China's e-commerce to be affected by US withdrawal from postal treaty

Photo: Baidu

The Trump administration has moved to pull the US out of the Universal Postal Union (UPU), opening a new front in the tightening trade fight between Washington and Beijing.

The UPU, established by the Treaty of Bern of 1874, is a specialized agency of the United Nations (UN) that coordinates postal policies of member nations, in addition to regulating the worldwide postal system.

Explaining the decision, senior White House officials said on Wednesday that favorable shipment rates for developing countries have let members like China flood the US with goods, putting American companies at a disadvantage, and fueled the shipment of counterfeit goods and illicit drugs.

According to the US Postal Service, it would cost around $20 to mail a small parcel of 2kg (4.4lbs) from one US state to another, but mailing the same package from China would only cost $5.

The officials said it is estimated that the 144-year-old UPU agreement costs the US Postal Service about $170 million to $300 million per year.

"This is a strong action by this administration to fix this flawed system and make it better," political information portal The Hill quoted senior White House officials as telling reporters in a background briefing call.

Rather than adhering to the fees set by the UPU, the US State Department will set its own "self-declared" rates for packages from abroad.

Withdrawal from the UPU is a year-long process, and the officials said they were open to remaining in the treaty if they could secure reform.

"If negotiations are successful, the administration is prepared to rescind the notice of withdrawal and remain in the UPU."

Effect on China' e-commerce

While US President Donald Trump has distanced the US from several major international organizations and treaties including United Nations Educational, Scientific, and Cultural Organization (UNESCO) and the Trans-Pacific Partnership Agreement (TPP), the move to pull out of the UPU could directly impact the daily lives of consumers in an age of e-commerce and globalization.

The UPU system divides member countries into categories based on their level of development, which determines postal fees paid to each other. The US is classified as a "target" country and China as a "transitional" country.

China is still considered a "transitional" country by the UPU, which means the world's biggest e-commerce country enjoys a lower rate for sending mail to a developed nation like the US.

As a result, mail services from China to the US cost less than Americans are charged by their postal service for a comparable domestic delivery.

According to a 2017 report, 70 percent of packages shipped by Chinese cross-border exporters are delivered through the postal system using UPU-dictated rates.

US business groups like and United Parcel Service (UPS) have long complained that the current UPU system is unfair and have urged the administration to leave the UN organization.

If the Trump administration finally pulls the US out of the UPU and sets its own "self-declared" postal rates, packages sent from China to the US through the postal system would face much higher costs.

Small Chinese e-commerce businesses will suffer most from the US' latest move, with some likely to struggle to survive, company representatives said.

The competitiveness of medium and small-sized cross-border e-commerce firms which rely on the UPU will decline.

The effect on larger e-commerce companies, however, may be limited because many have developed their own logistics networks to deliver products to customers.

Alibaba Group, China's biggest e-commerce platform, could risk losing trade if postal rates are increased. It has refused to comment on the matter.

In 2017, the volume of China's e-commerce transactions reached 8.2 trillion yuan ($1.1 trillion), a year-on-year increase of 22.3 percent, according to a report last month by the Beijing-based China Electronic Commerce Association.

"We regret the US' decision to withdraw from the UPU," Chinese foreign ministry spokesman Lu Kang told a regular press briefing in Beijing on Thursday.

"China has been calling for and upholding multilateralism and actively supporting the UPU," he said, adding "We will continue working with all sides to make our contribution to the development of the global postal service."

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