The Trump administration imposed further barriers to Chinese companies by announcing the US plans to withdraw from the Universal Postal Union (UPU).
The UPU involves 192 nations and provides subsidised shipping rates for Chinese companies sending parcels to consumers in the US. The White House claims the agreement allows China to ship goods to US consumers at an unfairly low rate.
Speaking to Fox Business News in the US, Peter Navarro, director of the White House Trade Council, explained, “The whole government pushed on this because it’s ridiculous. We have a situation now where it costs more to ship a package from Los Angeles to New York, than it does from Shanghai to New York.”
Navarro made a point that the terms are not specific to China, although China is the dominant beneficiary from the deal. Other countries, including Germany, benefit from the treaty, and the US is moving for a general correction, not one specific to China.
The notice to withdraw is the first step in a year-long withdrawal process facilitated by the Universal Postal Union. The notice of withdrawal allows the US to begin price negotiations within the union system. US officials stated that postal rates would not change for at least six months.
Speaking to Forward with Toll, a spokesperson from the US Postal Service stated, “The Postal Service fully supports the Administration’s decision to move to self-declared rates, and will work closely with the State Department, the Postal Regulatory Commission, and other stakeholders to implement the Administration’s decision.”
According to Bloomberg, White House Press Secretary Sarah Huckabee Sanders said, “If negotiations are successful, the administration is prepared to rescind the notice of withdrawal and remain in the UPU.”
The National Association of Manufacturers claims the discounts provided to Chinese shippers costed the US Postal Service $170 million in 2017. The rates enjoyed by Chinese companies were originally aligned to their economic status in 1969, and the US now claim those rates place US businesses at an unfair advantage.
A significant increase in the cost of shipping these smaller consignments may reduce US consumer on-line purchasing of products from China. In turn, airfreight volume from China to the US maybe adversely affected.
The impact of the tariffs on e-commerce from China into the US is as yet unknown and won’t be realised until well into 2019. However, the small packages and parcels sent from China to the US for delivery to on-line shoppers are the items that will mainly attract the increase in prices due to the withdrawal of the US Postal Service subsidy.