The US on Wednesday announced its intent to withdraw from the little-known UN Universal Postal Union (UPU), arguing that the current system that governs international postal rates allows countries like China to provide subsidies to their postal companies to ship products to the US at cheaper rates thus putting American firms at a disadvantage.
The State Department on Wednesday was scheduled to provide a notice in Switzerland to indicate that the US will be initiating withdrawal procedures from the UPU.
Even as the US is open to negotiations, the self-declared rates by the country could come into effect as soon as within six months.
"Under the current rules of the Universal Postal System, foreign governments, foreign posts are able to send packages to the United States at highly subsidised rates," a senior administration official said.
China, for instance, accounts for a large portion of the flow, but there are also other countries involved and other posts involved, the official said.
Singapore, for example, and several countries in Europe benefit from this. "So this is not a China issue, per se, it's a situation where people are getting hurt in this country by an unfair system," the official explained.
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The issue, the official claimed, has been long due and it was then US President Ronald Reagan who had first expressed concern in 1986.
Reagan had expressed concern to correct this problem, but it's an example where the US, stuck in a multilateral organisation with 193 countries and only one vote, has been saddled with this problem, the official noted.
Giving an example, the official said a one-pound package costs domestically about USD 10 to USD 13 for a US business or manufacturer to send, whereas the Chinese mailer, for the last mile, and same distance, one would reimburse about USD 2.50.
"That's a huge gap. It's an even bigger gap for a 4.4-pound package: The US mailer pays about USD 20 to USD 23 while the Chinese mailers pay just USD 5," the official added.
According to another senior administration official, there are 40 to 70 per cent discounts on packages from China to the US compared to what it would be to send them domestically.
"That's costing us about USD 300 million per year in -- in the United States and that's what we're trying to fix," the official said.
Explaining the reason for withdrawing from the international postal body, the official said the US Postal Service winds up picking up the tab for that which hurts the Post Office.
Secondly, in order for the Post Office to make up the losses on these foreign packages, it also raises the rates on Americans who want to send foreign packages abroad, and that hurts America's exporters. "So it's a double whammy there," he said.
According to the official, it's a system where America's own domestic manufacturers get hurt, the US Postal System gets hurt, and in an age of the Internet where there's been a proliferation of these so-called third-party marketplaces, this subsidy has basically facilitated the transfer of both a high level of counterfeit goods as well as the narcotic and fentanyl trade.
Last month, a US interagency delegation travelled to Ethiopia, where the UN Universal Postal Union meeting was taking place and demanded revision in the system.
"We were rebuffed there. Everyone was on notice that if we were rebuffed, we would move forward. This is in terms of, again, the Trump administration themes, we were dealing with a multilateral organisation, one vote out for 193. We didn't get fairness, and so this administration's taking unilateral action," the official said.