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The U.S. is pushing to reform the international postal treaty that subsidizes Chinese shipping

Jul 03, 2015

The Universal Postal Union, a postal treaty that legislators and witnesses say creates an uneven playing field for international e-commerce, is up for renegotiation in 2016.

And on June 16th, the Government Operations subcommittee of the House Oversight Committee held a hearing that committee chairman Mark Meadows characterized as the start of a broader push for a U.S. reform strategy.

As previously reported by Fortune, the Universal Postal Union is a treaty organization that sets international postal standards, including so-called terminal dues agreements between post offices. In opening statements, Congressman Meadows characterized the terminal dues system as a “trade distortion,” which “has left thousands of American small businesses at a disadvantage.” That’s because the system favors shippers from countries, including China, considered ‘developing’.

The question for the committee, Meadows posited, was how the situation could be improved. Few solid ways forward were offered by the witnesses, representing the State Department, FedEx, USPS, and Amazon.

U.S. reform efforts have made little progress since Congress took negotiating authority away from the U.S. Postal Service and gave the lead to the State Department in 1998. Robert Faucher, now State’s lead negotiator at the UPU, defended the progress made, while explaining that the UPU is simply a very slow-moving organization, dependent on a sprawling one-country, one-vote Congress held only once every four years.

Nancy Sparks, head of regulatory affairs for FedEx, claimed that lethargy was the source of the UPU’s worsening imbalances.

“The tradition of the UPU is that the haves pay the have nots,” said Sparks. “What’s brought this problem to a head is that the have nots suddenly have a lot.”

Sparks also pointed out that time was running short for a U.S. game plan ahead of next year’s UPU Congress, where rules could be amended. “In UPU time, September of 2016 is a heartbeat away.”

When pressed by Representative Meadows, Faucher declined to offer a timetable for meaningful terminal dues reform. The State Department’s most specific goal at the 2016 UPU Congress, he said, would be to establish a UPU task force to explore fundamental reforms. Similar proposals have been put forth by the U.S. at prior congresses, and failed.

David C. Williams, Inspector General of the USPS, couldn’t offer much more hope, pointing out that the terminal dues system left USPS with little or no leverage for bargaining more advantageous bilateral postal agreements.

More radical approaches were offered by Amazon representative Paul Misener, who called strongly for the U.S. to make postal rates part of broader diplomatic negotiations with China. Misener said that the UPU was “an imbalance that makes no sense to [Amazon], and we’re looking out for the entire ecosystem.”

The obscurity of the issue may make it hard to muster that kind of political pressure. Several committee members said that prior to the hearing they were unaware of the facts of the situation.

But according to Congressman Meadows, this was just the beginning.

“I can assure you this will not be the last hearing . . . because we’re going to look for real results.”

Correction, July 8, 2015: An earlier version of this article misstated the year that the U.S. State Department gained negotiation authority over the Universal Postal Union. It is 1998.

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