As China is considered a developing country, it gets much lower rates. So what the US is really challenging is this developing country classification of China
“Low costs in China is only one reason. Another major reason is the terminal dues system of the UPU, which fixes the postage rates artificially by classifying countries into different groups,” said Henry Gao, associate professor of law at Singapore Management University and a long time researcher on international trade pacts.
“As China is considered a developing country, it gets much lower rates. So what the US is really challenging is this developing country classification of China.”
Last year, the US said it would leave the global postal pact and set its own postal rates, claiming that the system is unfairly advantageous to China.
In his opening remarks to the UPU’s special congress in Geneva this week, White House trade adviser Peter Navarro said the US is forced to “heavily subsidise” small parcels “in a way that costs our Postal Service hundreds of millions of dollars a year and costs our economy tens of thousands of jobs.”
Amazon and UPS, both based in the US, have long said that the current UPU system is unfair and have argued for a review of delivery charges to increase their competitiveness.
I wouldn’t go so far to say the days of purchasing cheaper products from Chinese distributors via mail are over. However, there is certain to be, at a minimum, supply chain reorganisations at certain Chinese companies, and there is a high probability of some companies seeing their US market disappear overnight
Matthew White, a strategist at consulting firm IDrive Logistics, said that the withdrawal of the US from the pact is likely to be effective in discouraging shipments of cheap, sometimes counterfeit goods from China, and may trigger some disruptions in cross border e-commerce globally.
“I wouldn’t go so far to say the days of purchasing cheaper products from Chinese distributors via mail are over. However, there is certain to be, at a minimum, supply chain reorganisations at certain Chinese companies, and there is a high probability of some companies seeing their US market disappear overnight,” said White. “This is very difficult to predict from corporation to corporation.”
A network of sellers on e-commerce platform eBay have warned that “a significant number of American small businesses could cease to exist due to disruptions in international shipping” if the US pulls out of the UPU.
“It will be disruptive at a minimum, and a years-long quagmire at worst. China has been very, very aggressive in what I would term economic diplomacy or colonialism, and the US is increasingly trending towards isolationism,” White added.
The US’s stance against China’s low postal rates, however, has won support from other countries including Germany. Gero Furchheim, the president of Bundesverband E-Commerce und Versandhandel, an association for e-commerce and mail order firms in Germany, said that cheap postal rates from Chinese distributors were costing the country “thousands of jobs”.
“Even if we reject Trump’s method with trade escalation and unilateralism, the criticism is justified,” said Furchheim in an interview over the weekend with German news agency Deutsche Presse-Agentur. “The fees should be raised urgently. The German Post DHL [delivery service] already suffered a loss of an estimated 120 million euros (US$132 million) three years ago caused by the flood of Chinese goods shipments.”
“Similarly to the [US trade] tariffs, there is a chance that Chinese manufacturers and distributors will meet US buyers in the middle and take on some of the effective rate hike. This is contingent on specific products, the existence of American manufacturers and distributors, and if so, the pricing disparity between them,” White from IDrive Logistics said.