Trump Is Right About China’s Postal Subsidy
(The Bloomberg View) -- President Donald Trump has been known to exaggerate what he sees as China’s unfair advantages in trade with the U.S., and to unproductively escalate tensions between the two countries. But with his latest complaint, having to do with the seemingly trivial matter of global postal fees, Trump has highlighted an unfair imbalance between the two nations that should be relatively easy to put right.
Naturally, there is a danger the Trump administration will not take the easy path.
Here’s the problem: Arcane rules established by the 144-year-old Universal Postal Union make it possible for a Chinese e-retailer to send a package across the Pacific to a customer in the U.S. at a cost lower than what an American competitor would spend to ship the same item to a neighboring state.
This is because the union, which determines what national carriers can charge to deliver small packages and first-class letters originally sent from abroad, allows poor nations to pay lower rates than wealthy ones. That makes sense. But, insensibly, the union still places China, the world’s second-largest economy, in the same category as Bosnia, Botswana, Cuba and other developing countries. (India also gets some degree of preferential treatment.)
These steep postal discounts add to the considerable cost advantages Chinese manufacturers already have over American firms. And they hurt the United States Postal Service — which delivers packages that originate from China at a loss — and put private shippers like FedEx and UPS at a disadvantage.
Yet the U.S. should be able to solve the problem without withdrawing from the Universal Postal Union entirely, as the Trump administration has now said it will do unless it can renegotiate the international treaty before January 2020. For starters, a treaty negotiation would take too long. The union moves too slowly — its congress meets once every four years — to rewrite its pricing structure in little more than a year. What’s more, withdrawing unilaterally would free other countries to charge even more than they do now to deliver packages sent from the U.S.
A better strategy would be for the White House to reach a fairer arrangement as part of its larger trade negotiations with China, superseding the Universal Postal Union’s rates. (There is precedent: The Obama administration hammered out a limited postal compromise directly with Beijing, though this still left theChinese with a big advantage.) The U.S. could then have more leverage to seek bilateral and multilateral deals with India and other countries that don’t merit postal subsidies.
Trump may be misguided on much of his trade policy with China, but this is one issue in which his demands are justified and, with the right approach, within reach.
Editorials are written by the Bloomberg View editorial board.
©2018 Bloomberg L.P.