Outdated global postal system hurts US manufacturers

Last week, delegates from 192 countries met in Addis Ababa, Ethiopia to discuss the future of the global postal network. They met in the headquarters of the African Union in a building designed, built and financed by China.

It was an all-too-fitting setting given how much China benefits from an outdated postal system at the expense of manufacturers in America, and it is an urgent reminder of Congress’ need to fix the unfairness in the system.

{mosads}International postal operators came together in 1874 to establish the Universal Postal Union (UPU) — the second-oldest international organization worldwide — to create a system for exchanging mail between countries.

To make the process more affordable for mailers, they agreed in 1969 to a system of subsidized rates for shipping letter post items with the cheapest rates going to the poorest countries like Botswana, Gabon and China. These rates are called “terminal dues,” and despite a lack of oversight, they were not much of a problem for decades.

When the UPU agreed to the terminal dues system almost 50 years ago, they decided to treat items up to 4.4 pounds as “letter post” because nobody was expected to ship commercial packets through the mail.

Things look very different in 2018: e-commerce is massive, and innovative products are easier than ever for unscrupulous actors to counterfeit. But one thing hasn’t changed: China still gets the Botswana-level rates through the UPU even though it is far from a “poor” country today.

These days, the best way to get counterfeit goods, and even illegal drugs, into the United States is through international mail. By charging less for these international shipments under the UPU terminal dues agreement, our own postal service subsidizes these shipments to the tune of hundreds of millions of dollars per year.

For manufacturers in America, this can mean that it’s cheaper for Chinese competitors (and counterfeiters) to ship products to customers located anywhere in the United States than for U.S. companies to ship their products across the street.

One such U.S. manufacturer, Mighty Mug, discovered this unfairness when the company’s founder and CEO, Jayme Smaldone, ordered a counterfeit version of his Mighty Mug product from China. The Chinese product shipped for less than it would have cost Smaldone to send his own product to a nearby friend or relative.

To make matters even worse, the UPU agreement still does not fully require advanced electronic data for shipments, which means counterfeits and drugs are impossible to track. According to our own State Department, the United States has not even affirmed the UPU agreements for the past decade. 

Thankfully, a growing number of public officials have recognized this problem, including Reps. Kenny Marchant (R-Texas) and Ralph Abraham (R-La.); Sens. Bill Cassidy (R-La.), Marco Rubio (R-Fla.), Rob Portman (R-Ohio), Ron Johnson (R-Wis.) and James Lankford (R-Okla.); and most recently, President Donald Trump.

So how do we fix it? The first thing the Senate can do is pass Sen. Portman’s Synthetics Trafficking and Overdose Prevention (STOP) Act, which would close the customs loophole and require advanced tracking data.

This will make it easier to track counterfeit goods and dangerous products entering the United States and stop their flow at the source.

Then, because it is unlikely that the United States wins this fight through the one-country, one-vote system of the UPU, manufacturers also need the administration and Congress to work together to move to a fair system of so-called “self-declared rates,” in which the United States, not the UPU, sets the postage rates for products coming from countries like China. 

The next few months are a critical time for fixing this growing problem. Manufacturers look forward to working with the administration and Capitol Hill to get tough on China.

Jay Timmons is president and CEO of the National Association of Manufacturers (NAM) and chairman of the board of the NAM’s Manufacturing Institute.