Pulling out of the postal union
Trump sometimes makes good points but in ham-fisted ways. One of his many recent missives, a threat to pull America out of the Universal Postal Union, is yet another case of the "Shoot first, ask questions later" style of presidency.
I recently needed to replace a small piece of strapping on my rucksack, and as my local Army & Navy store has shut up shop, I turned to Amazon. I found two suppliers, one pricing the part at £1.99 plus £1.50 post and packing, and the other pricing an apparently identical item at just £0.48, and that included post and packing. Naturally, I ordered from the second one. I was somewhat surprised when, a couple of weeks later, the postman popped a small packet through my letterbox, containing the item I needed, which had been shipped from China. When it costs 56p for a second class stamp alone, how is it possible to sell the part and post it from China for just 48p?
The answer lies with the Universal Postal Union (UPU). It was established in 1874 in Switzerland as a forum for postal cooperation between governments, and nowadays is a specialised branch of the United Nations. Thanks to the UPU we have common standards for stamp design so that, for example, all stamps across the world show their denomination using numerals rather than words. It created envelope addressing conventions, and the convention that saw the world standardised on pale blue envelopes and stickers to signify air mail. Most importantly though, the UPU enables a simplified system of international post.
At one time, in the early history of postal services, if you wanted to post a letter to another country, you would need to affix a mixture of stamps for each country involved in delivering the letter. This was obviously massively inconvenient. In the middle of the 20th century, the UPU introduced a convention whereby countries would accept each other's mail at standard rates, and then deliver the mail with the same priority and service as their own domestic mail. This greatly simplifies the logistics of posting an item across international borders.
The UPU also showed great wisdom in having asymmetric rates to favour developing countries. Because of the differences in GDP, salaries, and wealth in general, the UPU convention expects people in the UK to pay more to deliver a letter to Kenya, for example, than it expects people in Kenya to pay to have a letter delivered to the UK. Few would argue with this. The problem, however, is that countries like China, the world's second largest economy, and on target to take number one position by 2030, is still classed by the UPU as a developing nation, and enjoys very favourable asymmetric postage rates.
This means that the UK supplier of my rucksack strapping had to purchase goods wholesale, pay shipping rates to have them imported, and then pay additional postage charges to have them delivered within the UK. In contrast, the Chinese supplier was able to purchase the items locally, as needed, post an individual item at very cheap Chinese subsidised postage rates, and have them delivered in the UK courtesy of Royal Mail deliveries.
The UK receives around two million small packages per week from Asia and whilst the Royal Mail will not disclose actual figures, the charges are based on total weight of the mail from the country, not per item, and it is thought that the retailers in China are paying as little as one penny postage per item for small lightweight goods. UPU rules, which were established to facilitate communication by letter and the exchange of small gifts, have been usurped by commercial retailers, and in an online shopping world, this makes it very difficult for UK retailers to compete.
It isn't just the postal subsidy which is a problem. UK retailers have to add VAT to their prices on all sales, but for an item imported through the post, if the contents of the package are valued at £15 or less, they avoid VAT. UK retailers have to abide by distance selling regulations and accept returns if the item is unsuitable or damaged. Whilst small retailers in the far east offer no quibble return and refunds, the cost of returning a package will usually exceed its value. There is also a question of standards, such as electrical safety, product labelling, regulation of pharmaceuticals, and so on. At a time when UK and EU politicians are at loggerheads over how to ensure UK imports meet EU standards and vice versa, we are importing two million items a week from the Far East which bypass quality control checks.
The same situation prevails in the EU, the USA and other countries worldwide, and has been a matter of concern for some time. For example, some twelve months ago, Canada began phasing out the subsidy, and Sweden has lowered the VAT exemption threshold to just one Krona, (approximately 10p). It is an issue that governments need to address as a matter of urgency, but inflammatory and confrontational presidential declarations that the USA is simply going to withdraw from the UPU are simply not helpful.
31st October 2018
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