Saturday, September 8, 2018

China's "Postal Rate Break" Feeds Into Fair Trade Issue!

Sewing Needles On E-bay For $0.99
The landscape of retailing in America can take us down an interesting path when buying something as simple as a needle and some thread to sew on a button. Most of us have not purchased a simple needle and thread for a long time, maybe decades, maybe never. These are not expensive articles to manufacture but what is shocking is that you can buy them cheaper from a company in China and have them shipped directly to your home for far less than you can buy them here in America. The question is how or why. The needles pictured on the right can be bought online from a seller in China for $0.99 or $3.99 from a seller based in "LA, United States" at your local store you pay around $5. This means local stores here in America can’t compete which results in more retail jobs disappearing or just hanging on with lower pay and benefits being reduced. Also when foreign online sellers pluck a sale away from American brick and mortar stores they are not collecting or paying any sales tax or income tax like importers located in the USA. 

Companies have repeatedly pointed out the rates that have been set by the United Nations Universal Postal Union or UPU currently allow a small package to be shipped to a customer in America from China for far less than it can be shipped across town. Reuters reports that the U.S. State Department said it would push for foreign postal carriers to pay the U.S. Postal Service more to deliver small parcels within the United States. It added that if insufficient progress is made with the UPU the U.S. Secretary of State will make recommendations for future action which would likely include adopting self-declared rates. The rates have been a longtime issue and a source of complaints from UPS, many American companies shipping here in the states and even Amazon.  They have rightfully claimed that because they give foreign companies a huge advantage in pricing they are unfair and harm American businesses. 

In the latter part of 2016, the National Review ran a piece calling for America to stop subsidizing foreign postal systems for both economic fairness and national security. It stated the Postal Regulatory Commission was slated to determine whether the new proposed rules of the UPU were consistent with the mission of the U.S. Postal Service. While it is difficult to find what was decided or how anything has yet to change the article made it clear what the commission decided could go a long way in either making us all safer and more secure.  Currently, the international postal-package system enables terrorists, drug dealers, and Chinese e-commerce companies to abuse us at our expense. A big problem here is the proposed new rules mirror the old rules with a few minor changes meant to mollify the growing number of critics here in America.

Under the current rules set by the UPU, the charges the USPS is allowed to charge foreign postal services to deliver packages they send into America (called terminal dues) are set ludicrously low for certain countries, among them China. Under UPU rules China, the world’s second-largest economy currently enjoys the same break on terminal dues as do Gabon and Botswana. This means that the USPS actually charges China's post office less to deliver a package from China into the U.S. than it charges a U.S. business or customer to deliver a similar size package within the 48 states. The post office is losing money on every package it delivers from China and then has to pass the cost on to its American customers and U.S. taxpayers.

Adding to the insanity of working under the rules set by the UPU the USPS is compelled to deliver all packages from foreign sources even if they have not passed any customs inspection, and even if the post office has no information about what the package contains or where it originated. This means under UPU rules, our post office has become a mule for international drug traffickers. As the traffic in international postal packages has exploded in the past decade due to e-commerce, so too has the ability of drug traffickers to flood the U.S. and the world’s postal systems with packages containing flakka, fentanyl, and other drugs. Again, much of this is flowing out of China. This is not just a gift to the world’s drug dealers but opens the possibility that terrorists could also exploit this flaw in security.

Why this has gone on for so long is disturbing but President Donald Trump issued a memorandum on "terminal dues," or rates one country's postal service pays another for finishing an international delivery and the State Department has finally signaled changes are necessary. Trump's memo states, "The current system of terminal dues distorts the flow of small packages around the world by incentivizing the shipping of goods from foreign countries that benefit from artificially low reimbursement rates," It is not clear if this memorandum is tied to recommendations, not yet made public, of the postal task force Trump set up this year to examine USPS's business and linked to a study of the low delivery rates Amazon currently enjoys.

The bottom-line is the UPU doesn’t care whether its rules pose a threat to the U.S.or other countries but internal postal regulatory commissions should. America should rapidly move to declare the UPU status quo isn’t consistent with the mission of the USPS in terms of postal rates and preserving our economy, our health, and our national security. Such a ruling would no doubt set off a firestorm at the UPU and within the U.S. State Department which has until now largely turned a blind eye to the dangers inherent in the international parcel-post system, for fear of creating a diplomatic brouhaha but it is the right thing to do.

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