The result, as reported in a recent eye-opening article in Forbes, has created an astonishing situation in which freight rates from China to the United States are less than shipping within the United States created a huge competitive advantage for Chinese manufacturers and shippers because, under current UPU rules, China, the second largest country in the world, is in the same category as poor countries in sub-Saharan Africa!
According to Forbes: “The cost to ship a one-pound package from South Carolina to New York City would run nearly $6; from Beijing to NYC: $3.66.” At the same time, the shipping rates from the U.S. to China are outrageous, and often preclude American customers from returning defective products. That same one-pound package would cost about $50 to send via USPS International Mail from New York City to Beijing.
American merchants, already facing higher production costs, are further penalized even in dealing with their American customers. Here's one example:
Becca Peter from Lopez Island in Washington state is in a similar situation. She sells something called Washi tape via a website called PrettyPackagesTape.com “at some of the lowest prices of any U.S.-based small business.” But these low prices are nothing compared to what Chinese competitors can sell at. While Peter must charge a flat $3.50 for shipping, Chinese merchants are selling versions of the product with all fees and and shipping charges included for a total price of $2.And shipping internationally? Fugeddaboudit!
It costs less than $4 to mail a 9-ounce parcel from China to Toronto or London. If I want to mail a 9-ounce parcel to Toronto it would cost me $14.73. If I wanted to send that same package to London it would cost me $21.38.As the author points out:
As you browse through the listings on sites like Amazon and eBay it is almost impossible not to be amazed at how cheaply China-based merchants are selling products for: xlr cables for $.99, a necklace for $.78, 10 watch batteries for $.78 -- all with postage included.My default position on international commerce is to favor free trade. And I don't begrudge China becoming more prosperous and more people moving out of poverty, and am happy for my friends there. But it is very clear that the existing trade rules, whether involving the UPU or the WTO are simply not "free" trade and have been successfully manipulated by China to the detriment of American citizens. When China gained admission, with U.S. approval (in an enormous miscalculation by the administration of President Bush), to the WTO in 2001 it was supposed to herald a new day of trade benefiting both nations. Instead, China has been skillfully able to use the WTO rules and its tribunals to pry open U.S. markets while keeping theirs relatively closed.
As several studies have pointed out it is the sheer scale of China's production boom that makes it unlike any other country which entered the WTO. Some estimates are that up to 2 million U.S. manufacturing jobs were lost to China's onslaught in the first decade of the 21st century. The suddenness and scale of China made it impossible for the U.S. to adjust gradually to change. That's why a free trade agreement with countries with much small economies and manufacturing sectors are much easier to deal with.
And that doesn't even get to the intellectual property (IP) issues American companies face with China. Those seeking to do business in that country are forced to turn over IP to the government in order to obtain access, and the outright theft of IP by Chinese companies is rarely punished by that country's legal system.
I saw some of this first hand during my many trips to China. It's a fascinating place and I'd like to visit again. But something has gone terribly wrong in our trade relations.