6 ms·

Can someone shed light on the subsidy structure behing the current model, are shipments from China being subsidized by shipments from other countries or is ther

by ajnin 7y ago

Can someone shed light on the subsidy structure behing the current model, are shipments from China being subsidized by shipments from other countries or is there government money involved ? In any case this kind of subsidy is not necessarily bad for developing countries, and it was probably instrumental in China's phenomenal economic growth, but it is now in the conquering superpower category, it's time it loses this advantage.

5822130027 7y ago
> it was probably instrumental in China's phenomenal economic growth Yes, it was subsidized postal shipping by the kind overlord USA that allowed china to become a "conquering superpower", without it Xi would still be in the paddy field.
rjtavares 7y ago
There's a good Planet Money episode about this: The Postal Illuminati (https://www.npr.org/sections/money/2018/08/01/634737852/episode-857-the-postal-illuminati?t=1566920610293 https://www.npr.org/sections/money/2018/08/01/634737852/epis...)
- sangerSCB 7y ago
  This was the first thing I thought of when I read this, it's fascinating the way this system actually works (or doesn't work.)
ComputerGuru 7y ago
I think the issue was in mistaking China for a developing country for so long. It’s different from western countries, but not undeveloped. Its size, population, culture, heritage, and history all play a role in how the ethnocentric West misinterpreted it.
- reaperducer 7y ago
  I'm not sure that "mistaking" is the right word. For years the United States has protested the cheap UPU rates that China gets. But the UPU still classifies it as a "developing" nation. China is the world's second-largest economy. It doesn't need or deserve the artificially cheap rates anymore. China shouldn't pay less to send packages overseas than countries in Africa. By leaving the UPU, the United States can set correct prices. It's one of those situations where China claims to be a developing nation when it suits its needs, and then claims to be a developed nation when it suits its needs. If you're going to play in the big leagues, you have to play by big league rules.
  - DiogenesKynikos 7y ago
    When does China claim to be a developed nation? Also, is there any reasonable metric by which China is not a developing economy?
    - reaperducer 7y ago
      is there any reasonable metric by which China is not a developing economy? Here's one: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal) https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi... Here's another: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP) https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)
      - DiogenesKynikos 7y ago
        By those metrics, Bangladesh is more developed than Luxembourg. That's not what I'd call "reasonable." You have to normalize by population.
        ComputerGuru 7y ago
        I think it’s a lot more complicated than that. You must divide by the population if wealth/development/whatever metric were uniformly distributed. But it’s a massive country with enormous diversity in statistics on all fronts. There are pockets far more developed than the average American town and even the most developed cities in other countries, and villages hundred of years “behind.” Debating whether or not to call it “developed” means missing out on a whole lot of nuance. You can’t even compare cities to cities, since even an entity like Beijing is structured and defined so differently from how we define a city like NYC or Chicago. This is why I stressed the ethnocentrism of it all. It’s a country that has developed tremendously but not at all in the same way that we have traditionally defined development in the western sense, and a lot of that comes from its size, its historic dynastic cultures and their political structures, and its population (count and local densities).
beowulfey 7y ago
It's not really a subsidy so much as an underpayment by the foreign goverments[1]. There is no tax money involved, and all the subsidizing comes from the increased revenue from raising domestic shipping costs. The UPU has been around for decades, but it's only been since 2010 that the USPS has formalized the process with the "ePacket" shipping. [1] https://www.washingtonpost.com/news/storyline/wp/2014/09/12/the-postal-service-is-losing-millions-a-year-to-help-you-buy-cheap-stuff-from-china/ https://www.washingtonpost.com/news/storyline/wp/2014/09/12/...
- ikeboy 7y ago
  UPU and epacket are different things, and epacket is currently profitable for the USPS.
- defertoreptar 7y ago
  > There is no tax money involved, and all the subsidizing comes from the increased revenue from raising domestic shipping costs. If the USPS loses money, which it has been every year recently, who pays the difference?
  - beowulfey 7y ago
    We do, the domestic customers of the USPS. But not via tax money; rather via increased local rates.
afiedler 7y ago
There's a fantastic Planet Money episode about the Universal Postal Union[1] and why this is a problem. Basically, the UPU assumes that a country will send about the same amount of international mail that it receives. There may be an imbalance between any two countries, but in aggregate, it assumes that these imbalances will net out. Furthermore, the UPU sets rates based on the sending country's costs. Since China was classified as a developing country, it was very cheap for Chinese to send mail into the international mail stream. This was justified because China's last mile delivery for mail received from other countries is also very cheap. However, with the huge US-China trade imbalance, these assumptions no longer hold. U.S. shippers were at a major disadvantage because of this. [1] https://www.npr.org/sections/money/2018/08/01/634737852/episode-857-the-postal-illuminati https://www.npr.org/sections/money/2018/08/01/634737852/epis...
- iagovar 7y ago
  Does this also affect Europe? I remember that there was free or very inexpensive shipping from China to Spain.
  - varjag 7y ago
    Yes it does, although AFAIK noone in Europe is quitting the postal union yet. However here in Norway VAT is being introduced on all packages now, which is going to cut Aliexpress down quite a bit. Previously it was duty free below €35 combined value & postage.
    - codebje 7y ago
      I pay Australian GST on AliExpress imports, but it doesn't make local outfits more viable. I buy hobby electronic components primarily, local suppliers are often one to two orders of magnitude more expensive, not just a few percent more.
      - syedkarim 7y ago
        One or two orders of magnitude? Isn't that ten-times or a hundred-times more expensive? What product could possibly be marked up by 100x?
deleted 7y ago
[deleted]
michaelt 7y ago
The explanation I've heard is: The Universal Postal Union rules for how international mail is paid for were established at a time when most mail was letters, and most letters would need a reply by letter. So on average, every international letter delivered in Country X behalf of the Country Y postal service would be balanced by one letter delivered in Country Y on behalf of the Country X postal service. No exchange of money between countries needed, and if a country had daily/weekly mail delivery or dense/sparse population or expensive/cheap postal employees or rich/poor citizens or tax/subsidy on post or efficient/inefficient processing that was no other country's business, so long as the number of letters balanced. In the modern age, the number of letters doesn't balance, because no-one places their AliExpress order by mail.
- kd0amg 7y ago
  Even if they did, there's often a substantial cost difference between delivering an order form and delivering the goods being ordered. I'm not sure I've ever ordered something as small and light as a letter.
jdietrich 7y ago
If someone in China sends a packet to the US via China Post, China Post are responsible for getting it to the US, while USPS are responsible for getting it from wherever it lands in the US to the recipient. An agreement made between all national postal services via the Universal Postal Union determines how much China Post have to pay the USPS for this final leg, a fee called the "terminal due". The UPU agreement on terminal dues sets a sliding scale based on the sending country's level of economic development - less developed economies pay less, while more developed economies pay more. The logic behind this is fairly obvious, in helping less-developed economies to fully participate in the international mail system. The problem for the USPS is that they are obliged to handle large volumes of mail originating in China, but the terminal dues for lightweight items are substantially below their cost of delivery. The handling of these items is effectively cross-subsidised by USPS customers. The US is demanding that terminal dues should be set at a flat rate based on domestic postal costs, with the possibility of direct subsidies for less developed postal systems. This would partly (though not completely) reduce the competitive advantage for Chinese e-commerce sellers.
samirm 7y ago
>but it is now in the conquering superpower category, it's time it loses this advantage why?

by ajnin 7y ago

5822130027 7y ago

> it was probably instrumental in China's phenomenal economic growth Yes, it was subsidized postal shipping by the kind overlord USA that allowed china to become a "conquering superpower", without it Xi would still be in the paddy field.

rjtavares 7y ago

There's a good Planet Money episode about this: The Postal Illuminati (https://www.npr.org/sections/money/2018/08/01/634737852/episode-857-the-postal-illuminati?t=1566920610293 https://www.npr.org/sections/money/2018/08/01/634737852/epis...)

sangerSCB 7y ago
This was the first thing I thought of when I read this, it's fascinating the way this system actually works (or doesn't work.)

ComputerGuru 7y ago

I think the issue was in mistaking China for a developing country for so long. It’s different from western countries, but not undeveloped. Its size, population, culture, heritage, and history all play a role in how the ethnocentric West misinterpreted it.

reaperducer 7y ago
I'm not sure that "mistaking" is the right word. For years the United States has protested the cheap UPU rates that China gets. But the UPU still classifies it as a "developing" nation. China is the world's second-largest economy. It doesn't need or deserve the artificially cheap rates anymore. China shouldn't pay less to send packages overseas than countries in Africa. By leaving the UPU, the United States can set correct prices. It's one of those situations where China claims to be a developing nation when it suits its needs, and then claims to be a developed nation when it suits its needs. If you're going to play in the big leagues, you have to play by big league rules.
- DiogenesKynikos 7y ago
  When does China claim to be a developed nation? Also, is there any reasonable metric by which China is not a developing economy?
  - reaperducer 7y ago
    is there any reasonable metric by which China is not a developing economy? Here's one: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal) https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi... Here's another: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP) https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)
    - DiogenesKynikos 7y ago
      By those metrics, Bangladesh is more developed than Luxembourg. That's not what I'd call "reasonable." You have to normalize by population.
      - ComputerGuru 7y ago
        I think it’s a lot more complicated than that. You must divide by the population if wealth/development/whatever metric were uniformly distributed. But it’s a massive country with enormous diversity in statistics on all fronts. There are pockets far more developed than the average American town and even the most developed cities in other countries, and villages hundred of years “behind.” Debating whether or not to call it “developed” means missing out on a whole lot of nuance. You can’t even compare cities to cities, since even an entity like Beijing is structured and defined so differently from how we define a city like NYC or Chicago. This is why I stressed the ethnocentrism of it all. It’s a country that has developed tremendously but not at all in the same way that we have traditionally defined development in the western sense, and a lot of that comes from its size, its historic dynastic cultures and their political structures, and its population (count and local densities).

beowulfey 7y ago

It's not really a subsidy so much as an underpayment by the foreign goverments[1]. There is no tax money involved, and all the subsidizing comes from the increased revenue from raising domestic shipping costs. The UPU has been around for decades, but it's only been since 2010 that the USPS has formalized the process with the "ePacket" shipping. [1] https://www.washingtonpost.com/news/storyline/wp/2014/09/12/the-postal-service-is-losing-millions-a-year-to-help-you-buy-cheap-stuff-from-china/ https://www.washingtonpost.com/news/storyline/wp/2014/09/12/...

ikeboy 7y ago
UPU and epacket are different things, and epacket is currently profitable for the USPS.
defertoreptar 7y ago
> There is no tax money involved, and all the subsidizing comes from the increased revenue from raising domestic shipping costs. If the USPS loses money, which it has been every year recently, who pays the difference?
- beowulfey 7y ago
  We do, the domestic customers of the USPS. But not via tax money; rather via increased local rates.

afiedler 7y ago

There's a fantastic Planet Money episode about the Universal Postal Union[1] and why this is a problem. Basically, the UPU assumes that a country will send about the same amount of international mail that it receives. There may be an imbalance between any two countries, but in aggregate, it assumes that these imbalances will net out. Furthermore, the UPU sets rates based on the sending country's costs. Since China was classified as a developing country, it was very cheap for Chinese to send mail into the international mail stream. This was justified because China's last mile delivery for mail received from other countries is also very cheap. However, with the huge US-China trade imbalance, these assumptions no longer hold. U.S. shippers were at a major disadvantage because of this. [1] https://www.npr.org/sections/money/2018/08/01/634737852/episode-857-the-postal-illuminati https://www.npr.org/sections/money/2018/08/01/634737852/epis...

iagovar 7y ago
Does this also affect Europe? I remember that there was free or very inexpensive shipping from China to Spain.
- varjag 7y ago
  Yes it does, although AFAIK noone in Europe is quitting the postal union yet. However here in Norway VAT is being introduced on all packages now, which is going to cut Aliexpress down quite a bit. Previously it was duty free below €35 combined value & postage.
  - codebje 7y ago
    I pay Australian GST on AliExpress imports, but it doesn't make local outfits more viable. I buy hobby electronic components primarily, local suppliers are often one to two orders of magnitude more expensive, not just a few percent more.
    - syedkarim 7y ago
      One or two orders of magnitude? Isn't that ten-times or a hundred-times more expensive? What product could possibly be marked up by 100x?

deleted 7y ago

[deleted]

michaelt 7y ago

The explanation I've heard is: The Universal Postal Union rules for how international mail is paid for were established at a time when most mail was letters, and most letters would need a reply by letter. So on average, every international letter delivered in Country X behalf of the Country Y postal service would be balanced by one letter delivered in Country Y on behalf of the Country X postal service. No exchange of money between countries needed, and if a country had daily/weekly mail delivery or dense/sparse population or expensive/cheap postal employees or rich/poor citizens or tax/subsidy on post or efficient/inefficient processing that was no other country's business, so long as the number of letters balanced. In the modern age, the number of letters doesn't balance, because no-one places their AliExpress order by mail.

kd0amg 7y ago
Even if they did, there's often a substantial cost difference between delivering an order form and delivering the goods being ordered. I'm not sure I've ever ordered something as small and light as a letter.

jdietrich 7y ago

If someone in China sends a packet to the US via China Post, China Post are responsible for getting it to the US, while USPS are responsible for getting it from wherever it lands in the US to the recipient. An agreement made between all national postal services via the Universal Postal Union determines how much China Post have to pay the USPS for this final leg, a fee called the "terminal due". The UPU agreement on terminal dues sets a sliding scale based on the sending country's level of economic development - less developed economies pay less, while more developed economies pay more. The logic behind this is fairly obvious, in helping less-developed economies to fully participate in the international mail system. The problem for the USPS is that they are obliged to handle large volumes of mail originating in China, but the terminal dues for lightweight items are substantially below their cost of delivery. The handling of these items is effectively cross-subsidised by USPS customers. The US is demanding that terminal dues should be set at a flat rate based on domestic postal costs, with the possibility of direct subsidies for less developed postal systems. This would partly (though not completely) reduce the competitive advantage for Chinese e-commerce sellers.

samirm 7y ago

>but it is now in the conquering superpower category, it's time it loses this advantage why?