President Donald Trump plans to withdraw from a 144-year-old, 192-nation postal treaty that has allowed Chinese companies to ship small packages to the United States at a steeply discounted rate, undercutting U.S. competitors and flooding the market with cheap consumer goods.
The withdrawal is part of a push by Trump to counter China's dominance and end what the administration says is a pattern of unfair trade practices.
The Universal Postal Union treaty, first drafted in 1874, sets fees that national postal services charge to deliver mail and small parcels to countries around the world. Since 1969, poor and developing countries -- including China -- have been assessed lower rates than have wealthier countries in Europe and North America.
While the lower rates were intended to foster development in Asia and Africa, Chinese companies now make up about 60 percent of packages shipped into the country, taking advantage of the lower rates to ship clothing, household gadgets and consumer electronics. Many websites now offer free shipping from China, in part because of the cheap postal rates, administration officials say.
A 2015 report from the Inspector General of the U.S. Postal Service found that the treaty, which was created to facilitate the flow of mail and small parcels among 192 countries, had not been updated to reflect the new realities of e-commerce 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 U.S. estimates. U.S. 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. Postal Service and American retailers."
The plan to withdraw from the treaty was welcomed by the U.S. National Association of Manufacturers, which called the postal pact "outdated" in the age of e-commerce and at a time of Chinese manufacturing dominance.
"Manufacturers and manufacturing workers in the United States will greatly benefit from a modernized and far more fair arrangement with China," Jay Timmons, president of the manufacturers association, said in a statement.
The group said the discounts amount to a subsidy for Chinese shippers that cost the U.S. Postal Service $170 million in 2017.
The Postal Service applauded the action Wednesday.
"The current system has led to the United States subsidizing the imports of small packages from other countries," said Jeff Adams, a Postal Service spokesman.
The decision to withdraw was made at the urging of Peter Navarro, Trump's trade adviser, who sees the move as a way to thwart China and an opportunity to challenge the authority of international groups, like the World Trade Organization, that, in his view, fail to give the United States voting powers commensurate with the country's economic stature.
State Department officials were expected Wednesday to inform officials at the Universal Postal Union in Bern, Switzerland, a U.N. branch that administers the treaty, of their intention to pull out of the system and "self-declare" new, higher rates on China, a U.S. official said.
According to the union's rules, members will have a year to negotiate new terms before the withdrawal becomes permanent.
The move is likely inflame tensions with China, which the administration has accused of unfair trade practices and has punished with tariffs on $250 billion worth of Chinese goods, investment restrictions and other measures. Administration officials are still weighing whether Trump will meet with China's president, Xi Jinping, in Argentina next month.
It is not clear whether China will retaliate if the United States pulls out of the treaty. Administration officials said they were assessing rates for other countries and had not made any decisions about whether the policy would extend beyond China.
Trump does not need congressional approval to withdraw because the last version of the treaty was never put up to a vote, administration officials said.
The pact has long been a source of frustration for presidents of both parties and prompted complaints from small businesses, big retailers like Amazon and shipping giants like UPS. The treaty was last modified in 2016 to raise some shipping costs on Chinese exports. But Navarro and Trump dismissed those changes as insufficient to deal with the explosion of online free-shipping offers for goods from China.
It is not clear how much the shipping-cost disparity costs U.S. 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.
Industry groups, even ones that have questioned the president's tariffs on Chinese imports, applauded the move as proportional and targeted.
But the changes could have an even bigger effect on small retailers that have found themselves outgunned and undercut by Chinese competitors.
Jayme Smaldone, who runs a 12-employee housewares company in Rahway, N.J., 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.
"Something has to be done," he said. "How can my government be subsidizing China and driving me out of business?"
Despite the ongoing trade conflict, the Trump administration has again decided not to brand China a currency manipulator. But the U.S. is targeting China and five others for special monitoring for what the administration says are practices that are worsening America's trade deficit.
In a report issued Wednesday, the Treasury Department said no country meets the criteria to be labeled a currency manipulator. But the report says that six nations -- China, Germany, India, Japan, South Korea and Switzerland -- will remain on a watch list subjecting them to added U.S. pressure to lower trade surpluses.
The Treasury Department report said the administration will closely monitor the recent depreciation of Beijing's currency, which it said will likely worsen America's trade deficit with China.
During the 2016 presidential campaign, Trump vowed to name China a currency manipulator as soon as he took office. But so far, the administration has passed up four opportunities to do so in a report that the administration is required by law to deliver to Congress every six months.
Information for this article was contributed by Glenn Thrush of The New York Times; by Justin Sink and Alyza Sebenius of Bloomberg News; by Danielle Paquette of The Washington Post; and by Zeke Miller, Martin Crutsinger and Paul Wiseman of The Associated Press.
A Section on 10/18/2018