President Trump's administration formally initiated withdrawal proceedings from an international shipping agreement that it feels gives China and others an unfair advantage.
Two senior administration officials told reporters Wednesday that the State Department initiated the withdrawal process from the Universal Postal Union, a sub-agency of the United Nations that organizes postal service policies across member countries. On the domestic front, the Trump administration is going to begin the process of self-declaring postal rates.
Manufacturers have long complained that the UPU's rules allow packages of up to 4.4 lbs to be shipped from certain countries at the same rate for flat mail and this has allowed foreign companies to undercut U.S. competitors. Among the countries that get this preferred rate is China, a policy set up in 1969 when its economy was still developing. White House officials estimated that this rate has amounted to a $300 million annual subsidy.
The administration is solely focused on packages under 4.4 lbs, which both administration officials noted can cost 40-70 percent more to ship domestically than abroad.
"It costs less to ship a package from New York City to Beijing than it does from San Francisco to New York," one administration official said, adding that the U.S. loses some $300 million annually because of higher domestic shipping rates.
Withdrawing from the United Postal Union will take a year to effectuate. In the meantime, the administration said it is open and plans to continue to negotiate a better deal for the U.S.
The current agreement lists China and other countries, including Singapore, as developing nations. Due to that designation, these countries receive lower shipping rates than the U.S.
Some lawmakers on Capitol Hill and business leaders are expressing their support for the president's move.
"President Trump deserves tremendous credit for the administration’s focus on eliminating the anti-U.S. manufacturer subsidy China receives from the U.S. Postal Service," National Association of Manufacturers and CEO Jay Timmons said in a statement Wednesday. "This outdated arrangement contributes significantly to the flood of counterfeit goods and dangerous drugs that enter the country from China. Manufacturers and manufacturing workers in the United States will greatly benefit from a modernized and far more fair arrangement with China."
Sen. Bill Cassidy, R-La., has been one of the most vocal supporters of reforming the United Postal Union. Cassidy worked with the administration for months and continues to voice the issue on Capitol Hill.
"I’ve been working with the administration for months on addressing this terrible deal, because American companies are being run out of business by foreign competitors making cheap knockoff products they can ship to Louisiana for less than it costs an American company to mail the genuine product,” he said in an August statement. "President Trump is standing up for American workers and companies who are being hurt by this outdated, unfair international agreement on shipping rates."
The move will likely be met with opposition from China, a nation that is already in the midst of a trade battle with the Trump administration. Trump's administration has levied tariffs of 10-25 percent on $250 billion worth of Chinese imports and is threatening to slap additional tariffs on all Chinese imports if the nation does not agree to renegotiate a deal that is more favorable in the eyes of the administration.
The Trump administration has also placed tariffs on steel and aluminum imports, policies directed mainly at China, and included a provision in the recent US-Mexico-Canada Agreement on trade that restricts those countries from negotiating separate deals with China.