As more and more ships deliver goods across the globe, it’s not surprising that the international shipping industry carries around 90% of world trade, according to the International Chamber of Shipping. But in recent news, the Trump administration has formally initiated intentions to withdraw from an international agreement that “it feels gives China and others an unfair advantage,” according to the Washington Examiner.
Bankruptcies in the U.S. increased to 25,227 companies in the second quarter of 2016, and BusinessDay says that this decision is a result of impending escalation of Trump’s ‘economic confrontation’ of Beijing.
“President Trump deserves tremendous credit for the administration’s focus on eliminating the anti-U.S. manufacturer subsidy China receives from the U.S. Postal Service. This outdated arrangement contributes significantly to the flood of counterfeit goods and dangerous drugs that enter the country from China. Manufacturers and manufacturing workers in the United States will greatly benefit from a modernized and far more fair arrangement with China,” said Jay Timmons, the president of the National Association of Manufacturers, in a statement last Wednesday.
Manufacturers have long had complaints about the UPU’s rules regarding flat mail rates, and this decision will allow foreign companies to essentially undercut their U.S. competitors. This policy and preferred rate was set up in 1969, when the economy was still under development. Now, White House officials estimate the rate to have exponentially increased to a subsidy of $300 million annually.
Currently, the administration has set its focus on packages that weigh less than 4.4 pounds. This is because these packages often cost between 40% and 70% more to ship domestically than internationally.
“It costs less to ship a package from New York City to Beijing than it does from San Francisco to New York,” said one administration official before adding that the U.S. loses about $300 million each year as a result of higher domestic shipping rates.
Some lawmakers, as well as business executives, have expressed their support at this withdrawal decision, which will take about a year to become official.
Among the supporters of the decision is Sen. Bill Cassidy, R-La., who has been ‘one of the most vocal supporters’ of the United Postal Union reform. He’s still voicing his opinion on Capitol Hill.
“I’ve been working with the administration for months on addressing this terrible deal, because American companies are being run out of business by foreign competitors making cheap knockoff products they can ship to Louisiana for less than it costs an American company to mail the genuine product. President Trump is standing up for American workers and companies who are being hurt by this outdated, unfair international agreement on shipping rates,” he said in an August statement.