“Something has to be done…How can my government be subsidizing China and driving me out of business?”
Those are the words of Jayme Smaldone, who runs a 12-employee housewares company in Rahway, N.J., who first became aware of the problem when he noticed websites selling Chinese knockoffs of his “Mighty Mug,” a desktop coffee cup he designed with an anti-topple base.
And it appears President Trump has listened to Jayme among many others, as The New York Times reports that he plans to withdraw from a 144-year-old postal treaty that has allowed Chinese companies to ship small packages to the United States at a steeply discounted rate, undercutting American competitors and flooding the market with cheap consumer goods.
Peter Navarro, Mr. Trump’s hard-line trade adviser, wrote in a Financial Times op-ed last month.
“These disparities have introduced a massive distortion in the eCommerce market.
It is often possible for a Chinese company to sell ‘knockoff’ products through online vendors, such as Amazon or Alibaba, to U.S. consumers for less than it costs for American mailers to ship authentic goods. Moreover, while USPS loses an estimated $1 on every small package that arrives from China, outbound mail of American exporters is charged at well above cost.”
As The New York Times details, a 2015 report from the Inspector General of the United States Postal Service found that the treaty, which was created to ease the flow of mail and small parcels between 192 countries, had not been overhauled to reflect the new realities of eCommerce and China’s aggressive undercutting of international competitors.
The price of shipping a 4.4 pound package, the largest parcel covered by the treaty, from China to the United States is about $5, according to United States estimates, according to post office estimates culled by Mr. Navarro’s staff.
American companies can pay two to four times that amount to ship a similar package from Los Angeles to New York, and much more for packages sent to China.
The “system creates winners and losers,” the report’s author’s concluded, especially China’s national postal service and “Chinese online retailers in the lightweight, low-value package segment at the expense of the U.S. PostalService and American retailers.”
It is not clear how much the disparity costs American taxpayers and retailers, in part because the Postal Service does not release detailed country-by-country shipping breakdowns. A 2014 study, cited in a Postal Service analysis of the issue, estimated that discounted shipping cost industrialized nations as much as $2.1 billion a year in aggregate.
The losses to retailers and manufacturers could be much more, as online commerce expands further.
Presumably, President Obama decide to ignore the 2015 report.
What is most odd about this decision by President Trump is no one is against it, no one is complaining at Trump “breaking norms” or “isolationism” or “being racist” – politicians and industry groups are all in agreement that it was unfair and needed to stop…
Even industry groups that have questioned the president’s tariffs on Chinese imports, applauded the move as proportional and targeted.
“This outdated arrangement contributes significantly to the flood of counterfeit goods and dangerous drugs that enter the country from China,” said Jay Timmons, chief executive of the National Association of Manufacturers, a trade group.
“Manufacturers and manufacturing workers in the United States will greatly benefit from a modernized and far more fair arrangement with China.”
“Manufacturers are pleased to see that this issue has been elevated to the very highest levels in the Trump Administration.”
Patrick Hedren, National Association of Manufacturers vice president for labor, legal and regulatory policy, said in an emailed statement:
“Manufacturers have struggled in recent years with the rapid growth of counterfeit goods pouring in to the country through the U.S. postal system from countries like China. This problem is fueled by heavily subsidized shipping rates and it displaces American innovators from online marketplaces,”
The announcement was welcome news to Sen. Bill Cassidy, R-La., who has been pushing legislation on the issue.
“I’ve been working with the administration for months on addressing this terrible deal, because American companies are being run out of business by foreign competitors making cheap knockoff products they can ship to Louisiana for less than it costs an American company to mail the genuine product,” he said in a statement.
“President Trump is standing up for American workers and companies who are being hurt by this outdated, unfair international agreement on shipping rates.”
A new front has been opened in the trade war with China – the question is: how will China respond to this one?