Four possible outcomes of America’s withdrawal from the Universal Postal Union

by Nick Zaiac
| November 17, 2018 12:00 AM
In just two short paragraphs, the White House announced its intention to withdraw from a treaty it first signed during the Ulysses S. Grant administration: the Universal Postal Union. In doing so, President Trump opened a new front in his bid to rebalance trade between the United States and China.

At issue are the rates that foreign postal services pay the U.S. Postal Service to allow shippers abroad to send mail and small parcels to American customers. Since international mail necessarily involves two post offices, both of them need to be paid to have a reason to receive and deliver mail across borders. The UPU’s terminal dues framework coordinates negotiations between the world’s 192 postal operators, avoiding the need for individual treaties between every pair of countries that wish to allow mail to be exchanged between them.

In 2017, USPS took in $2.7 billion in international mail revenues — about 3 percent of its total revenue. With America’s exit from the UPU just 14 months away, the nation will be forced to choose one of four likely paths forward.  One potential option would be for USPS to cede the market to foreign post offices to the private sector. This would make all international mail in the United States behave like the express mail market that operates outside of the terminal dues framework. This change would dramatically increase the cost of sending standard letters both inbound to and outbound from the United States, as well as that of small parcels shipped into the United States from abroad. However, it would also end USPS’s obligations to the international postal system.

A second option would be for the United States to lay out a set of its own rates for each individual country based on whatever standard it sees fit. Other countries could accept or reject these rates based on how much they value the ability to send mail to the United States. And in this case, they would also set their own rates for Americans to access their postal systems.

America negotiating with international postal operators through treaties outside of the UPU would be a third potential outcome. Articles addressing the international mail issues that the United Nations covers could be added onto existing treaties with other countries. If the United States decides to pursue this option, we could see postal issues lumped in with broader issues of trade and even inserted into trade agreements. The need to pass treaties to address postal issues could then become a starting point for new negotiations to liberalize trade more broadly.

That said, the State Department has limited capacity to negotiate and Senate time to vote on a wave of new treaties is as scarce as ever. Moreover, the cost of these negotiations could wipe out a substantial portion of the gains from an international postal order that is more favorable to American shippers.

The fourth and most likely outcome is one where the UPU flinches and the world makes concessions that give reason for the United States to remain in the treaty. Rates, especially those on Chinese small parcels, could increase in order to stem complaints from American merchants unfairly disadvantaged by current shipping rates. A UPU response with concessions avoids the need to upend how international mail is sent in the United States, as well as the need to negotiate and vote on a series of new postal treaties.

The administration is playing a game of chicken with the international postal order. The question between now and January 2020 will be who blinks first. What happens will determine the shape of international mail for years to come.

Nick Zaiac is a fellow in Commercial Freedom at the R Street Institute.

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