https://www.wsj.com/articles/this-subsidy-for-china-is-dumb-...
Seems like a win for American innovation if you care about that thing.
Seems like China is going to get hurt by this change which is bad for globalization if you are into that thing.
It's China receiving subsidies from the US because it was considered a developing country in 1969. It's not anymore, it's a global superpower now, it can pay its own postage.
Now you have to pay for Switzerland delivery and then the domestic cost.
Wish and EBay from China is now bye bye.
Why would this change the be end of direct shipping from China? Currently (rounded off numbers) the cost of shipping a 2 lb (1 kg) package within the US is about $7, and the cost of shipping such a package from China to a US address is about $2. The obvious solution would be that the Chinese shipment ends up costing $9 (current Chinese rate of $2 to the US border, plus $7 standard US shipping). The Chinese shipping would thus end up $2 more than the US. Presumably there would be lots of cases where the $2 greater shipping is offset by lower price of the item?
For the US cost, a "Priority Mail Small Flat Rate Box" is $7.20 between any two US addresses, and a "Priority Mail Flat Rate Envelope" is $6.70. If you don't use one of these, the postage will likely will be slightly more.
My understanding is that there's a nominal fee for last-mile delivery the USPS charges mail from other countries, which is all (or the vast majority) that's being charged for Chinese shipments, as the Chinese side is subsidized completely (or almost so) for outgoing mail. I think the $2 you are quoting might be the treaty fee for delivering mail from other countries, which is not the true cost of delivery, but mostly works out as long as there's a fairly even flow of mail between two countries. What we have here is that China is subsidizing their side of the outgoing mail, so all that's being paid is the treaty set delivery fee for external mail (which again, isn't the true cost of last-mile delivery).
the treaty fee [...] is not the true cost of
delivery, but mostly works out as long as there's
a fairly even flow of mail between two countries.
I think this was covered in an Planet money podcast from NPR.[1] It's also possible I'm not remembering portions of it correctly, but I think they did an interesting treatment of the subject.
1: https://www.npr.org/sections/money/2018/08/01/634737852/epis...
The US rates are for small flat rate packages and envelopes on USPS.com. I didn't find an exact source for the China-to-US rate, so the $2 was the low end of a small number of articles about shipping rather than an exact quote. I may have misinterpreted, or converted using outdated exchange rates, or missed details about minimum quantities. As you say, there is subsidization involved, but I think this is about right for the amount charged to the shipper.
Oh, I'm not questioning your accuracy, I was just wondering the source, since I wasn't finding anything easily. :)
I don't think this is the end of direct shipping from China, but it is a large blow to that random super cheap Chinese knock-offs market. The Planet Money episode I linked in a sibling comment covers the story of an American (unspillable) mug maker that noticed knock-offs selling super cheap from China. He was able to order one with free shipping for $5.59, free shipping from China. He asked his shipping department how much it would cost to mail the mug across the street, and was told $6.30, just for shipping. I think that illustrates the distortion this has on the market very clearly, where something can be manufactured in China and shipped to a US home cheaper than a US manufacturer can just ship the item.
I'm sure there are plenty of items with a higher base cost where Chinese manufacturers will be able to make up that shipping extra in a lower item cost, but given how large the market of very cheap directly shipped items is, I think this will have a very large effect, especially since I think there's a lot more consumer confidence ordering very cheap things from China than somewhat expensive things. I don't care too much if my $10 item from China is crap, or unsuitable for it's intended use, or just fake, but I might really care if it's a $50 item, so I might choose a North American company to order from.
But your example of the powers that be waving thru a bad rule refresh suggests my notion won't be sufficient.
Thoughts?
Were it to pass as such, say, Kenya and many other African countries would've too.
According to a 2015 report[2] cited by Fortune, that included $2.1B in waived taxes, the benefit of a federal monopoly on deliveries worth $14.9B, and as much as $490M/yr in subsidized lower interest rates due to not having to have a credit rating and borrow on the open market, but instead getting preferential treatment from the Treasury. Not included in the report is the fact that USPS OIG and USPIS are federally funded through appropriations[3]--whereas UPS or FedEx would have to hire their own off duty police offers at significant expense to receive the same level of protection.
[1] https://www.uspsoig.gov/blog/taxing-postal-service [2] http://www.sonecon.com/docs/studies/Study_of_USPS_Subsidies-... [3] https://www.uspsoig.gov/sites/default/files/document-library...
No it is the demand for better working conditions and wages. That helps the local Chinese and American workers. Oh that's right labor unions are evil????
Chinese peasants were starving because of bad Chinese domestic policies, not because of a lack of globalization: https://en.wikipedia.org/wiki/Great_Chinese_Famine.
Or, to put it another way, if two people wish to trade, it must be in both of their interests. If I, as a westerner, go to a third world country and buy a bunch of stuff that from my perspective is cheap but from their perspective is expensive, we both end up happy. What's so terrible about that?
(Of course where it falls down is where labor is cheaper because of poor worker protections and exploitative practices, in which case it constitutes an end-run around the labor laws of the richer party. But they are the ones that should be upset, not the poorer party, whose labor laws would be terrible regardless of exploitation)
If you enforce labor laws in developing countries, the cost of production will be high enough that industry doesn't develop. At that point, the people there have no industry and are much worse off (e.g. a sweatshop is better than subsistence farming).
A better argument is 'labor choice'. Individuals need to have the ability to choose their circumstance. If they can choose, and choose freely, over time the whole society can ratchet up their standard of living by making these choices at the margin.
If the reason is ethical than why would we support sweatshop labor, or any other exploitative labor?
What exploited people need is not sweatshop jobs but access to capital and education. Invest in them, do not exploit them.
Investment in people is a red herring. You can give people choice and invest in them. Though guess what: developing countries (which is who we're talking about) don't have money to do the latter.
As for Mao holding back China, no doubt there were big problems. But the greatest increases in life expectancy at birth came under Mao [1] and his push to greatly expand access to medical care and education in rural areas. That was itself an investment which set the stage for future growth. (It's a lot easier to get things done when your people aren't dying at age 45.)
[1] https://data.worldbank.org/indicator/SP.DYN.LE00.IN?location...
Early Maoist policy hadn't helped matters, but it's pretty hard to argue American, Japanese, and European policy hadn't already left them in an incredibly shitty position.
This crosses into nationalistic flamewar, which we ban accounts for, so please don't do it again. More generally, please don't post aggressive snark here, or any snark.
My understanding is that Nixon went to China to create a another pressure point on the USSR. The Cultural Revolution was bad, but mostly for the Chinese.
Think about the scale, scope and impact of the Apollo program, which ultimately was done for similar reasons.
Similarly, using American corn as an example of how free trade should work is pretty underhanded. There’s a ridiculous amount of subsidies there, and the US doesn’t have any qualms with dumping the resulting product on international markets.
I'm still not sure how Switzerland the geographic place intrinsically leads to more efficient watch-making, as Shenzen and other Chinese factory cities make copious use of établissage in many different industries. Also, Apple's offshored Chinese manufacturing demonstrates that extremely high quality hardware manufacturing is not ethno-culturally-bound, and can be successfully transmitted through a corporate culture.
Ricardo's comparative economic advantage in Net age-birthed industries seems increasingly more hand-wavium the further away I get from intrinsically geographically-tied economic inputs like mineral resources, fresh water, salt water fish migration paths, or latitude-dependent agriculture, etc., and the further one transits away from historical network effects like Swiss watch-making, Silicon Valley software-writing, or Belgian diamond-polishing, etc.
The mathematical and empirical analyses of comparative advantage [2] [3], as well as great explanations about it [4], don't seem to address extremely complex goods with very high cognitive input factors, like semiconductors, industrial machinery, bio-pharma products, avionics, spacecraft, high-end electronics manufacturing, fracking, cloud services, search engines, e-commerce, etc., and I suspect comparative advantage breaks down as we evolve those and similar economic areas because ceteris paribus, there is no natural, lasting advantage one nation comparatively holds over another on human cognitive power (which I celebrate). In all those areas, there are leaders, but not so much and to such a comparative degree that they decisively elbow out other nations from economically attempting to enter those industries now or in the future.
The Sudan might be a cognitive desert right now compared to Palo Alto or Shenzen, but there is nothing structurally preventing them from turning into a powerhouse in the future (on a multi-generational timescale) to contend with, as say there is with them turning into the next corn-production hub like Iowa, or oil-producer like Saudi Arabia or the fracking Permian Basin.
[1] https://www.watch-wiki.net/index.php?title=Etablissage
[2] https://www.dartmouth.edu/~rstaiger/Bernhofen%20and%20Brown%...
[3] https://www.nber.org/papers/w17969
[4] https://www.pauldeng.com/teaching/intecon/IE_Fall2011_Lectur...
The pages about the various watch brand histories is quite interesting.
The other point - most countries subsidy agriculture in some way. If US shouldn't dump their corn on global market, so shouldn't european farmers/milk producers (especially French I think).
There is probably no advantage to making machines in Switzerland that you couldn't duplicate in Iowa, but because Iowa has the natural advantage in corn it is better for everybody if Iowa concentrates on growing the best corn (hopefully this includes improving their soils to grow even better corn), while the people of Switzerland concentrate on making better machines. Then they trade machines for corn and everybody is better off. If instead everybody was a jack of all trades there would be less corn because the people of Iowa aren't as focused, and the machines the Swiss produce wouldn't be as good because they don't get as much practice making them.
Of course the above is simplistic. Iowa has machinists that make fine machines, and there are Swiss farmers who grow some fine corn.
Even if the world isn't so cut and dry to turn all of Iowa into one giant corn farm if Iowa is the best place to grow corn than corn production should naturally trend there, pushing internal business out that can operate elsewhere while subsuming corn production elsewhere where its less profitable.
That kind of effect is very minute on the actual day to day operating economy and decision making process of business entities involved which is why we don't just see all of Iowa turned into a corn farm, but those kind of effects have positive efficiency influence over long time frames.
It is both positive- and negative- feedback. There are lots of things Switzerland doesn't have which makes it specialize in the things it does – that concentration of specialization is it's own efficiency generator.
It does not help laborers anywhere in the world to exploit labor and further weaken places where labor has already organized and achieved protection.
This is a fundamental failure of capitalism and a particularly harmful neo-liberal belief.
The trickle of money from the pockets of capitalists into the dictators of Indochina in exchange for functionally slave labor is still better than if these countries had nothing to offer the world at all.
You would want the optimistic capitalist means to uplift the third world to be simple investment - you take a country with nothing to offer and no resources, invest money in it to educate its people and develop its infrastructure, and then you would have their substantially improved productivity to profit off.
But that has never happened on just the backs of dollars because there is no way to risk manage that kind of arrangement. It almost always comes second to bombs or prophets as a way to provide that collateral - even if the country fails to recoup the investment, you can pillage the natural resources or convert its people into adherents of your own culture. Because those acting in self interest are approaching a scenario where the other party has nothing to offer (except idle hands) and you have everything.
Ricardo and Adam Smith argued that the consumer surplus gains of free trade for the higher labor market would be greater than the losses sustained in producer surplus in the same market. I.e. that American consumers reap more $$ from imported foreign cars than American workers/business lose.
However, since then its become obvious that the population that loses jobs cares a LOT more than consumers do about their cars being a few $$ cheaper (e.g. Donald Trump won Michigan and Ohio).
In other words - political differences DO matter. Perhaps economics should return to its previous name - Political Economy - in order to actually describe the real world again.
It isn't what happens at the moment. Every dollar of growth worldwide is subtracted many times over from our environmental commons. At the moment the global economy is a heavily negative-sum game.
You don't need to have read The Wealth of Nations to know that it's possible to increase the GDP of a country without decreasing the overall savings. Service driven economies are the best example of this.
Please show your evidence that global trade is a zero sum game and that the "imperial core" has reaped all the benefits. Not one example of a singular country (sure, there are some losers for a variety of reasons), but for example, show us how the African continent has gotten worse due to globalization.
I didn't say it was zero sum. Poorer nations have experienced some growth, and a lot of that growth has been extracted by the West. Generally, the more a developing country has embraced globalization, the worse it has been exploited. This is not a hugely controversial statement.
If you'd really like to understand the power dynamics, you'll need to do some reading. Former World Bank chief economist Joseph Stiglitz's "Globalization and its Discontents" is a good start, though a little dated now.
See you on the picket lines, comrade!
I'm a supporter of liberal trade between all countries but you've got to be honest that pure "free" trade just ain't happening while there's a few hundred individual countries on Earth
I get the argument of globalization but I just don’t see it playing out how people say it’s supposed to.
Nonetheless, it's clearly not in the interest of US businesses. The US is not obligated to provide subsidies that, due to the scale of trade using this tool, demonstrably favor Chinese small businesses over those in the US and distort the market.
I'd much rather see the market made more balanced by charging the same prices for shipping than by tariffs. At least that's a real cost. Though I have the ulterior motive of thinking charging full price for air freight will reduce carbon emissions and inefficient supply chains.
But everyone faults the US for taking advantage. /petpeeve
Trump seems quite fond of withdrawing the US from one negotiating table after another.
USA as well, but there is a good reason for it. It's a strategic. You are 9 meals away from a revolution. Other subsidies are for strategic purposes. There are always a few abuses which you hear in the news, but the logic is sound.
If all countries had the same worker and environmental protections and same degree of unionization, aka an actual level playing field, then maybe. But instead its more about exploitation and breaking organized labor unions.
So I asked the Postman delivering my Amazon package on a Sunday, and he confirmed that indeed the Post Office was being paid far less on a per package basis for Amazon deliveries than the regular rate.
In the case of this Postal Treaty, it seems like the Post Office is losing money on delivering these <= 4 pound packages from China.
The US Post Office is struggling enough, I think pulling out of this treaty is a good thing if it can help them.
1. https://www.congress.gov/bill/109th-congress/house-bill/6407
No it just was a bad policy. It has to be a win/win for both sides. Currently this was a bad deal for America.
Prepare for things to cost much more now in regards to electronics.
If MSI is taken into account, then India & China are among the most developed nations!
More importantly: the real world does not conform to any such arbitrary differentiation into a single binary variable.
There just isn't any need for such a classification anyway. If you want to index something to a country's wealth, just use any per-capita economic measure and be done with it. GNP is fine, I'm sure it wouldn't make much of a difference if you used iPhones/per million or the Big Mac Index, instead.
- the cost of recovery is high. 140 years ago, doing the accounting for all the parcels, letters sent from France to the US would have cost and from the US to France to then "balance" the accounts would have been way higher than the recovered money from one party.
- the traffic is balanced, that is, both countries send/receive approximately the same numbers of parcels/letters each way, each year.
Once these two assumptions do not hold any more, it makes sense to reconsider the situation. This is a question of balance.
The main exception is in luxury products like Gucci bags, iPhones and LV.
The cost of $300 million per year as quoted in the article seems like peanuts compared to some of the other actions this administration has burdened tax payers with.
You need to keep in mind that the postal treaty wasn't JUST for China either, almost every single nation was part of the postal treaty. Withdrawing from this treaty would likely result in increased postage for all international shipments.
Prior to 2005 it was consistently less expensive to shop at the local CVS, book store, or radio shack than to order online.
If my business model requires public subsidies for shipping my goods to turn a profit, my business model is garbage since 100% of my profits are literally taxpayer funded. Maybe small quantity mail order batteries from China isn't actually a reasonable thing to have and it maybe actually costs less to buy batteries in giant crates and have them available in local stores.
I might even say that this is obviously the case (for the battery example). Plus you build the local economy rather than subsidizing it's obliteration.
Once Amazon or Wal-Mart are the only company left, they will be free to raise the prices to whatever they want.
If a middle man was used, like an importer/warehouser, that middle man added their markup on shipping as well, typically 20 to 40%.
This change will likely disproportionately affect the poor and middle-class (who will see a sharp rise in manufacturing jobs) as well as smaller businesses who rely on manufacturing to survive.
Given the state of the economy, "burdened" is not a reasonable description.
https://money.cnn.com/2018/01/05/investing/jobs-report-const...
https://www.industryweek.com/leadership/america-s-new-factor...
https://www.bloomberg.com/news/articles/2018-01-03/manufactu...
https://www.businessinsider.es/jobs-report-july-manufacturin...
It's true that manufacturing jobs are on the rise, but it's still fairly clear what the long term trend looks like.
[0]: https://www.politifact.com/punditfact/statements/2018/mar/08...
1990 is a long time ago.
Steel is far from the only kind of manufacturing. Even if steel mill jobs all disappeared, overall manufacturing could be doing well. I'm not even 100% sure that steel should be lumped in with manufacturing; it's kind of like the final step of mining.
Process enhancements and technology face declining benefits. At some point, you've automated everything that makes sense to automate.
The jobs are going to stick around for 10 years unless we go back to a policy of purposely regulating American industry out of existence.
Not sure how that would impact the current global work-share in any measurable way...
I would rather subsidize domestic shipping to lower barriers to e-commerce entrants if we feel a burning desire to subsidize something in this area.
epacketEMS is a class of mail with tracking. How is it unrelated?
The USPS makes a profit on epacket shipments [0][1], but loses money on UPU inbound shipments. The two aren't directly related.
[0] https://www.uspsoig.gov/sites/default/files/document-library..., page 6 table 2
[1] https://www.uspsoig.gov/sites/default/files/document-library..., footnote 17
...in China, while improving emloyment in manufacturing in USA.
Currently you have an imbalance in America's economy, where the poor and middle-class get goods from China, and the poor and middle-class in manufacturing[1] in China get the monetary reward.
Used to be that, due to local manufacturing of the goods, the same poor-and-middle-class americans would be earning back the money spent on the goods[1] by their neighbors, in effect exchanging with each other (and with local capitalists). However due to the current trade costs imbalance, a lot of the money flows out of american's pockets, but not back to them.
Will there be a price increase right around the change? Sure. But it will make local manufacturing more cost-effective, in effect spurring local employment in both production and related services, and thus looping the money expended on the goods[1] back in to the neighbor's pockets.
It's a win-win for the voters in USA.
[1] and related services, like engineering, transportation, worker catering & care, etc.
I remember taking apart an old Cisco switch that had "Made in USA" silkscreened on the motherboard.
(Fairer trade is literally the one thing I agree with Trump on...)
https://en.wikipedia.org/wiki/Rowland_Hill
The basic principle is a simple one, a letter could be sent to any address in the UK at the universal rate. There would be no surcharges just because you lived in a remote part of Wales. Equally there would be no discount because you lived next to the sorting office in London and wanted to send a letter to the next street.
In the UK we did celebrate Rowland Hill and his work, sadly times have changed and successive Conservative governments have undermined the universal postal service by privatisation and trying to make it 'better' with 'competition'. Hence, rather than one Royal Mail van delivering letters and parcels there is now a small fleet of other delivery vans and outsourced casual labour 'gig economy' type delivery options. It is not more efficient to send six different vans out to a small village, each of them delivering one or two items when you could have just the one Royal Mail van carrying a few dozen parcels.
Moving on from 1837 to today where ecommerce and email has changed things, there is the 'ePacket', not very well understood by most end consumers. Here is an article on Shopify that helps explain the fundamentals:
https://www.shopify.co.uk/blog/epacket-delivery-explained-ev...
Now I am no fan of the 'evils of global capitalism', however, I believe that the work done by China Post and their partners in 30+ countries is very much in the spirit of 'the Penny Black'. If your business in the West does have product made in China for good reasons, e.g. that is where your supply chain is, then you want to get your products to customers in good time. Why send a crate of product to your local warehouse to then have people then resend that on to customers when you can have a pick and pack operation in China?
This is particularly the case if you are wanting to offer your product to people internationally. For instance, Australia. If you have production facilities in China and then have a head office and warehouse in the UK, you can't realistically sell to the Australian market if it takes weeks for your parcels from the UK to get there, inevitably spending a week doing nothing in the Netherlands en-route. It makes customer service a non-starter. What you really want, and what your customer really wants is the China Post ePacket service and no extra trip for your products around the planet.
This applies for premium products people want, not the forged knock-off product that people berate Amazon for. ePacket helps the small to medium sized business compete against the giants of industry that can afford their own planes.
There is no 'win' for American innovation here, this is like a 'tariff' in that it is actually a 'tax' on American consumers. ePacket was as bit as innovative as 'the Penny Black' and it facilitates trade on a level playing field.
I am sure that knee-jerk reactions will mod-down my opinions on this, however, the ePacket and how we got here is not understood that well and going Donald Trump on parcel delivery is not going to solve the problems and frictions that genuinely exist with the status quo.
Right now the low shipping costs for parcel-sized orders make this set-up, with stock as far from customers as it probably can, economic. Once this cost advantage is gone the last-mile performance from "local" warehouses, read warehouses on the same continent or in the same country, is winning the day.
In short, it is likely that the majoprity of the inventory is moved from China to the individual markets by someone. If this Amazon that would mean competition for seller doing drop-ship out of China. Still, even Amazon is offering FBA-services for the procurement part from China using Amazon container lines. Or it is some sort of wholeseller who is just covering the import part, maybe even up to warehousing.
I see a business opportinity for a logistics provider offering bulk-import, storage and distribution for the existing dropshippers. Workling interfaces to Shopify and co. wouldn't hurt neither.
1. American innovators buying components from overseas, which include many on HN and in SV, will now have to pay more, reducing their ability to innovate.
2. American consumers will have to pay more.
3. American consumers will have less innovative products, as their ability to get innovative products from other countries will be reduced, and as innovators in both the U.S. (see #1 and #4) and in other countries will be hamstrung.
4. American innovators will face less competition, which is certainly not what leads to innovation; it leads to profit-taking based on market power, not meritocratic competition.
5. Reduced international cooperation and trade will reduce American innovators ability to sell abroad; the U.S. is only 5% of the world's population; the other 95% of the market is elsewhere. Cooperation and trade will not only be reduced as a direct effect, but also as a result of the U.S. appearing to be an unreliable partner, and as a result of other countries responding in kind by pulling out of treaties when they find any problems.
6. As reduced trade hurts economies here and abroad, Americans will pay more, have fewer people to sell to, resulting in lower wages and fewer jobs.
Finally, the greatest American innovation is democracy, the belief that all men are created equal and that's what leads to prosperity. That innovation has resulted in an explosion of peace and liberty unlikely anything the world has ever seen, and it has, as a secondary side effect, brought an explosion of prosperity unlike anything the world has ever seen. The U.S. is now purposefully killing that innovation.
> Finally, the greatest American innovation is democracy, the belief that all men are created equal and that's what leads to prosperity. That innovation has resulted in an explosion of peace and liberty unlikely anything the world has ever seen, and it has, as a secondary side effect, brought an explosion of prosperity unlike anything the world has ever seen.
Yeah, I don't know about that. Maybe in the US we've had a decent run of peace (with 50 years of nuclear holocaust hanging over our heads), but we've definitely dropped a lot of bombs on people. Enough that I think we can say that US democracy has not "resulted in an explosion of peace and liberty unlikely anything the world has ever seen".
But we have. Name any other period in world history that has seen the same spread of freedom and peace. There is nothing that comes close.
> The fewer artificial market constraints the better.
The Postal Treaty, and free trade and globalization in general, is a removal of artificial market constraints. Now we will return to artificial constraints at international borders.
I count the middle east and south east Asia as part of the world, and no what we spread there was not freedom and peace, it was/is decades of war and destruction.
I think you're referencing the cold war and the lack of direct conflict between major superpowers in the 20th century. That was a direct result of mutually assured destruction and the industrialization of the military. It was not caused by democracy. It was also replaced by a number of proxy wars. Again, not peace and freedom.
I didn't say all the world had freedom and peace, but that it has spread far more than ever before. And it has. Again, name any other era that remotely compares.
> I think you're referencing the cold war
The Cold War has been over since, effectively, 1989, almost 30 years ago. Yet the world is, by some people's measures, more peaceful now than at any time in history. As simple examples, there is almost no international war anywhere. The entire North and South American continents, and Europe east of Ukraine, are at peace.
> It was not caused by democracy
The victors of WWII put mechanisms in place expressly to prevent more wars, including the UN and the EU, institutions designed to apply democracy to international relations. People can always make up reasons, since it's impossible to prove, but the results are what they intended. Further, with the spread of democracy in Europe, for example, the threat of war - which tore apart Europe for centuries before democracy became almost universal there post-WWII, war between European powers is now unthinkable. The exception is the sole non-democratic power, Russia.
Looking around the world, democracies don't tend to start wars or invade their neighbors - there is no chance of war between the U.S., Canada, European countries, Japan, etc. etc. All democracies. In East Asia, almost all threats of war are between the non-democratic power, China, and others. Japan and S. Korea, for example, have no interest in it and work out their issues peacefully.