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US Announces Plans To Withdraw From 144-Year-Old Postal Treaty (thehill.com)
JoeyRox writes: The Trump Administration announced today that it's intending to withdraw from the Universal Postal Union, an international postage rate system overseen by the United Nations. "The decision was borne out of frustration with discounts imposed by the Universal Postal Union (UPU) that allow China and some other nations to ship products into the U.S. at cheaper rates than American companies receive to ship domestically," reports The Hill. "The administration argues the system undercuts U.S. manufacturers and allows China to flood the market with cheap goods." The U.S. is hoping to renegotiate the rates, known as terminal dues, but was frustrated with opposition from other nations in the UPU. According to the report, "The withdrawal would not take effect for one year, allowing the U.S. some time to broker a new deal."
"The 144-year-old UPU sets fees that postal services charge to deliver mail and packages from foreign carriers," reports The Hill. "For decades, developing nations have been allowed to pay lower rates than wealthier nations. China has fallen under the developing nation category, a designation the U.S. says it no longer deserves because of its booming economy." The Trump administration wants to move to a system of "self-declared rates" that would allow the U.S. Postal Service to set its own prices for shipping international packages of all sizes. As it stands, the P.O. is only allowed to use self-declared rates on packages exceeding 4.4 pounds.
"The 144-year-old UPU sets fees that postal services charge to deliver mail and packages from foreign carriers," reports The Hill. "For decades, developing nations have been allowed to pay lower rates than wealthier nations. China has fallen under the developing nation category, a designation the U.S. says it no longer deserves because of its booming economy." The Trump administration wants to move to a system of "self-declared rates" that would allow the U.S. Postal Service to set its own prices for shipping international packages of all sizes. As it stands, the P.O. is only allowed to use self-declared rates on packages exceeding 4.4 pounds.
The Planet Money podcast did a good story relating to this topic on August 1st, 2018. The episode was titled "The Postal Illuminati".
4.4 lbs == 2kg
(for those people wondering why it wasn't a whole number -- it's a whole number is the rest of the world)
This is being blown out of proportions. There is only an advantage for small packages under 1lb. Over 1lb international rates are much higher than domestic. Under 1lb there is about a $1 advantage to foreign shippers. But the USPS is not losing money on delivering these packages, the foreign rates cover the cost of delivery. The argument is over pension contributions and that extra dollar from a price increase for foreign packages will go into postal worker's pensions.
This situation in the media is being distorted by comparing Priority Mail rates to international EMS. My Priority Mail packages arrive in 2-3 days. My EMS packages take at a minimum of 9 days and many take closer to 21 days to arrive. These services are not comparable. If I want three day service from China it costs over $50.
U.S. income distribution is actually pretty good. Certainly not at European levels, but it's a myth that the 1% control U.S. income. Income stats are readily available from the iRS. The top 1% (about $500k/yr and above) only account for about 19% of total income. The top 5% (about $200k/yr and above) account for about 35% of total income. The problem is the top 25% (about $75k/yr and above) account for 70% of income. And the top 50% (about $38k/yr and above) account for 90% of income.
That is, the bottom 50% only make 10% of the income. So the problem is not limited to the 1%. Even if you confiscated all of the top 1%'s income and distributed it to the bottom 50%, that would only improve their share of income from 10% to 29%. If you make more than about $38k/yr, and especially if you make more than $75k/yr, you are part of the problem.
You're also incorrect in assuming that increased equality always equals more productivity. Aside from city-states and countries with disproportionate oil imports or banking industries, the U.S. leads the world in GDP per capita. That is, there isn't a linear correlation between income inequality and productivity. Extremely high income inequality like in nations with high corruption (Central America, Taiwan, South Korea, and China) reduces GDP per capita (productivity per citizen). But extremely low income inequality like in EU nations also reduces productivity per citizen. The U.S. sits at pretty much near the productivity optimum - the amount of income inequality it has is just about what you need if you wish to maximize productivity per citizen.
I liken it to the checkout lane problem. What's the quickest way to get shoppers checked out of a supermarket? Fast lanes (where a few elite shoppers get their own dedicated lanes with no waiting) obviously slow things down. But if you try to make everything equal (everyone stands in one line, and the person in front goes to the next available checkout lane, so it's impossible for someone who's waited less time to check out before you), that actually ends up being slower than if everyone just picks whichever lane they want. In the pick-your-own-lane model, inequality is higher (you sometimes get stuck in a slow lane so other people who've waited less than you get checked out before you). But on average the extra time added on due to the inequality is less than the time added due to the inefficiency of trying to make everything equal (in the one-line model, each checkout lane sits idle slightly longer while it waits for the next person to move from the one line to the register). Satisfaction is higher because people like fairness and equality, but the higher equality actually results in lower productivity.
So one can argue that income equality is a more desirable goal from a moral standpoint. But economically it is not optimal - a certain level of inequality is needed to maximize productivity per capita. We can still do it, like how we do not discriminate against physically disabled persons holding jobs (non-disabled people subsidize the cost of equipment to allow disabled persons to do those jobs). But understand that it results in lower productivity per capita, not higher.
1st/2nd world gets nothing out of it.
Those aren't economic tiers.
"First World" is a relic from the cold war. It refers to the non-communist developed nations that were allied with the US. "Second World" is the communist developed nations that were allied with the USSR. "Third World" is everyone else.
Third World nations were poor due to not being developed. They aren't all poor now. And they don't move into "second world" unless they become communist.
>You haven't explained why that would make the cost
>go down for US exporters though.
Currently, the payment for internationally shipping from the US is basically the price plus a subsidy. For example, a $5 fee paid is $4 for the shipping, and $1 for the subsidy.
If a packages is $5 to a developing country, it might be only 50 cents to ship *from* the developing country. The first world receiver pays more to deliver in country than it is paid on that package--and subsidizes this loss from that extra dollar above.
The reason for this is to let Elbonia pull itself up into the the modern world; it is deliberately subsidized.
The problem is that as China left that developing status, it hasn't given up its rates.
I've actually ordered something for eleven cents, delivered . . .
If China has to pay the rates of an economy of its state of development, subsidy of its shipping no longer has to be built into the other international rates. *That* is where the reduction comes from.
Shipment between the US and Europe don't subsidize one another, and their cost could reasonably be expected to go down without the subsidy for China (or at least not increase as much as they would have).
hawk, wearing his econ professor hat for a change
Then I hope at least an US - EU deal is made. My impression is that there are plenty of places in the EU that would want out of this skewed treaty: the postal services are overloaded with China shit, most imports aren't declared or declared incorrectly, import fees aren't paid, taxes aren't paid. That means the Chinese not only have the advantage of lower wages and worse working conditions but also of bypassing the fees EU companies have to pay. Another example is that electronics in the EU have to be taken care of at end-of-life and manufacturers are required to handle this - which the Chinese avoids. There have been cases where the Chinese products contain dangerous constructions, dangerous substances or other problems like not caring about radio interference. More costs that EU consumers, companies and countries have to take care of.
So let's stop this bullshit.
>I was confused, because we didn't have 28 million
>people out of work (unless the unemployment figures
>are rigged)
Speaking as a displaced economist . . .
"rigged" is an overstatement, but they sure don't measure what normal people think of as unemployment.
The most commonly reported figure is U-3, which just takes those with no work at all in the "labor force", and divides by the size of that force. The labor force is defined (roughly) as those actively looking for work.
U-3 can, in an economy that isn't changing much, tell you about employment trends.
One problem is that in long poor economies, people give up and stop looking. These are called "discouraged workers" and are not counted as part of the labor force.
Another is that the guy that got two hours of work but needs 40 still counts as unemployed.
U-4 to U-6 take that into account. By the time you get to U-6, the folks that have given up and those that can't get enough work count towards unemployed.
In "normal" times, U-3 and U-6 kind of move together. But as we went about eight years after the last recession (which was really a run of the mill recession, it's just that we hadn't had a "real" one since the early 80s) without a normal expansion, U-3 and U-6 diverged more and more widely.
So once we got back to "normal" economic growth, some discouraged workers resumed working, and some of the underemployed got more hours. This is reflected by U-6 moving *far* more than U-3, with large numbers of people becoming employed with only small changes in the labor rate.
So there are always more people out of work than the common U-3 shows--they've just been redefined as out o the labor force. In normal times, there aren't as many.
Frankly, I'd phase out U-1 to U-5 entirely . . .
hawk, economist at large