What Happens if the US Withdraws from the UPU?

Ever heard of the Universal Postal Union (or UPU)? That’s okay, most people haven’t. You should probably educate yourself though, because there’s something big brewing. Earlier in 2018, President Trump threatened to pull the United States out of the UPU. Then, on October 18, 2018, the United States officially initiated the withdrawal process. This is a very, very big deal, and it’s time to start considering the potential outcomes if the US withdraws from the UPU.

What Does the UPU Even Do?

To put it simply, the UPU makes the global postal system run smoothly. They are the governing board that regulates the cost of international mailing and shipping. The UPU is the reason you can send a postcard from Japan to New York City without paying outrageous fees. You get the picture.

Why Did President Trump Threaten to Withdraw the US from the UPU?

Basically, it all stemmed from growing tensions between the US and China. The Donald and his administration cite that China is enjoying unfair terminal dues while the United States continues to pay unfavorable rates. Though most countries have proposed amending terminal due regulations within the UPU, President Trump’s solution is for the US to withdraw altogether.

What are Terminal Dues?

Terminal Dues are what different countries’ postal systems pay each other to deliver cross-border mail. Think of them like the cost of doing business. For example, let’s say someone in the United States orders a pair of pants from Australia.  Australia’s postal operator is supposed to pay the United States’ postal operator for the cost of processing that parcel. Their postal operator is also supposed to cover the cost of having someone transport those pants all the way to the final destination.

Why Does China Pay Less?

In the 1960’s, the UPU granted shipping discounts to a number of developing countries to help grow the global economy. China was one of those countries…and despite its current position as an emerging global power, they are still on that list. As a result, the terminal dues China pays are significantly smaller than countries like the United States. In essence, the US and other developed countries are footing the bill for China’s cheap overseas shipping, specifically on parcels 4.4 pounds or lighter.

The Options: Where Do We Go From Here?

There are two key arguments on the table, each preferred by different countries. Option 1 is to tweak the UPU’s current framework on terminal dues (preferred by China). Option 2 is to create self-declared rates (preferred by the United States, Latin American countries, Canada, Norway, and more). This means that if the US withdraws from the UPU on October 18, 2019, it will have to negotiate self-declared rates with every other country in the world.

While Option 2 might not seem like a big deal, it is. If the US starts setting its own rates, then other countries will surely do the same. As a result, the affordable rates we currently get for shipping to other countries may get a lot more expensive! Therefore, while the US setting its own rates could aid American businesses that compete against goods imported from China, it could hurt American businesses exporting goods to every other country in the world.

The Voting and Amendment Process

Such drastic change in the UPU doesn’t happen overnight. Here’s the process of how measures in the UPU come to pass:

• First, a resolution is introduced by a member country with the support of two other member countries
• Then, a 45-day comment period begins, followed by a 45-day voting period
• In order for a resolution to move forward, half the voting members in the UPU need to vote on the resolution
• Finally, in order for a resolution to pass, two-thirds of those members who voted need to vote in favor of the resolution

The working groups of the UPU are scheduled to meet again on February 21st. In the meantime, the US Postal Service is already starting to outline solutions for how it will function without access to the UPU’s network (which it has relied on for so long). As for what will actually happen over the next few months, we’ll have to just wait and see.