Is Trump’s decision to quit the UPU a bad thing?

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President Trump has put the Universal Postal Union on notice that he intends to pull the USA out of the agreement (read story here). It’s a decision that will surprise no one following the UPU’s failure to address the problem of ultra-cheap Chinese postage to the West. Will this force a much-needed rethink by the UPU, or lead to its dissolution, asks ParcelHero’s head of consumer research, David Jinks MILT

We all know by now that President Trump isn’t afraid of a scrap with China if he thinks the USA is on the wrong end of a deal. We also know that he’s not worried about junking long-standing international agreements in the process.

This summer Trump put the Universal Postal Union (UPU) on notice that if it did nothing to remedy the huge subsidies on Chinese letter-size post into the USA, he would take unilateral action to impose his own rates.

Nonetheless, the UPU decided at its Extraordinary Congress in September to push the decision back to its next meeting in 2020. This was certainly an extraordinary decision. In fact, it even issued a self-congratulatory press release saying it had “achieved a major success by approving a compromise proposal”. This remarkable piece of obfuscation certainly didn’t look like a ‘success’ to me at the time, unless the ostrich’s defence of sticking its head in the sand can be considered successful.

True to form, Trump has now announced his intention to quit the UPU and introduce his own rates on Chinese letters and small packets arriving in the USA. It’s easy to see why. British and American online retailers have long-complained that Chinese e-commerce letter-size packages to the West are massively subsidised by our postal services, thanks to rates arranged by the UPU.

You can currently buy a necklace for US$0.78 online in the USA from China and that includes free postage – it would cost far more to post the item from one state to the next within the USA. It’s the same in the UK, of course, where it costs far less to send a bracelet from Beijing to Birmingham by post than it does to send the same item from Bromsgrove to Birmingham.

Now, quitting the UPU is about as labyrinthine a process as leaving the European Union. It will take a year for the process to grind through. In that time Trump says the UPU could still act and re-think China’s terminal due rates; in which case the USA will remain.

If the UPU fails to act and the USA really does leave, what will be the result? Will the USA find itself isolated, or will many other nations follow suit, leading to a complete breakdown of the long-standing international postal agreement?

It’s not just the UK and the USA that suffer from China being rated by the UPU as a Class 3 ‘transitional’ nation, and gaining significant subsidies on international post.

Delivering letter-sized packages in Australia is naturally an expensive business given the distances covered. One Australian trader told me recently that an Australian shopper can buy an item on AliExpress in China for A$0.80, including postage, but the minimum cost to post the same item to the next suburb within Australia is A$7.95.

So, we could potentially see a significant group of countries quitting the UPU and introducing their own protectionist tariffs, which could then be followed by a tit-for-tat by China.

The result could be a international Wild West, with every nation imposing its own dues on letters and small packets arriving at its borders. What would the impact be on genuinely poor nations with struggling postal infrastructures?

One other thing to consider is that many UK traders might not actually be the ones that gain should the UK follow the USA’s lead and quit the UPU, because many items and components are sourced in China – whether directly from factories, or bought in bulk by online marketplace traders – and the cost of bringing in new stock would rise significantly.

There may be a happy ending; the UPU might cave in and introduce significantly fairer rates on Chinese international postage. But it could also lead to a free-for-all that benefits no one in the end.

Of course, ParcelHero has skin in the game: US and UK couriers have long wanted to see the end of cheap rates for Chinese traders using national carriers. But there’s an old saying: be careful what you wish for, it may come true.

 

David Jinks

David Jinks is head of consumer research and public relations at the international courier ParcelHero. He is an award-winning journalist and blogger who specializes in logistics and transportation. David was formerly publisher at The Chartered Institute of Logistics & Transport, where he ran the institute’s journals, news bulletins and international newsletter. David was previously a newspaper reporter and has edited magazines on classic cars, railways and commercial vehicles.

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