A new front could be opening in Donald Trump’s trade war with China: the UN’s postal arm, which the US president says has failed to reform a system that favours Chinese ecommerce retailers over their US rivals.
Mr Trump has threatened to take action if the Universal Postal Union, a UN body, does not change rules that make it cheaper to ship small items from China to the US than within the US itself. That, Mr Trump says, forces the US Postal Service to subsidise mail from China and other countries, damaging US retailers.
The UPU’s extraordinary congress in Addis Ababa decided earlier this month that it will not discuss the issue until its next meeting in 2020. But Mr Trump has already issued a presidential memo asking Mike Pompeo, the secretary of state, to present him with proposed solutions by November 1, and the US has threatened to set its own rates.
If the US does take action, it could prompt other countries to increase the prices the US pays to ship packages internationally. It comes as the US fights trade wars on multiple fronts, recently slapping tariffs on steel imports and pledging to redraft a key deal with Mexico and Canada.
The UPU sets terminal dues, which dictate how much national post offices must pay their counterparts for handling international mail. China is classed among the least developed countries, so it only pays a fraction of what developed country post offices do.
The USPS lost more than $135m handling inbound mail from across the world in 2016. While a US business pays $7-$9 to send a 1lb package from Los Angeles to New York using priority mail retail rates, the USPS receives only $2.50 for a similar package originating in China and travelling the same route.
The price for a 4.4lb package shipped domestically in the US is $19-$23, while China Post pays $5 to ship it to the US.
Terminal dues, which apply to packages up to 2kg, were set before the ecommerce explosion, which has connected US shoppers directly with retailers around the world through sites such as Amazon, Alibaba and Ebay. There was an 86 per cent increase in all inbound terminal dues mail between fiscal year 2012 and 2016, the USPS said. The dues mean that many shoppers can obtain small items from China for less than the cost of postage alone within the US.
Peter Navarro, Mr Trump’s trade adviser, has denounced the “inequity” of the system. He wrote in the FT before the UPU meeting that the USPS lost $1 on every Chinese package.
“These disparities have introduced a massive distortion in the ecommerce market. It is often possible for a Chinese company to sell ‘knock-off’ products through online vendors, such as Amazon or Alibaba, to US consumers for less than it costs for American mailers to ship authentic goods.”
He wrote that if the UPU did not act the US could simply ignore it and set its own rates.
The UPU said after its congress in early September that it would work on an integrated remuneration plan ahead of its 2020 meeting that could change the terminal dues. It has already decided to increase rates for China and some other countries marginally — around 10 per cent — by 2021.
The group gives one vote to each of its 192 members, making it unlikely that the US could find enough allies to force reform through the group.
In addition to the dues, the White House also wants those sending parcels to provide to customs detailed evidence of what they contain. It says that many illegal drugs including opioids, the single biggest killer of Americans, arrive in the post from overseas. It also believes that many products shipped from China are counterfeit.
The White House and the state department did not respond to requests for a comment.
Paul Steidler, a fellow at the Lexington Institute, a think-tank, said another option would be to force Chinese packets to arrive in Hawaii and then pay normal US postal rates from there. He called the Trump administration’s stance “a refreshing and positive change”.
“There are simply too many American ecommerce companies and manufacturers of light products that are being hurt by the current pricing scheme.”
Retailers in other countries including the UK and Germany have complained, but their governments have yet to back reform publicly.
The USPS said: “We welcome the president’s efforts to ensure that the compensation paid to the Postal Service for the delivery of international letter post mail is fair. We also appreciate the president’s direct support in our ongoing efforts to ensure that all UPU member countries take action to furnish advance electronic customs data to facilitate the detection of shipments of opioids and other illicit materials, and to improve service.”
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