The United States has announced it will withdraw from a treaty that allows developing countries to pay less for international shipping, pending a renegotiation of rates. The move is the latest development in the country’s ongoing trade war with China, one of the treaty’s top beneficiaries.
In a statement on Wednesday, the White House said that the State Department would file a notice with the Universal Postal Union (UPU) to withdraw from the 192-nation treaty. According to the Swiss body’s constitution, the U.S. can leave the treaty after one year — during which time the State Department says it hopes to negotiate for more satisfactory terms.
“The President concurs with the Department of State’s recommendation to adopt self-declared rates ... as soon as practical, and no later than January 1, 2020,” read the statement from White House press secretary Sarah Huckabee Sanders. “If negotiations are successful, the Administration is prepared to rescind the notice of withdrawal and remain in the UPU.”
Established in 1874, the UPU began adjusting international delivery rates in 1969, allowing for developed and developing countries to pay according to their ability in an attempt to bridge the economic gap. China joined the UPU in 1914, when its economy was almost entirely agrarian.
Nancy Sparks, managing director at delivery service company FedEx, said in 2015 that under the UPU’s rate structure, “the haves pay the have nots.” And rival logistics firm UPS told Bloomberg on Wednesday that the Trump Administration “took the right step” in withdrawing from the treaty. “All parties should pay the same parcel delivery rates for the same services from the U.S. Postal Service, regardless of whether the country of origin is foreign or domestic,” UPS said in its statement.
While American delivery companies seem to welcome the Trump Administration’s bold move, investors in their Chinese counterparts may be getting nervous. Shenzhen-listed logistics firm SF Express — an industry leader — saw its share price drop by 2.7 percent shortly after the market opened on Thursday.
Meanwhile, the stock prices of Nasdaq-listed Alibaba and JD.com — China’s largest e-commerce companies, accouting for over 80 percent of the domestic market — on Wednesday dropped by 1 percent and 3.9 percent, respectively. Neither company had responded to Sixth Tone’s request for comment by time of publication.
Xin Hua, research director at the Shanghai Institute for European Studies, told Sixth Tone that while there may be some impact on trade and communication between the two countries as a result of the U.S.’s latest move, it’s unlikely to be substantial. “Anything that uses traditional mail channels — small packages of 10 kilograms or less, for example — is more likely to be affected by the change,” he said. “Large logistics companies, however, have their own well-established international networks, and won’t be impacted to the same degree.”
Li Pengbo, a partner at Shenzhen-based e-commerce company Tomtop, echoed Xin’s sentiment that those whose businesses rely heavily on standard mail service to deliver their products to customers in the U.S. could stand to lose the most. “Direct mail is dependent on the low-cost channel from the UPU, which offers China a lower rate,” Li explained, giving a few examples. “The cross-border e-commerce business of eBay and Wish — which mainly uses direct mail — could see a drastic decrease in transaction volume with the added logistics costs.”
As for why the share prices of larger players like Alibaba and JD.com fell, Xin said it’s probably just a knee-jerk reaction. “The element of uncertainty can lower investor confidence and future expectations,” he said, adding that he expects any minor downturns for such companies to be short-lived.
Xin views the U.S.’s withdrawal as a means toward promoting “America First,” a slogan used by several U.S. presidents, including Donald Trump, to encourage economic self-reliance and political noninterventionism. According to the U.S. Census Bureau, Americans bought $505 billion in goods from China in 2017 while exporting just $130 billion worth of products to China — a trade imbalance the American president hopes to rectify.
“Trump hopes that all American needs can be met by American businesses,” Xin said. “But if Chinese businesses can provide services in a fair and competitive market, it shouldn’t be a big issue — unless the Trump Administration were to introduce very specific plans to limit American consumers’ access to Chinese delivery companies.”
Also this week, China’s intellectuals have expressed concerns over the Sino-U.S. trade war, with many calling for an end to the escalating tensions. During a talk at Harvard on Monday, Zhang Weiwei, a professor of international relations at Shanghai’s Fudan University, urged the U.S. to pursue a “win-win” strategy rather than a “cold war” strategy.
“Today, we have the option of choosing mutually assured prosperity, which is a hundred times better than mutually assured destruction,” said Zhang.
Editor: David Paulk.
(Header image: A woman mails a package at a U.S. post office in Gaithersburg, Maryland, Dec. 19, 2017. Kevin Dietsch/UPI/IC)