President Donald Trump is taking another swipe at China — by ripping up an international treaty that’s more than a century old.
The Trump administration announced Wednesday that the US will withdraw from the Universal Postal Union (UPU), the organization that coordinates postal policy around the world. At 144 years old, the UPU is one of the oldest intergovernmental agencies. It makes the international postal system run smoothly; it’s the reason why you can get a package from South Africa or a postcard from your aunt on vacation in Bali.
“What [Trump] seems to be trying to do is raise the price of shipping costs for small packages for a lot of things from China to the United States, and he wants to have those decisions be made entirely under American law,” Craig Murphy, an international organizations expert and political science professor at Wellesley, told me.
Here’s how this works: China (and other developing countries) can ship small parcels to the United States at low cost based on rates established by the UPU. It’s one reason why consumers can afford to buy so much random junk online — from fidget spinners to fishing gear to foot cream. And it’s actually cheaper to ship some products from certain places overseas to the US than it is to deliver something between New York and Kansas.
Trump does have a legitimate gripe, and administrations going back to Ronald Reagan have voiced similar complaints about the UPU. But threatening a century-and-a-half-old organization is a disproportionately dramatic response to the issue, which reveals the White House’s obsession with what it sees as China’s unfair advantage in global trade.
“No president recently has decided to make a big deal out of the situation [with UPU] — until Trump,” Kevin Kosar, vice president of the free-market think tank R Street Institute, told me in an email.
The White House’s solution is to adopt its own rates for letters and goods coming into the US, and then get out of the UPU. But the formal withdrawal process from the organization takes a year, and the White House left open the possibility that the US would remain if it could negotiate a better deal.
Experts tell me this is probably the most likely scenario, as the US’s proposed departure from the UPU is kind of weird and its consequences are a bit unpredictable. Here’s what you need to know.
What is the Universal Postal Union, and why is Trump mad at it?
The Universal Postal Union is probably not something you’ve ever concerned yourself with, and that is very much okay. As one expert quipped to Vox: “I’m really sorry, I am a hardened multilateralist, but even I have never given a thought to the UPU until this week.”
But the UPU is coming up because the Trump administration has decided it wants to wage its bilateral trade war with China through a multinational body, one that doesn’t “like to be in the news,” as Richard John, a historian at Columbia University who wrote a book about the American postal network, put it.
That’s sort of by design. The organization has made a point to try to negotiate policies out of the public view, even if it means developing a reputation as a kind of secretive Postal Illuminati. “That’s why it’s so effective,” John told me. “It keeps itself out of politics.”
The elusive UPU is based in Bern, Switzerland, with 192 members. It was first established by a treaty in 1874, though it’s a United Nations agency today. It’s the second-oldest international organization.
Letters were the big political issue back then, but the UPU sought to embrace a lofty goal — to promote and foster the free flow of information and ideas. There was genuine idealism in its founding, John said. The US, which pushed for its creation, was one of the countries that thought a universal postal union should be more about ideas than commerce.
Incidentally, it’s also a heck of a lot easier to let an international organization handle the complexities of sending things between countries, rather than each country signing scores and scores of bilateral treaties.
“The organization made possible the international mail system,” Jim Campbell, a Washington-based lawyer who’s an expert in all things UPU, said.
The UPU has the vital, if rather boring-sounding, role of setting technical and security standards that both post offices and private companies use, so packages and letters can get from one place to the other. It ensures that things like bar codes work around the world and that countries can process and sort items with foreign postage.
“It’s a primarily technical organization whose purpose is to reduce the transaction costs of doing business,” Murphy said. “That’s its role. So threatening to withdraw from it is sort of absurd.”
But the UPU also does oversee rates and fees — and these are what the Trump administration considers unfair. (Senior officials, after making the UPU announcement, also brought up some security concerns, such as Chinese shipments of narcotics or other counterfeit items, but that’s secondary to economic concerns.)
The main issue for the Trump administration is something called “terminal dues,” which are the rates and fees set by the UPU that the country responsible for mailing a letter or package pays to the country that receives the letter or package.
For example, if you’re living in the US and you order knockoff earbuds online from China, China’s postal operator is supposed to pay the US’s operator for the cost of processing that parcel and the cost of having someone (like a US postal worker) transport it to its final destination (like your apartment).
But the rates China and some other countries are paying don’t meet the actual costs of delivering those earbuds. This happens because the UPU gives discounts to a list of developing countries that was negotiated in the 1960s, and China is still on the list.
That means the United States is effectively subsidizing cheap overseas shipping, specifically anything that’s 4.4 pounds or lighter. The administration has said that these rates for China cost the US $300 million per year, coming out to a 40 to 70 percent discount on shipping.
So the Trump administration wants to set its own rates based on what it thinks China should pay, which would go into effect no later than the end of 2019.
Manufacturers and retailers small and large have been irritated by this system for a while, and shipping companies and the USPS cheered the administration’s announcement that it would set higher rates. “The current system has led to the United States subsidizing the imports of small packages from other countries. As such, the Postal Service and its Governors fully support the Administration’s decision to move to self-declared rates,” Jeff Adams, a spokesman for the United States Postal Service, said in a statement.
But the US also said it would withdraw from the UPU unless an agreement could be negotiated. It was essentially an ultimatum, Campbell said: “We want you to fix the UPU, and if we don’t make progress in a year, we’re going to get out.”
The administration isn’t wrong to put a little pressure on the organization, Campbell continued. But the one-year withdrawal timeline that the administration set is premature because the UPU is a big, bureaucratic organization with a lot of rules. “They can’t really change it before 2020,” Campbell said.
What does all this mean, though?
Trump has displayed a particular distaste for anything that implies international cooperation: The Trans-Pacific Partnership, the Iran deal, the Paris Climate Accords, and UNESCO are just a few multilateral agreements that he’s backed out of.
But the US’s problem here isn’t really with the UPU. It’s with China. “It’s a pretty straightforward protectionist gambit,” John said.
The Trump administration, vowing to make its own rates for parcels coming into the United States, is effectively setting up another barrier to trade with China. The US has imposed billions in tariffs on a slew of Chinese goods in recent months, and it’s now trying to co-opt an international organization to escalate its trade war.
The problem is that the whole point of the UPU is to make it easier and cheaper for companies to ship and send stuff worldwide. “To use the postal system in lieu of tariffs, that’s not what this organization is about,” Murphy said. “This organization is about sending more stuff [from] place to place, not sending less stuff.”
Now the Trump administration has said it intends to withdraw and set its own rates. But what’s to stop other countries, including China, from retaliating and trying to do the same?
China probably won’t do that, though, because the US just handed them an even greater win: ceding more leadership and clout to Beijing on the world stage. China now gets to be seen as the good global actor, stepping in as the US retreats from the international order it helped create.
“China has been calling for and upholding multilateralism and actively supporting the UPU,” China’s foreign ministry spokesperson Lu Kang responded to the US’s announcement. “We will continue working with all sides to make our contribution to the development of the global postal service.”
Campbell, the UPU expert, said that he thinks the US should use a little muscle here — but that it basically botched the rollout. “Finally the Trump guys have done something — and that’s great,” Campbell told me. “But we have to follow through with a little more planning than we’ve done so far.”
The US has a legitimate case against the UPU. It’s not all that transparent about its pricing, but it is clear that China is getting a big discount. And the US has a bunch of allies in places like Europe who are also drowning in cheap foreign imports that could add to the pressure to UPU reform. A unilateral move by the US undermines that effort.
But there are a lot of practical problems attached to the US’s threat to withdraw from the UPU. Experts told me they don’t really see a way for the US to truly, fully disengage. At the most basic level, the US is a huge part of the international postal system and the global trade and communication that it fosters. Billions of dollars are at stake, and being outside of that system would create huge transaction costs for the US and anyone who does business with us.
“It’s too important for it to really fall apart,” Murphy said.