No Fair! Americans Pay Way More to Send Goods to China
If you’re an American, chances are you’ve received quite a few packages from China. Some may have even noticed the mysterious Mandarin markings on the shipping label. Just don’t ever think you can ever send a package back. Because of the bizarre quirks in international postal law, it costs Americans way more to ship their goods to the People’s Republic of China than the other way around.
Fortunately this travesty may finally be ending, thanks to a Universal Postal Union (UPU) meeting in Geneva, Switzerland, where international mail and package pricing was discussed.
A Chinese merchant who wants to ship a two pound package to the United States will likely pay less than $20 in postage. But an American who wants to reach the Chinese market will be set back at least $30. This is because Americans must pay a penalty for shipping products to a “transitional country,” according to dictates set by an obscure global organization, the UPU. This international governmental organization lays the groundwork for how much postal services around the world are able to charge consumers for mail originating in other countries.
Normally, if mail is then sent to another nation, the origin country will pay for any shipping costs faced by the recipient country. But “transitional” countries, like China, get a reprieve from having to pay full shipping costs on mail shipped to richer countries in North America and Europe. Under the tortuous system in place, China pays foreign posts, such as the United States Postal Service (USPS), considerably less than the actual costs required to get products to their destinations. And because the USPS is forced to agree to international postage prices that don’t cover these costs, the agency has some hefty bills to pay. According to the Trump administration, the USPS must shoulder a $500 million bill each year because of Chinese underpaying.
These added expenses have worsened the financial situation at the USPS, which is already slated to run out of cash in 2024 absent significant changes to its business model. But it also causes tremendous issues in the here and now. Small companies, such as the New Jersey-based travel mug manufacturer Mighty Mug, complain that Chinese knockoffs are invading U.S. markets thanks to the UPU system. If shipping costs are low enough, even an inferior product produced in violation of intellectual property rights can sell well in America. According to Mighty Mug founder and CEO Jayme Smaldone, “There is no efficiency that we or any business can implement to overcome the shipping subsidy that the UPU framework creates. This situation has helped fuel an avalanche of knockoffs online.”
Fortunately, the days of absurd, UPU-set rates and Postal Service subsidies to China may finally be coming to an end. On September 25, UPU member-states agreed on a plan that would give participating countries far more flexibility in setting rates and allow America to reclaim a larger share of shipping costs from China. Under this new framework, the U.S. (and USPS by extension) will have the power to set rates in line with market realities rather than bureaucratic dictates.
This increased flexibility will benefit U.S. small businesses such as Mighty Mug and allow American goods to finally reach Chinese markets. Sure, future negotiations will be tricky, and “transitional” countries such as China likely won’t be pleased with their preferential treatment finally ending. But this hard-fought compromise will result in fairer, more transparent prices for millions of merchants around the world.
Ross Marchand is the director of policy for the Taxpayers Protection Alliance.