Trump Targets China by Pulling out of “Flawed” Universal Postal Union
Earlier this Wednesday, Oct. 17, 2018, the White House formally announced its intent to withdraw the United States from a 144-year old international postal alliance. Amidst the two superpowers’ ongoing trade war, the withdrawal is simply the latest of President Trump’s actions to curtail Chinese trade power.
The primary problem with the Universal Postal Union (UPU), as pointed out by the US, is the terminal dues and classification system that was adopted in 1969, which ranks countries based on their level of development and determines their rates for packages under 4.4 pounds. Because China is still seen as a developing nation under this structure despite its massive economic size, the US ends up subsidizing China’s growing manufacturing industry while its consumers and businesses suffer. Discrepancies between shipping prices have cost the US $300 million each year because China receives a 40 percent to 70 percent discount on small packages shipped from China to the United States compared to domestic U.S. deliveries.
Although the terminal dues were intended to foster development in Asia and Africa, the steep discounts enjoyed by Chinese companies has led to 60% of all packages shipped to the US to be from China. Jim Campbell, a lawyer, and consultant on postal affairs, reports that the primary concern is that the pricing system does not reflect the rise of e-commerce in China, who is “now the largest source of e-commerce postal packages sent to the US.” Problems related with the UPU has been brought up several times by the US government as well as by Amazon and the United Parcel Service, all of whom have alleged the flawed system hinders a competitive environment.
The Trump administration had hinted to the withdrawal since August when the President issued a memo for renegotiations of UPU rules and threatened to set its shipping rates if progress on negotiations were not satisfactory. While the talks did lead to a proposal, the Universal Postal Union announced that negotiations would not be presented until 2020. UPU Director General Bishar Hussein has openly stated that “the UPU remains committed to the attainment of the noble aims of international collaboration by working with all its 192 member countries to ensure that the treaty best serves everyone.” However, it seems that Trump will not have the patience to wait until then.
The final decision was urged on by Peter Navarro, Trump’s hard-line trade adviser, who looks to undermine China and the influence of international organizations that allegedly do not give the United States power equivalent to its economic stature. Just during Trump’s tenure alone, the United States has pulled out of the Trans-Pacific Partnership, UNESCO, the United Nations Human Rights Council, and the Paris Climate Agreement, all in the name of putting “America First.”
In reality, this act of rebellion against China may have only resulted in further commerce complications regarding postal treaties. Paperwork for the retraction from UPU will likely take a year, during which rates can be renegotiated. Furthermore, the US will be forced to negotiate treaties with individual countries, making international shipping more costly and complicated for US producers and consumers. Analysts have pointed out that the simplest solution in the situation would have been to pressure and reform the organization from within with the backing of allies rather than protesting it head on alone.
From China’s perspective, Vice-Premier and economic aide Liu He has claimed that the impact of the trade war on Chinese stocks is “more psychological than real.” It is likely that Trump’s strategy for an all-out containment of China will result in backlash because of the damages caused by US tariffs on Chinese imports. While it is true that medium and small-sized cross-border e-commerce firms who rely on the UPU will experience additional costs and difficulties, it is small businesses that sell to US e-commerce platforms like Amazon and eBay who would suffer the most from higher US postal rates.
Regardless, both U.S. and Chinese consumers are likely to see higher prices reflecting new shipping rates. The date November 29 has already been set for Trump and Xi Jinping’s next meeting at the G20 leaders’ summit in Buenos Aires, Argentina. It would be the first face-to-face meeting between the two leaders in over a year and comes after a host of issues — including the South China Sea, Taiwan, and allegations of election interference — have strained relations between the two countries and economic giants.