The US will throw the next punch in its trade battle with China, though this one doesn't involve the word tariffs. Politico reports the White House on Wednesday said America would pull out of a 144-year-old international postal treaty—if it had to. The process of withdrawing from the Universal Postal Union (UPU), a UN body, takes a year, and a top official tells the site the US would optimally like to stay in but have the terms changed. The AP reports that if the treaty can't be renegotiated, the US is out. As the terms stand now, China benefits big-time. We explain:
- Lower rates: The New York Times reports that since 1969, China and other developing or poor countries have been able to gain access to the global economy by paying lower shipping rates to get small packages (up to 4.4 pounds) to international destinations; wealthier countries pick up the tab to deliver the package the distance. If the US exits the treaty, it would set its own rate for Chinese packages. It's unclear whether other countries would see new rates
- The rub: The AP reports it's cheaper to send packages from Beijing to New York than from California to America's own East Coast. Further, officials believe Chinese fentanyl manufacturers are benefiting from the low rates. The Times reports that at this point, 60% of packages shipped into the US from abroad are from China.
- Earlier report: The Financial Times last month reported the president was threatening to take this very move if rates weren't changed, but that the UPU had determined earlier in September that it wouldn't consider terminal dues—those are the UPU-set rates national post offices fork over to the countries that handle their mail—until its 2020 meeting.
- The numbers: As for that aforementioned scenario, the FT explains the USPS will get $2.50 from China for a 1-pound package bound for New York; sending that package from LA to NYC would cost a US company between $7 and $9. In 2016, the USPS spent $135 million subsidizing this international mail.
(Read more China