October 22, 2018
President Donald Trump is threatening to intensify the trade war between the United States and China by ordering the U.S. Postal Service to withdraw from a treaty that has set shipping rates among 192 member nations for 144 years.
The Universal Postal Union—established in 1874 and adopted as a body of the United Nations in 1948—has enabled developing countries to pay lower rates when shipping packages internationally; often putting some of the cost of delivering packages on the postal services of wealthier countries.
Indeed, according to an October 17 report by Politico, the policy initially was intended to spur economic growth in poorer countries by connecting them with global markets.
But now that some of those countries—including China—have become exporting giants, the Trump administration hopes to use its withdrawal as leverage to negotiate more favorable terms for historically wealthy countries, like the United States.
Reaction has been mixed. A senior administration official told Politico that the administration would prefer to stay within the union and that a full withdrawal takes a year to implement. Therefore, he said, he hopes that America can negotiate more favorable terms within that time frame.
“You could have something shipped from Indiana to New York and it would be more expensive than having it shipped from China because of price distortion introduced through the [old] rates,” Professor Rick Geddes, a postal service expert and Director of the Cornell Program in Infrastructure Policy at Cornell University, told NBC News for an October 19 story.
However, on the plus side, American manufacturers, believe that withdrawing from the agreement would level what they see as an unfair playing field.
Indeed, Jayme Smaldone, CEO of the New Jersey–based company, Mighty Mug, wrote an opinion piece for the Wall Street Journal last February, noting that his firm paid $6.30 to ship by regular mail; but a Chinese company that sold a knock-off version could ship it to the same location from 8,000 miles away for just $1.40.
NBC News that the administration was making a positive move. “Manufacturers and manufacturing workers in the United States will greatly benefit from a modernized and far more fair arrangement with China,” he said.
American consumers had for years benefited from lower e-commerce prices on sites like Amazon and eBay when buying lower-priced Chinese goods. Without the discount, those sellers could evaporate and U.S. online shoppers would have to pay higher prices.
“Chinese sellers on eBay and other platforms may disappear, or at the very least they will not find it so easy to sell to Americans anymore,” Gary Huang, chairman of the Supply Chain Committee of the American Chamber of Commerce in Shanghai, told Bloomberg.
He added, “American consumers will have less access to that really cheap stuff.”.
Research contact: @matthewchoi2018