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Trade war

Trump's trade hawks dial up China pressure with postal threat

Beijing 'regrets' latest US move against multilateral body

Packages roll through a New York City post office. The Trump administration says international rates under a 144-year-old postal treaty give Chinese shippers an unfair advantage.   © Reuters

WASHINGTON/HONG KONG -- The Trump administration has opened a new front in the trade war by threatening to withdraw from a global postal agreement, prompting China to blast what it sees as a pattern of American rejection of international cooperation.

International rules for cross-border shipping are based on a 144-year-old postal treaty under the Universal Postal Union, a 192-member United Nations agency. The system makes shipping cheaper for postal services in emerging nations -- something the U.S. says unfairly benefits China, now that it is the world's No. 2 economy.

The Trump administration's move to pull the U.S. out of the deal was spurred by China hawk Peter Navarro.

"It costs more to ship a package through the U.S. Postal Service from Los Angeles to New York City than it costs to ship that same package from Beijing to New York," Navarro, a trade adviser to U.S. President Donald Trump, wrote in an Op-Ed in the Financial Times last month.

Navarro wrote that "UPU rules give companies in countries such as China, which already benefit from domestic support, an extra postal rate advantage and a head start in the race to win the world's growing e-commerce business." He said that if the UPU does not make sufficient changes to the "gross inequity" of the system, the U.S. Postal Service will adopt "self-declared rates."

The move underscores Trump's willingness to use any means at his disposal to put trade pressure on Beijing.

China expressed regret over the announcement. "Recently the U.S. side has decided to pull out of not just one or two organizations," Foreign Ministry spokesman Lu Kang told reporters Thursday. "The U.S. may have its own ideas, and there is no need to bring up China as a reason."

"China always advocates and commits itself to upholding multilateralism, and takes an active part in and supports the work of the UPU," Lu added.

Martin Bao, an analyst with ICBC International, expects a U.S. withdrawal would have minimal impact on Chinese e-commerce leaders like Alibaba Group Holding and JD.com, which enjoy a deep domestic market.

"Most cross-border e-commerce in China deals with imports from overseas, not the other way around," Bao said.

While some small Chinese merchants sell products to U.S. customers on Alibaba's platforms, Bao said such trade is "very, very small" and "negligible" given the size of the e-commerce groups.

Yuan Peng, a Chinese online vendor on Amazon.com, is not bothered by Trump's UPU threat. His company in Shenzhen sold 100 million yuan ($14.4 million) worth of Bluetooth headphones and other electronics to American customers last year, but Yuan said the products were shipped in containers, not in parcels.

"Most of Chinese midsize and large online vendors on Amazon use warehouses in the U.S.," according to Yuan. "They do not deliver goods through postal service anyway."

Although smaller vendors might be affected, "those companies contribute only one-fifth of Chinese goods sold to the U.S. on Amazon," he estimated.

Meanwhile, the National Association of Manufacturers, a major U.S. business lobby, welcomed the move.

"Manufacturers and manufacturing workers in the United States will greatly benefit from a modernized and far more fair arrangement with China," NAM President Jay Timmons said in a statement.

Under the UPU's rate system for international shipments, the fees a postal service operator pays to its counterpart in the destination country are set at low levels for developing nations, China included. The price gap is especially large for smaller packages.

Washington says the U.S. Postal Service has had to raise domestic rates to offset the expense, which it says totals $300 million a year. Meanwhile, some Chinese online vendors offer free shipping to the U.S.

In an order issued in August, Trump called for a review, saying it was U.S. policy to "encourage the development of an efficient and competitive global system that provides for fair and nondiscriminatory postal rates."

The move to withdraw from the UPU came after Trump's complaints about the system were rejected at a UPU meeting in September.

As there is a one-year moratorium on a pullout, Trump said he could reconsider his decision depending on how negotiations with the UPU member countries go. The U.S. Chamber of Commerce has proposed deciding on a fair system that matches the shipping costs through bilateral negotiations with each country.

This would not be Trump's first break with multilateral agreements and institutions.

So far the president has pulled the U.S. out of the Trans-Pacific Partnership trade pact and the Paris Agreement on climate change on the grounds that they are unfair to the country. He has also suggested exiting the World Trade Organization.

The UPU was established in 1874.

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