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Postal Remuneration Boring but Important

boring eCommerce Global Economy Subsidizing Chinese developing country Postal Remuneration UPU Postal Remuneration

UPU Postal Remuneration is Boring but Important

Another meeting of the UPU on postal remuneration of terminal dues occurred April 9th. Most likely, you didn’t hear about it. Often times the UPU is not that interesting, but whats happening now could change eCommerce and the global economy for years to come. The UPU (Universal Postal Union) coordinates postal policies of 192 countries. The UPU uses postal remuneration to help developing countries by subsidizing more prosperous countries with terminal dues. As a result the wealthier countries pay a higher share of the costs. Countries are placed in nine different categories based on their level of development. The rates developing countries pay are usually far lower than rates paid by domestic shippers in more developed countries. In some cases, terminal dues are so low that that developed countries like the U.S. actually lose money on mail sent to them internationally from less developed countries like… China?

The USPS is Subsidizing Chinese eCommerce

The UPU categorizes China as a developing country entitling them to huge international postal discounts. China is however, the world’s largest exporter and the second largest economy in the world. The deluge of eCommerce packages from China is costing the USPS, Canada Post, and other international postal services too much. Mail services for small packages shipped from China to the US cost significantly less than what USPS charges American mailers for a domestic service. At the same time, local companies are losing business because they cannot compete with the subsidized postal costs their Chinese competitors benefit from.

The U.S. Will Leave the UPU

The United States must find the UPU Postal Remuneration boring too. Last Year, the U.S. informed the UPU of its decision to withdraw effective 1/1/2020. No doubt, this got the attention of the UPU. An extraordinary postal congress happened September of 2018 with a second meeting this week and another scheduled this September. If a resolution is not found, the US would unilaterally set postal rates for packages entering the United States or increase tariffs again. The postal services and local businesses of countries continue to lose money on eCommerce packages from AliBaba, Ebay, Wish, etc. The USPS loses about $1 on every eCommerce package arriving from China. If a resolution is not found, the impact to the postal systems of the world and global trade will suffer. Imagine the largest economy in the world setting the postal rates of their biggest competitor.

Another Boring UPU Meeting that will Impact the Global Economy

Again, there was another boring UPU meeting this week. So what happened at the meeting? In short, not enough. There are three options being weighed by 192 countries with a vote coming this September. First, allow member countries to self-declare postal rates. Second, accelerate rate increases already approved by the UPU. Finally, the third option that also adopts self-declared rates as its basis, but with elements aimed at mitigating undue price impacts. The next postal remuneration meeting planned September 23-24, impacts every country.  Leaving the UPU now has many unknown consequences. For the USPS, leaving the UPU means negotiating individual postal agreements with every country in the world. That’s a logistical nightmare, in a boring sort of way. 

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