Policy

American Taxpayers Are Subsidizing Ultra-Cheap Shipping From China

For decades, the U.S. Postal Service has charged some countries less than it charges domestic shippers to move packages within the United States.

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Postal agencies around the globe sighed in relief this October as the Trump administration allowed America to remain a member of the Universal Postal Union (UPU). Founded in 1874, the 194-nation organization guarantees the delivery of international mail by brokering shipping rates across borders. The Trump administration said in 2018 that if rates didn't change (for China in particular), the US. would withdraw from the group.

UPU Director General Bishar Hussein said America's withdrawal from the union would be "a nightmare scenario" that would make it impossible to deliver foreign mail destined for, or originating from, the U.S., leading to "total disruption of service."

Hussein was right, but so were White House trade adviser Peter Navarro and other critics of the UPU. For decades, the U.S. Postal Service has charged some countries less than it charges domestic shippers to move packages within the United States.

"At today's rates, the shipping of a 100-gram parcel to Fairfax, Virginia, would cost a small business in Marion, North Carolina, at least $1.94…but it would cost a company in Shanghai only $1.12," Paul Misener, Amazon's vice president for global public policy, told Congress in 2015. "This has left thousands of American small businesses at a competitive disadvantage against foreign competition…because of the size of the hidden shipping subsidies."

Foreign mail weighing less than 4.4 pounds arrives at U.S. "transfer points," where it is then distributed by the USPS like regular domestic mail, but at subsidized "terminal dues" rates set by the UPU, not by the U.S. Postal Service.

China's rates were the focus of the standoff because of the sheer amount of small packages arriving from China to the U.S. each year, and also because China benefits from rates meant to aid developing or "transition" countries. "China is included in the same group as Libya, Kazakhstan, and others making it eligible for higher preferential rates," Misener told Congress. China was certainly a transition country in the 1960s, but it is now a global economic powerhouse.

An "extraordinary congress" convened by the UPU in October finally addressed the disparity. UPU members voted to allow the U.S. and other countries to set new reimbursement rates beginning in July 2020. Terminal dues could increase anywhere from 125 percent to 600 percent, according to Cathy Roberson of Air Cargo World. Whatever the change, American tax dollars will no longer be used to benefit one group of businesses over another.

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  1. Gee….maybe we should stop subsidizing China’s businesses? Ya think? 🙂

    My question: Where the hell was POTUS Bush and POTUS Obama on this issue?

    1. Or Clinton, or Bush I or Reagan or Carter….

    2. A small price to pay to save $1.25 on cheap Chinese crap at Walmart.

    3. I buy lots of small items from China – like circuit boards and electronic components.
      The only difference between buying from a US provider and a Chinese provider is the middle-man markup and the postage.
      The ratio in price varies widely – but 4:1 is typical and sometimes the ratio is as high as 10:1 or 20:1.
      If my taxes are paying for reduced shipping costs, I consider it one of the FEW benefits I see from paying taxes (where the cost/benefit ratio is typically more like 60:1 or 100:1).

  2. To be fair, the shipping subsidies help offset the increased tariffs so it’s a win-win situation for the consumer.

    1. Increased tariffs before Trump or after Trump was elected?

    2. I mean, given that the subsidy is ultimately paid for by american taxpayers (which is a shockingly small subset of american consumers) and that the cost of the subsidies to an individual is in proportion to their tax burden, this is probably true. The average person almost certainly benefited more from the cheap rates than they paid in subsidy – even just saving a couple of cents a year is probably more than the sliver of a cent of your taxes paying for the subsidy, with the remainder being covered by wealthier americans.

      Nevertheless, it’s a stupid arrangement in the first place and should really be done away with. We have no need for a postal monopoly in the modern age.

    3. There are no duties on small value shipments. So rather it’s a double whammy for US business. They charge more to cover the tariff and higher shipping costs.

    1. Good link; thanks!

      Import from end of link:

      Importing t-shirts and sneakers from China doesn’t threaten our national security. Let that kind of trade continue unmolested and work instead on protecting our advantages in quantum computing, artificial intelligence, autonomous drones, and so on.

      The Trump administration appears to (finally) be getting this. They are clearly seeking ways to pull back the various tariffs and ramping up other efforts.

      1. SQRLSY

        You can’t protect knowledge. You cannot protect the spread of science. I read technical articles in a certain field. Frequently they are from researchers in China. They are very innovative and use solid research. You can see the learning curve is steep in what was once a backwards country.

        This is all very good. I can learn from those published articles in academic journals. I am not talking about patent law or the military.

        All of what you say about protecting I do not believe. You cannot stop China or anyone else in those fields. The information is out there already as it should be. Why stop it?

    2. We should not be using the blunt tool of tariffs to fight a trade deficit that is actually necessary. The Chinese are not paying our tariffs; US consumers are.

      Importing t-shirts and sneakers from China doesn’t threaten our national security. Let that kind of trade continue unmolested and work instead on protecting our advantages in quantum computing, artificial intelligence, autonomous drones, and so on.

      The Trump administration appears to (finally) be getting this. They are clearly seeking ways to pull back the various tariffs and ramping up other efforts.

      Good argument, but to the extent that “the Trump administration” is simply Donald Trump and his very good brain, I’m not holding my breath that he’s actually getting it. Go back to his talking about withdrawing from the TPP while describing it as a bad trade deal Obama was making with China. After somebody explained to Trump what the TPP actually was, he dismissed it as still a bad deal because he didn’t like comprehensive deals but preferred to negotiate with each nation separately and on each aspect of foreign relations separately. That is, as far as Trump is concerned, trade and security and second-order effects of trade and security agreements are all totally separate things. Notice when he started talking about our trade deal with China, it was simply a matter of dollars and cents in the trade deficit and only later did he add the other aspects – it’s as if Trump might be willing to sell China advanced military tech as long as the price is right and only later worry about what China might be planning to do with the advanced military tech because those are two separate issues.

      1. Do you see any problem with US reliance on foreign manufacturing?

        1. Complete reliance on fireign manufacturing might be a problem. But that isn’t what’s happening.

          1. Yeah I mean other than microchips, circuit boards, semiconductors, modems, switches, radios, textiles, steel, finished goods, heavy machinery and automobiles we still manufacture tons of stuff in this country!

            1. We manufacture all of the listed things in this country, just not at a price that’s competitive in the general market, so the uses are constrained to specialty cases. More to the point, if another country wanted to try to screw with us by screwing around with the supply chain of some useful good, they would pretty quickly discover that just because we don’t manufacture said good for our domestic market in no way means that we can’t.

        2. No Nardz I don’t either.

  3. Clever Americans stole all sorts of technology (e.g. textile manufacturing) from Great Britain in 1800s and they couldn’t do anything about it. What can U.S. (companies, government) do to keep Chinese from buying up U.S. technology and reverse engineering it?

  4. You wanted globalism, you got globalism. Enjoy it.

    In the 21st century, libertarians are going to have make common cause with the globalists of all parties

    1. There’s more than one way to do globalism.

      1. No, there really isn’t. Because international trade isn’t like your grade school level “Economics in One Lesson” models. The supranational global governance is baked right in. Even if there were some other way to do globalism – and again, there’s not – Reason has made its choice very clear.

        1. There was supranational global governance built into the Silk Road, you say? Interesting theory, Chomsky.

          More pointedly, free nations don’t trade with each other, free citizens trade with each other (to their mutual enrichment).

        2. Well thank goodness for that choice.

          Mercantile nativism is the road to poverty and serfdom. The Chinese and USSR tried it.

  5. Us postal service does not receive tax money.

    1. It doesn’t pay taxes like its competitors, has a monopoly on mailbox delivery and has access to below market subsidized government loans. All of which are giveaways by Uncle Sam.

    2. Correct.
      It just continues to pile up debt until is MUST get bailed out by the taxpayers.

    3. It might not be a line item in the Federal budget, but it is most certainly held afloat only through the indirect largesse of the american taxpayer.

  6. Seems like a lot of bureaucracy for no good reason. Why not just charge standard domestic rates for incoming post office mail, whether letters or parcels?

    IOW, why not just leave all domestic shipping charges as is? Someone wants to send a package across an international border — great: pay what it costs to ship from origin to the foreign country, and pay what it costs from the foreign point of entry to its final destination.

    IOOW, pretend there is no UPU. Seems like it is just a typical government ersatz market bureaucracy, whose every regulation is designed to emulate, poorly, a free market.

    1. Or just stop delivering international packages (or actually privatize the USPS and let them figure it out). I don’t think there is much reason to use a postal service rather than a private parcel carrier if you don’t get artificially low rates. And US domestic postal rates are already low because they need congress to approve increases.

      1. Yes, even better. It’s amazing how many things work better without government distortion.

      2. Many members of the UPU are privatized. God you guys are fucking stupid.

  7. “Whatever the change, American tax dollars will no longer be used to benefit one group of businesses over another.”

    Well thank goodness that’s over.

    1. Gotta take the victories where we can find them – under a microscope, usually.

  8. Geez!!! When they advertised “free-trade” I didn’t realize I was stealing money from all my neighbors to pay for it. /s

  9. Alternate headline: How the ruling-class (and their deep-state quisling confederates) fuck-over regular Americans for fun and profit.

    1. In terms of who’s paying for it, it’s basically a subsidy from rich americans to everyone else who buys a lot of shit from China. It’s definitely pretty fucky, but for reasons of principle.

  10. Only the post office could figure out a way to lose money in that business.

  11. I, for one, cannot wait for June/July of next year when we’ll all be enjoying Reason’s principled articles about how Trump’s proposed rate hikes are unfairly taxing Americans who just want to buy products from China.

    I predict OBL will comment in them about the walls closing in, and that the Rev will call someone a clinger.

    1. I’m pretty sure that in the event of rate hikes (which would be pretty damned unlikely due to their unpopularity) Reason’s stance would be their standard stance on the Post Office – it’s a useless relic monopoly whose time has long since passed, and we should stop giving it lots of money to do poorly what private business could do far better. I mean, I think that’s nearly a direct quote from the 2006ish article they did, I’ll let ya know if I can find it.

  12. LAME article as it did not even mention the USA is the only member of the postal union that will not allow it’s citizens to mail using surface mail. We get surface mail from the world, but can only use airmail when we ship overseas.
    This is the BIG unfairness.! We lost most our foreign business when the surface shipping was eliminated.
    China can mail surface to us for less than 2.00 , but to ship the same item to China cost us more than 12.00. Hard to compete when the government creates such a large barrier.

  13. This #LibertarianMoment ending one bit of crony capitalism for Slaver Emperor Xi brought to you by Orange Man and the Deplorables who supported him, over the hysterical pants shitting opposition of @Reason.

    You’re welcome.

    1. UPU members voted to allow the U.S. and other countries to set new reimbursement rates beginning in July 2020. Terminal dues could increase anywhere from 125 percent to 600 percent, according to Cathy Roberson of Air Cargo World. Whatever the change, American tax dollars will no longer be used to benefit one group of businesses over another.

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