Around 3.8 billion international letters and small packages are sent each year through a global network of postal operators. The complex set of rules and regulations that determine how operators handle, transport, and deliver these items is set by the Universal Postal Union (UPU), an international organization founded in 1874. Unfortunately, by operating with little public transparency or accountability, the UPU has failed to keep up with the times, resulting in unfair pricing, prioritization of member’s interests ahead of the public interest, and a slow response to rapidly changing conditions brought on by the Internet. To address these problems, the United States should push for increased transparency at the UPU, as well as other reforms to ensure the UPU promotes the public interest.
The UPU is the second oldest international organization in the world, founded with the goal of reducing transaction costs for the international post. It is a specialized agency of the United Nations, meaning the organization falls under the UN’s mission and mandates. The UPU includes all UN member states*, and delegates meet every four years to discuss reforms and set rates for the upcoming cycle. Although the UPU was designed to promote cooperation and information-sharing, it remains secretive to outsiders, including many policymakers and private companies. For example, the UPU does not make information on specific remuneration rates —the compensation paid by the country of origin for the delivery of letters and parcels abroad— publicly available on its website. This lack of transparency, which directly contradicts UN open data commitments, has led to three core problems: distorting prices, catering to member interests, and failing to innovate to address e-commerce.
First, the UPU distorts the prices to send letters and small parcels. The UPU sets the rates at which member states compensate each other for the cost of delivering letters from abroad. Originally, the UPU set lower rates for lesser developed countries to send international mail for the purpose of allowing these countries to put these savings towards developing their domestic postal systems. However, by keeping rates artificially low, the UPU allowed some countries like China to unfairly compete with sellers in other countries, including the United States, because they receive significantly lower rates for sending international mail and packages, essentially forcing other countries to subsidize their mail. After the Trump administration threatened to withdraw the United States from the UPU unless rates were adjusted, it began allowing all countries to self-declare their remuneration rates beginning in January 2021. The United States increased its rate to 70 percent of the domestic shipping rate. Likewise, other nations increased their rates both to level the playing field and to counter the U.S. increases. Resulting from this change, the United States Postal Service gained a great deal of revenue on inbound post from foreign countries, yet remains disadvantaged with outbound services. The exact pricing for UPU members including the United States is extremely difficult to acquire and is not published publicly.
Second, through its pricing and rules, the UPU has created an incentive for companies to send parcels through UPU-designated operators —the national postal operator tasked by each country with fulfilling its obligations to international postal treaties— rather than with commercial carriers—prioritizing the interests of its members over those of the public. For example, shippers have an incentive to send parcels through the UPU system because private companies like FedEx or UPS must supply a rigorous set of customs data. In contrast, some lesser-developed UPU member states must only participate in these declarations to a limited extent, meaning criminal organizations. such as those supplying Fentanyl from China, can use those exempt countries’ posts to send illicit materials abroad and bypass customs screening. In general, these actions disincentivize the use of commercial carriers. In some cases, countries have privatized their national postal services, like Germany with Deutsche Post or Britain with Royal Mail, so when these countries. Other stakeholders, including those representing customers, delivery service providers, workers’ unions, suppliers of goods and services to the postal sector, and other businesses, have some ability to observe and advise through the UPU’s Consultative Committee but have no guaranteed access to information about proposed changes or key data, such as remuneration rates.
Third, because the UPU remains so closed off from other stakeholders, the organization has had an inadequate response to the growth of e-commerce and the new challenges associated with the digital economy for the postal sector. Whereas private companies have updated their transportation, technology, and logistics strategies, the UPU has been slow to innovate, including by not moving quickly to digitize customs declaration data needed for efficiently shipping small packages. While letter mail used to be the primary item sent worldwide, small packages are now the majority. As of 2019, UPU-designated operators carried 72.8 percent of all letter post, but the inverse is true with parcel post. Private postal operators carried 62.2 percent of all parcel post in 2019 and the number is only increasing. As the continued growth of e-commerce means more international shipments of packages, postal operators will need to adapt their business models to this new environment.
In order to correct these issues, the UPU should embrace openness throughout the organization to increase transparency and oversight. At the 2021 Congress in Abidjan, Côte d’Ivoire, the UPU has begun to take some steps to increase participation to additional postal sector players, including by reforming its Consultative Committee. But the United States should push for additional reforms. First, the United States should insist that future meetings should be open, recorded, and available online to the general public. Second, it should call for the UPU to commit to a policy of “open by default” and publicly publish its data on remuneration rates and other UPU data. Finally, the United States should continue to call for the UPU to strengthen the advisory role of the Consultative Committee by ensuring that committee members are guaranteed access to key decisions and creating a process to incorporate feedback from these stakeholders.
By moving discussions about international postal rates out of backrooms and fostering more collaboration among stakeholders, the UPU can help modernize the organization to meet the new challenges of 21st-century e-commerce.
*The UPU has 192 member states. Andorra relies on Spain and France for its postal services.
Image credit: Chris Blakely on Flickr