U.S. Department of State
March 14, 2019 Meeting
There has been a lot of discussion today about international postal rates and the processes of the Universal Postal Union. That is indeed important, but we should also keep in mind that postal rates can accelerate or inhibit a lot of economic activity.
Broader Economic Ramifications
In a January 2019 report, the White House’s Council of Economic Advisers was clear about this and said, “… distortions in the pricing of international postal services created by the UPU’s remuneration system can impose costs on producers and consumers who do not transact with any postal operator. These distortions in the pricing of international postal services for items likely to contain goods would be expected, like any set of price distortions, to lead to the type of misallocations of the factors of production that lower standards of living in both developed and developing countries.”
Said more plainly, the current international postal terminal dues system means lost jobs and non-created jobs. It means billions of dollars of lost U.S. sales as well as related tax payment losses. Internationally subsidized postal prices may even be the final straw that breaks the backs of many entrepreneurial companies selling on the web, such as those seen on Shark Tank.
Many U.S. Businesses Impacted
This is not just economic theory. I have spoken with several business owners recently who shared the challenges and setbacks they have faced from the current international postal system.
Mike Devries is a farmer in Rock Valley, Iowa who also has a tractor repair shop and an E-Bay business selling farm, automotive and machinery parts. A couple of years ago his E-Bay business saw its sales contract because of the Postal Service’s ePacket from China. His business has recovered, but he now makes it a point to not sell anything small.
Mike adds, “If it’s available in China, I don’t sell it.”
The owner of a shaving kit business, however, was not as fortunate. Low-cost postal rates from China made it no longer viable for him to continue the business.
Jose Calero is an Amazon merchant who sells accessory products for computers and iPads, such as stands. His home-based business has been operating for 18 years and has three employees. Over that time, he has seen millions, and he emphasizes millions, of new vendors from China come online who are looking to sell to U.S. consumers.
Jose asked that I share with the committee, “If they can raise (postal) prices it will solve a lot of problems.”
Honey-Can-Do International is a truly middle America company, headquartered in Berkeley, Illinois outside of Chicago. This provider of home storage and organization products has had great success since its inception in 2008 and has 160 employees. But the company has been burdened by terminal dues and would be thriving even more if Chinese shippers paid the same rates as U.S. shippers.
The company’s CEO, Steve Greenspon, also points out that Honey-Can-Do has had to spend considerable time chasing out knock-offs of its products coming into the U.S. from China. This is made possible in part by these low shipping costs. Honey-Can-Do also sells a lot of products used by children that have to meet the rigorous standards of the Consumer Product Safety Improvement Act. Yet Chinese shippers of similar products do not face such requirements or scrutiny under current international postal practices.
All this is disconcerting and must end.
These and many other hard-working Americans are just looking to sell products at a fair price, on a level playing field. They want to work to make a living and they also do not have time to travel across the country to meetings like these.
They are not looking to game the system. Nor are they asking for a special tax break or a subsidy. They just want China and other large exporters of e-commerce to pay the same as U.S. shippers.
It is a reasonable request and the United States should continue to vigorously pursue this policy. Please keep these and other Americans in mind as you continue discussions with the Universal Postal Union. Thank you.
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