Of all the multilateral institutions to be challenged by the United States over the past few years, the body governing international mail delivery is surely the least recognizable.
The Universal Postal Union (UPU) has quietly co-ordinated shipping rates and policies among member nations since it was founded 144 years ago, serving as the invisible machine behind the smooth delivery of everything from postcards to birthday packages from one side of the world to the other.
Now, the U.S. is threatening to throw the system into disarray, withdrawing from it altogether in October unless emerging economies such as China that “benefit from artificially low reimbursement rates,” pay their fair share, the U.S. said in a report last August.
Currently, developed countries pay higher shipping rates than developing economies. That discrepancy means it’s more expensive to post a package from Los Angeles to New York than it is from Beijing to New York, Peter Navarro, the President’s trade adviser, told the Financial Times last year.
A U.S. retreat could have “massive” repercussions for vendors and consumers on both sides of the U.S.-Canada border, said Andrea Stairs, general manager of eBay Canada and Latin America.
A potential U.S. withdrawal from the UPU is yet another storm cloud of uncertainty for Canadian small businesses, “who disproportionately rely on Canada Post and the United States Postal Service to facilitate the movement of goods back and forth across the border,” Stairs said.
“At a time when both sides are working to improve trade relations between Canada and the U.S., withdrawal by the U.S. from the UPU would be a major setback for small business trade.”
eBay’s Andrea Stairs: “… a major setback for small business trade.”
At issue is the UPU’s mandate to set “terminal dues” or fees that postal services can charge for delivering shipments from foreign carriers. Under the current rules — established before the expansion of the Chinese economy and the explosion of e-commerce that transformed the retail sector — China is recognized as a developing nation, meaning its businesses pay considerably less to send packages weighing under two kilograms to customers in the U.S., Canada or elsewhere.
The difference in terminal dues didn’t matter much when most of the items sent between Asia and the West were letters, said Kate Muth, executive director of the U.S. based International Mailers Advisory Group.
“But now the vast majority of what people buy online from China is under two kilos,” she said. “Clothing, electronics, cosmetics, most of it is in that category. That means small companies and consumers are paying more to ship something from New York to Florida than it might cost to order something online and ship it from China.”
It’s a system that, in effect, leaves national postal services subsidizing much of the shipping costs for Chinese retailers, she added.
“It’s a distortion in the system and it’s one the U.S. very much wants fixed,” she said.
Letter mail has declined and e-commerce has increased by many orders of magnitude. And Chinese vendors are using this very favourable rate to ship goods to Canada in massive quantities.
Karl Littler, Retail Council of Canada
U.S. retailers aren’t the only ones irked by the policy. Karl Littler, senior vice-president of public affairs for the Retail Council of Canada, called China’s designation as a developing country “an absurdity.”
“Letter mail has declined and e-commerce has increased by many orders of magnitude,” he said. “And Chinese vendors are using this very favourable rate to ship goods to Canada in massive quantities.”
The issue escalated last October, when the U.S. gave a required one-year notice of its intention to withdraw from the UPU — an action it intends to follow through with unless the organization allows its 192 member nations to self-declare their own terminal dues.
With the deadline for withdrawal fast approaching, the UPU nations have agreed to hold a vote in Geneva in September over the terminal dues question.
But if an agreement isn’t found, a U.S. withdrawal could mean chaos for small businesses whose sales depend on the holiday season.
“If the U.S. leaves it won’t be part of the coding systems and infrastructure that makes up the international postal system,” said Muth. “All that will have to be recreated through bilateral agreements with more then 190 other countries. And the thing that’s most concerning is I don’t think the small businesses, the mom-and-pop businesses, know that.”
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