand wood in an unprocessed state and add all the value.
As you went up the value chain, it created more employment and earned more money that stayed in the local economy, Mr Cunliffe said.
The value of a cubic metre of laminates was about 10 times the dollar value of a cubic metre of log, while sawn timber was worth double the value of a log, he said.
Asked how its policy would reduce the number of fatalities and injuries in the forestry sector, Mr Cunliffe said Labour would ''give the industry a fright'' by bringing in corporate manslaughter law and extending responsibilities to forest owners. A ''litany of disasters'' were coming from light-handed regulations.
Asked about the response from the industry to the policies, Mr Cunliffe said it had been ''bloody good'' but that was not surprising, as the party had consulted widely with industry in putting the package together.
Last week, he visited Rotorua-based timber company Red Stag which publicly committed to a $120 million investment, increasing mill capacity by 70%, conditional on Labour being elected and bringing in its policies.
Economic Development Minister Steven Joyce has been critical of the policies, saying Labour seemed to want to ''turn the clock back'' to the 1970s.
''Subsidised loans, expensive tax concessions, preferential treatment, and make-work schemes for young people are all a flashback to a time when governments decided which industries succeeded based solely on political whim rather than competitiveness,'' Mr Joyce said.
He questioned why the forestry industry should receive ''preferential treatment'' over the high tech manufacturing industry, ICT, the services industries, the construction industry or the farming industry.
