Trump Scores a Big Victory—on Stamps

The Trump administration on Wednesday scored an important victory in an arcane battle over postal rates that threatened to paralyze international mail delivery—even if it may mean consumers everywhere will pay higher prices to send and receive goods around the world.

After two days of marathon diplomacy, the Universal Postal Union (UPU) in Geneva reached an unexpected compromise that will keep the United States in the 145-year-old organization that was the original keystone of globalization. The Trump administration had vowed to leave the postal union if its demands for a more level playing field weren’t met—which would have thrown international mail service into turmoil.

But the administration’s battle to overhaul how the mail is delivered is really about a bigger and simpler issue: its belief that the globalized world is stacked against the United States and that a bigger and richer China in particular is taking advantage of America and American workers. For the same reason, U.S. President Donald Trump has ramped up a trade war with China, actively sought to decouple the two biggest economies in the world, threatened to leave the World Trade Organization, and attacked globalization in his U.N. General Assembly address on Tuesday.

The Trump administration’s threats to leave the UPU were among its more bizarre assaults on multilateralism, which include plenty of higher-profile targets like the United Nations and NATO. The administration’s beef was simple: The rules and rates for sending mail from one country to another were drafted decades ago, were unfair, and needed updating.

Countries like China that were developing nations in 1969, when the rules were first set, still pay the U.S. Postal Service a pittance to deliver mail, even small packages, in the United States. (Plenty of other countries, like Denmark, shared the grievance.) In a world of exploding e-commerce, that means that Chinese firms had a tiny edge in shipping goods to the U.S. market—making the Postal Service pick up much of the tab for actually delivering the package, even while costing U.S. firms potential sales.

Peter Navarro, a White House trade advisor, argued in Geneva that the current system costs the United States hundreds of millions of dollars a year and costs thousands of jobs because U.S. retailers operate at a disadvantage. U.S. disquiet with the mail, as with the world trading system, predates Trump: The Obama administration, too, sought to reform the outdated rules, but change comes slowly in a group with more than 190 members, who each get a vote.

That’s where Trump’s bulldozer diplomacy paid off over almost a year and a half of unrelenting effort. The agreement reached Wednesday will let most countries, including the United States, raise postal rates for international mail well above the old levels, and the stark differences between the rates that developed and developing nations pay will be quickly phased out.

“It’s an example of having a strategy, having an end game, building coalitions, and at the end of the day, entering into something which is very reasonable and effective for the United States,” said Paul Steidler, an expert on logistics and shipping at the Lexington Institute, a think tank.

One potential benefit of the new arrangement could be a boost for U.S. retailers, especially smaller firms, which have been faced with a competitive disadvantage due to artificially low shipping rates from China.

“Shipping costs are a determining factor in sales between China and the United States, and as e-commerce gets even more important, those shipping differentials are even more important,” Steidler said.

One downside to the new deal will be higher postal rates. UPU Director-General Bishar Hussein acknowledged that letting countries set rates for international mail delivery close to domestic levels will mean “prices will rise” for consumers generally and in most places.

At the same time, while the Trump administration sought the postal reform when saddled with a post office that loses money at a terrific rate, the new measures will do little to stanch the bleeding.

The U.S. Postal Service lost $5.8 billion in the nine months through June 30, but most of that is due to lower volumes of traditional mail, legacy costs, and an inability to really raise prices on its bread-and-butter domestic mail service. A 2015 Postal Service Office of Inspector General report found that the outdated postal rules cost the United States about $300 million over five years, but Navarro said the losses have grown to as much as $300 million a year as China has increased its small-parcel trade with the United States.

But international mail is so tangential—about 3.5 percent of U.S. Postal Service revenue, with inbound international mail making up only 1 percent—the task force Trump assembled to find solutions to the Postal Service’s financial mess didn’t even consider the issue.