The Postal Service is undercutting US trade interests — it's time to level the playing field
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Through short-sighted and needless bureaucratic actions, the U.S. Postal Service (USPS) is undercutting the Trump administration’s widely supported push to fix international postal rates and degrading our broader trade negotiating position with China.

In one of the most bizarre and unfair international agreements to which the U.S. is a party, it costs 65 percent or less to send a small package (4.4 pounds or less) from China to the U.S. than to send the same package within the U.S. And most packages are under 4.4 pounds.

International postal rates are set by the United Nations-affiliated Universal Postal Union (UPU). Through effective, overlooked lobbying of the UPU, China and a handful of nations have gotten the rest of the world to provide major subsidies to their international shipping. The ongoing, explosive growth in e-commerce, though, means the U.S. and other nations can no longer afford to look the other way.

The current system costs U.S. manufacturers, retailers and e-commerce companies’ tens of billions of dollars annually in lost sales. There are also lost jobs and lost tax revenues. 

Leveling the playing field

To fix this, on Aug. 23, 2018, the president issued a straightforward and fair memorandum that calls for “ensuring that rates charged for delivery of foreign-origin mail containing goods do not favor foreign mailers over domestic mailers.”

The memorandum also calls for “a system of fair and nondiscriminatory rates for goods that promotes unrestricted and undistorted competition; and terminal dues rates that fully reimburse USPS for costs to the same extent as domestic rates for comparable services.” 

The U.S. is hoping to structure a new UPU deal at an Extraordinary Congress being held Sept. 24-25. There is a good chance of that because most industrialized countries have the same frustrations with the UPU that the United States has. If an agreement is not reached by Oct. 17, though, the U.S. will leave the UPU and seek to negotiate bilateral and multilateral agreements with self-declared rates.

Impediments from the Postal Service

The Postal Service threw a major wrench in the works on May 20. In a filing to the Postal Regulatory Commission, its regulator, it offered a range of rates, under seal, for foreign inbound mail and small packages. The Postal Service also refused to announce a specific schedule of rates and asked to be able to charge rates as it saw fit. They effectively said to the regulatory commission and the administration, “Trust us.”

The Postal Service’s chutzpah does not stop there. It says in the filing, “because the Postal Service does not yet know which scenario will prevail in the UPU negotiations, and to preserve its flexibility, it has established a range of acceptable rates within which rates can eventually be selected as circumstances warrant.”

The Postal Service is thus openly questioning whether U.S. negotiators will be able to get a good deal within the UPU or through subsequent negotiations and if the U.S. has the resolve to self-declare its rates.

For the Chinese, this is empowering.

Simply put, there is no reason for secrecy if the Postal Service is committed to “fair and nondiscriminatory” rates that would charge foreign shippers the same as U.S.-based shippers.   

While the Postal Service has been bold with the Postal Regulatory Commission and the administration, it has been perennially tepid when it comes to taking on China and its sweetheart UPU deal. Many countries’ postal services have been more outspoken

When the administration’s UPU plan was attacked by special interests, the Postal Service was vague in rebutting a false charge that leaving the UPU could hurt delivery of mail to U.S. troops in foreign countries. Yet, the Postal Service’s own website makes clear this is a non-issue as mail to U.S. troops stays within U.S. control. 

Broader ramifications 

To meet its mission of “binding the nation together” and to strengthen the U.S. negotiating position before the UPU and other countries, the Postal Service needs to immediately withdraw its May 20 filing. 

In fact, the stakes are much higher. 

It is inherently challenging for the U.S. to secure a fair and effective trade deal with China to reduce our $400 billion annual trade deficit with them. By achieving success within or outside the UPU, the administration will send an important message to Beijing that we will find ways to chip away at our mammoth trade deficit, with or without their cooperation.

And we will register a win for the U.S.

Paul Steidler is a senior fellow with public policy think tank the Lexington Institute. Follow him on Twitter @PaulSteidler