Trump Moves to Pull U.S. from Universal Postal Union

cross-border ecommmerce globe and boxes

The Trump administration has announced plans to withdraw the United States from the Universal Postal Union by January 2020. The move is an effort to counteract below-market parcel shipping rates that China has enjoyed for years to the competitive disadvantage of U.S. merchants.

The administration’s move is based on an August report from the State Department that found “sufficient progress has not been made on reforming terms of the Acts of the UPU in line with the policies of the United States.”

This will begin a one-year withdrawal process, during which time the State Department will negotiate bilateral and multilateral agreements to address what the administration sees as inequities in global shipping rates.

The Universal Postal Union or UPU, administered by the United Nations from an office in Bern, Switzerland, was created in 1874. It has allowed developing countries in Africa and Asia to enjoy discounted mail and parcel shipping rates in an effort to foster development. However, China has been able to continue to benefit from the lower rates even as it has grown into an ecommerce powerhouse. It’s gotten to the point where U.S. consumers can buy the same item significantly cheaper from a Chinese seller than one based in the states.

The so-called “terminal dues” collected by the USPS to deliver small parcels under 4.4 lbs. from overseas companies are steeply discounted under the UPU rate structure compared to actual costs, making it easier for them to undercut domestic sellers.

The State Department was expected to notify Universal Postal Union officials of the move today and “self-declare” new, higher shipping rates on China, according to the New York Times. It’s in line with Trump’s hardline stance on trade with China, and his abhorrence of international trade agreements in general.

MCM Musings: Say what you will about Trump, but the Universal Postal Union agreement is ripe for upending as it has contributed to the significant trade imbalance between the U.S. and China by putting a finger on the scale in favor of Sino-based sellers. This is a move that domestic merchants should applaud as the UPU has in effect underwritten shipping charges for Chinese firms, giving them an unfair advantage in cross-border selling.

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