Does the US subsidize mail from China?

[madoka]

I saw this post on another forum:

http://slickdeals.net/forums/showpost.php?p=87334675&postcount=17

Believe it or not, US taxpayers fund a trade agreement with China to give them low cost shipping.

I used to work for the US Post Office, and I couldn't understand how the Chinese could send a small package halfway around the world by registered mail with a one dollar item in it when the same package would cost over ten dollars to mail registered in the US.

Don't believe me? Check out the prices here for registered mail next time you go to the post office. We had to scan them and treat them like gold. I think they even required a signature.

But there you have it. We Americans are getting ripped off! You can order items for under a dollar from China and they will get delivered for next to nothing, but don't try shipping to China. This was a very one-sided trade agreement. And the US taxpayer has to fund the shipping costs that aren't covered by the actual Chinese mailing system.

This actually matches my experiences with receiving cheap packages from China.

Does anyone know more about this? I'm wondering why our government would approve of such a lopsided trade agreement.

 

[Sonikku]

It's easier to keep the jobs in China rather than America when the end cost of Chinese made products is supported by low shipping charges subsidized by Americans.

 

[SKORPI0]

From eBay community..

Why is China to US shipping cost so much cheaper than US to China?
June 2013

There are three reasons:
1. There is a difference in economies. You have to earn five times as much here to get by financially.
2. The Chinese government subsidizes shipping.
3. eBay and USPS brokered a trilateral ePacket agreement with China Post that gives China bulk shipping rates (which apply to individual packages as well) at a rate far below what we have to pay and which INCLUDES tracking to the U.S. destination and which does NOT require China to offer reciprocal tracking.

ePacket is quite fast and extremely economical and enables Chinese sellers selling small items to retain their TRS status.

Domestic shippers sending small items by First Class Letter or Flat do not get similar tracking and thus cannot be TRS without charging USPS shipping rates that are 10 times what Chinese sellers pay. In other words, we can't compete pricewise.

Something to read about ...

The Postal Service is losing millions a year to help you buy cheap stuff from China - Sept 2014

 

[flexy]

Yes, and I read the US actually makes a loss with each package.

 

[trenchfoot]

So in this scenario, what US based/American owned businesses are making a profit from this arrangement and who is getting shortchanged in order for those businesses to rake those profits in? <----rhetorical question.

 

[madoka]

So in this scenario, what US based/American owned businesses are making a profit from this arrangement and who is getting shortchanged in order for those businesses to rake those profits in? <----rhetorical question.

I don't know why you think it's a rhetorical question. I think it's valid to expect an answer as to why the USPS is subsidizing Chinese sellers at a loss and ensuring an uneven playing field for American sellers.

 

[eng2d2]

I had suspicion now its validated. Thanks. I do order a lot from china.

 

[WHAMPOM]

'cause American millionaires make millions with drop shipped China products. Laws brought to you by the same lobbyists that made the laws that paid out your tax dollars so US companies could move off shore.

 

[theeedude]

It's not only China, I order bike parts from UK, and they are shipped dirt cheap too.

 

[Moonbeam]

The whole purpose of the Post Office is to subsidize. to eliminate the natural barriers what distance automatically creates on the theory that the exchange of information between people benefits society in excess of the cost. The Post office could make a killing if they didn't have to deliver to Republican Hicksville where government is about the only thing keeping them alive.

 

[Linux23]

This is why Trump will win the election. People are fed up with this BS.

 

[Perknose]

From the OP's link:

The inspector general’s report says that the Postal Service could have lost another $1 million or so in 2012 had Chinese shippers opted for regular mail instead of ePacket.

So . . . it's not this program's fault? Am I reading that right??

At the latest round of negotiations in 2012, countries did agree to raise fees slightly. The United States will get to charge about 13 percent more every year from 2014 to 2017. Under the new terms, the inspector general’s office believes that the USPS will start to lose less money on inbound mail. [3]

[3] The funny fact here is that the USPS actually makes an operating profit on this kind of international mail. (That is, it makes more than the marginal cost, but not necessarily the total cost including infrastructure and other operations.) Whatever it loses on underpriced inbound mail, it recoups through what it charges Americans for outbound mail. In a way, those who mail stuff abroad are helping to pay for other Americans to get cheap shipping on purchases from China.

Seems like a more complex situation than the headline.

 

[agent00f]

The marginal cost bit is key to understanding the deal. Yes it costs china less than if they were to establish their own shipping service in the US, so in that naive sense it's "subsidized". But shipping extra packages for the chinese help utilize existing infrastructure which the USPS is already paying for.

It's akin to offering special bulk rates for data transfers to fill up backbone capacity is already built and not used. Tiered prices to that end are nothing new in business.

 

[Zstream]

The marginal cost bit is key to understanding the deal. Yes it costs china less than if they were to establish their own shipping service in the US, so in that naive sense it's "subsidized". But shipping extra packages for the chinese help utilize existing infrastructure which the USPS is already paying for.

It's akin to offering special bulk rates for data transfers to fill up backbone capacity is already built and not used. Tiered prices to that end are nothing new in business.

It's not unused bandwidth. If they increased the cost for China and decreased the cost in the states, the bandwidth would again be filled. It has nothing to do with unused bandwidth, it has to do with the cost is so cheap, China would never build out an infrastructure as it makes no sense.

Start decreasing the charges in the states and increases the charges back to normal cost for China and you would see more US based goods and services sold.

 

[agent00f]

It's not unused bandwidth. If they increased the cost for China and decreased the cost in the states, the bandwidth would again be filled. It has nothing to do with unused bandwidth, it has to do with the cost is so cheap, China would never build out an infrastructure as it makes no sense.

Start decreasing the charges in the states and increases the charges back to normal cost for China and you would see more US based goods and services sold.

If they significantly increased cost for china, then the business of shipping cheap crap would be lost anyway, just like with bandwidth.

The fundamental rule of business is to charge what the market will bear, not "fair" prices as the most naive consumers sometimes believe.

 

[Zstream]

If they significantly increased cost for china, then the business of shipping cheap crap would be lost anyway, just like with bandwidth.

The fundamental rule of business is to charge what the market will bear, not "fair" prices as the most naive consumers sometimes believe.

I'm fully aware of market supply and demand. You're not talking about market supply demand. You're referencing subsidized cost to a client that HAS to pay more in order to survive.

You're stating that if services are offset in both locations, they will lose demand. I disagree with that statement and assert that charging more for China and decreases cost of services in the states will be a better long term business plan.

This is taxpayer money here, if your operation can't sustain the cost of business, they need to re-evaluate their business model. Stop the globalism

 

[agent00f]

It's simply the case that you don't understand how business decisions are made.

Imagine you're the USPS losing money with the existing fixed costs. Now there are these people who're willing to pay to use up that available capacity, just like with bandwidth. Only dummies would fail to deal because of some ideological enthusiasm.

Now it's certainly possible that US consumers are willing to bear higher aggregate cost for cheap crap direct from overseas, especially now the market for this is realized, but that has nothing to somehow balancing domestic shipping costs. Just like comcast isn't going to lower your bill because they can charge a bit more for the excess.

 

[Zstream]

It's simply the case that you don't understand how business decisions are made.

Imagine you're the USPS losing money with the existing fixed costs. Now there are these people who're willing to pay to use up that available capacity, just like with bandwidth. Only dummies would fail to deal because of some ideological enthusiasm.

Now it's certainly possible that US consumers are willing to bear higher aggregate cost for cheap crap direct from overseas, especially now the market for this is realized, but that has nothing to somehow balancing domestic shipping costs. Just like comcast isn't going to lower your bill because they can charge a bit more for the excess.

This has nothing to do with bandwidth. I'm not sure why you keep bringing it up except to fit your analogy. Bandwidth is a fixed sunk cost with little to no opex once in place. I worked three years at one of the worlds largest providers. I knew fully well what it cost for those type of costs and the business model is completely different than say managed services, very similar to USPS.

 

[Perknose]

This has nothing to do with bandwidth. I'm not sure why you keep bringing it up except to fit your analogy. Bandwidth is a fixed sunk cost with little to no opex once in place. I worked three years at one of the worlds largest providers. I knew fully well what it cost for those type of costs and the business model is completely different than say managed services, very similar to USPS.

While you are correct that in this case, what the USPS is providing is a managed service, because of it's fixed in place infrastructure, the marginal cost of "managing" the China mail both to and fro is less overall than it costs the USPS to provide it. Hence, overall, it makes a profit.

This FACT is stated right in the article:

[3] The funny fact here is that the USPS actually makes an operating profit on this kind of international mail. (That is, it makes more than the marginal cost, but not necessarily the total cost including infrastructure and other operations.)

 

[agent00f]

This has nothing to do with bandwidth. I'm not sure why you keep bringing it up except to fit your analogy. Bandwidth is a fixed sunk cost with little to no opex once in place. I worked three years at one of the worlds largest providers. I knew fully well what it cost for those type of costs and the business model is completely different than say managed services, very similar to USPS.

Bandwidth here is meant to be an analogy to help understand marginal costs. It really says something you work with it in a professional capacity and still don't understand it. The post office's substantial fixed/sunk costs are those associated with running so many routes just like wiring to every home, like pensions for the people running them. They can't simply stop drive those routes any more than rip out the wiring to save money, so the gist of their profitability is monetize them the best they can.

 

[FrankRamiro]

If they significantly increased cost for china, then the business of shipping cheap crap would be lost anyway, just like with bandwidth.

The fundamental rule of business is to charge what the market will bear, not "fair" prices as the most naive consumers sometimes believe.

Trolling is what i see more in here;

Isn't China already benefiting from this so bad Free trade agreement for America that this Latest administrations have negotiated?, all manufacturer and jobs that USA had before went down to the Chinese,and most ridiculous we are buying all the Chinese crap that American factories once produced in USA are now producing in China and we are buying it,and that is because the owners of these Factories belong to the American Politicians either in the government or in the senate or state wise,the only reason a see for this reckless free trade agreement,all corrupted politicians.

 

[agent00f]

Trolling is what i see more in here;

Isn't China already benefiting from this so bad Free trade agreement for America that this Latest administrations have negotiated?, all manufacturer and jobs that USA had before went down to the Chinese,and most ridiculous we are buying all the Chinese crap that American factories once produced in USA are now producing in China and we are buying it,and that is because the owners of these Factories belong to the American Politicians either in the government or in the senate or state wise,the only reason a see for this reckless free trade agreement,all corrupted politicians.

It all rather regrettable and a touch ironic that people only started paying attention to what was taught in school about how capitalism works after losing their jobs.

 

[Zstream]

Bandwidth here is meant to be an analogy to help understand marginal costs. It really says something you work with it in a professional capacity and still don't understand it. The post office's substantial fixed/sunk costs are those associated with running so many routes just like wiring to every home, like pensions for the people running them. They can't simply stop drive those routes any more than rip out the wiring to save money, so the gist of their profitability is monetize them the best they can.

Opex and capex - I suggest you learn them.

 

[IronWing]

Bandwidth here is meant to be an analogy to help understand marginal costs. It really says something you work with it in a professional capacity and still don't understand it. The post office's substantial fixed/sunk costs are those associated with running so many routes just like wiring to every home, like pensions for the people running them. They can't simply stop drive those routes any more than rip out the wiring to save money, so the gist of their profitability is monetize them the best they can.

The assumption here is that lowering prices for American shippers wouldn't increase demand to fill the bandwidth at a higher revenue point than the current high price for American customers and low price for Chinese customers strategy. Jacked up shipping costs have made ebay selling no longer worth it to me. If I could get lower shipping costs, I would likely be back in the game.

This rate policy highlights the failure of the U.S. policy of trying to run the USPS as a business instead of as a government provided service. That's for another thread, I suppose.

 

[Zstream]

While you are correct that in this case, what the USPS is providing is a managed service, because of it's fixed in place infrastructure, the marginal cost of "managing" the China mail both to and fro is less overall than it costs the USPS to provide it. Hence, overall, it makes a profit.

This FACT is stated right in the article:

Makes sense until you read what the language describes. I cannot find out what infrastructure means based off the document. Infrastructure cost do not change, so it's either a cleverly worded statement that hides the true cost like gas, maintenance on cars etc... to make you believe it's making money.

Operating cost, which is stated in the statement means it's making opex profit. So, it's making revenue from the door to door delivery man/woman. However, it does not state the extra cost of gas, delays in delivery, insurance etc...

If I would take a guess, it's losing money on that, but gaining on opex, which looks better from a business budget standpoint as high opex is a negative tone.

I'm not advocating any direction, but a direction that helps the American (US citizens). I'm a little tired of globalism!