With the global economy becoming increasingly interconnected, it is essential that international package delivery keep up. International parcels weighing four pounds or less will more than triple to $1 trillion in merchandise value annually by 2030, according to conservative estimates by McKinsey & Company.
This is good news for American businesses looking to sell more abroad. And for businesses and consumers, low-cost and efficient international e-commerce means more affordable and reliable purchases.
The rise in international e-commerce can also serve as a workaround, and insurance policy, for supply chain bottlenecks. When items are stuck on container ships, they can more easily be individually ordered from foreign producers. But the vast promises of expanded international e-commerce will be diluted, and perhaps sidetracked, if the current regulatory regime of small packages is not overhauled.
The regulator at issue is not in Washington, D.C., but rather 4,000 miles away – the Universal Postal Union (UPU), which is part of the United Nations (UN), based in Bern, Switzerland. The UPU’s members are 192 countries, that is the governments of such countries. The UPU was formed in 1870 to facilitate the global delivery of mail. It provided systems and standards to smoothly facilitate international mail, along with lower shipping rates to those from poorer countries.
Today, with mail volume plummeting and package volume rising, that system provides often bizarre pricing subsidies which help certain developed countries at the expense of others. Winners under the current scheme include the already wealthy countries of China and Germany. Losers are the Nordic countries, Canada, and many others.
Compounding this problem, many of the world’s posts are now privatized, owned in part or whole by non-government stockholders. This has led to a troubling situation where some governments’ policy at the UPU has been driven predominantly by corporate interests, benefiting privately owned postal operators at the expense of the public good.
Bishar Hussein, who stepped down as the head of the UPU in January, has been advocating fundamental reform at the organization for more than a decade. In a November interview he told me, “The push for reforms has been inspired by the need to ensure a clear separation between governmental and operational dimensions in the organization’s (the UPU’s) decision-making process.”
Key to the UPU’s survival and transformation will be expanding its operational procedures and practices for use by non-postal members. This includes forms, regulations, standards, international mail processing center codes, and custom procedures. In return, non-postal members using these services would pay fees to the UPU.
Today, package delivery is perhaps the ultimate example of John Nash’s game theory, as seen in A Beautiful Mind. Private carriers and postal services are competitors, customers, and vendors to one another, often all at the same time. By working for the common good, all can grow and prosper.
The UPU will be having an Extraordinary Congress in 2023, aimed at transforming its operations. The U.S. State Department is working on proposals for the UPU to be revamped so that it focuses on setting and refining world-class standards. These will provide greater competition for the users of international package services, while eliminating the often arbitrary financial arrangements that benefit corporations in foreign countries, and the government of China.
Some foreign governments will stand in the way. But most countries are likely to stand with the U.S. on common-sense reforms which will ensure an elimination of higher, discriminatory rates that are charged to foreign customers for the same postal services. This includes African countries, 44 of whom have recently entered a broader free trade agreement.
The U.S. Postal Service should publicly and enthusiastically support the push for a significantly reformed UPU. Such change will be the best way for expanding international e-commerce package delivery, of which the Postal Service only handles a small fraction.
In conjunction with the UPU Extraordinary Congress, it is important the United States develop and push fundamental reforms. There are significant opportunities for U.S. businesses and consumers, and the emerging economies of the world, if we do so.