"If you buy the cheap goods from abroad today, you can often get them shipped "free" around half the planet and to your home. It may be cheaper to order a remote control with batteries from China and throw the remote away, rather than going to the store and buying a pack of batteries.
That this may be a problem for local businesses is obvious, but the reason you can order extremely cheap goods from China is far more complicated than you think. Most countries in the world have actually joined forces in an international collaboration to allocate freight costs between themselves a partnership, where the importing countries eventually ended up holding the bag.
This agreement is called Universal Postal Convention, and it's important for many of us in everyday life. It is quite simple to regulate mail traffic between all the countries that have joined, not to mention how much it will cost to ship the item. The intention behind the agreement was good when it was introduced, but over a hundred years later, the social conditions changed and it helps to create distortion of competition across the world.
Universal Postal Convention was created in a completely different era than the one we are in now, namely around 1870 - at the time it was snail mail which reigned, e-mail was by no means invented and not even the largest visionary had thought of the idea of sending the mail electronically.
If we go back to the time of the Convention's birth it was not so easy to send a letter abroad. Each country had to enter into their own individual agreements with every country they wanted to send mail to. If you wanted to send mail to a country who didn't have a mail agreement with your own country, you would have a problem.
The solution could then be to send the letter via a third country, which had agreements in good standing with both the country you were sending from and the country you would send to.
To calculate the postage was no trivial matter either. Here you risked the postage getting split up in multiple parts, so that the first part covered the mail crossing the border. Then the poor postal workers had to sit with price lists from other countries to calculate the rest of the postage, after which they also had to stick on a stamp for the recipient country. Should the letter go through several countries on its journey, one can only imagine how cumbersome the system was.
One particularly cumbersome system, without a doubt, and so thought the those who lived at that time too. Thus, the Universal Postal Union, UPU, established in 1874. The main pillar of this association is what we call the Universal Postal Convention.
The Universal Postal Union was a set of rules that regulated postage prices, and one of the most important rules was the various national postal service does not distinguish between mail from inland and mail from abroad. As a final pillar was the rule that the postal service in each Member State would gain the postage that was paid to ship the overseas mail.
It was the end of letters filled with stamps from many countries. The stamp of the sending country was enough to get all the way to the recipient's mailbox.
In 1947 UPU became a specialized agency within the UN, and it's currently the second oldest organization within the United Nations, surpassed only by the International Telecommunication Union - ITU. To become a member here it is a requirement that the Universal Postal Convention is enacted.
In 1969 a central and important change was enacted, it introduced a so-called terminal fee, to be paid if one country mails more to a country other than what it self got in return.
This system makes it fairer for those countries that receive a lot of mail. Here in Norway we get considerably more more mail into the country, than what we send out, so this is an important factor we should return to later in this comment.
You can still send letters and mail in an easy way, anywhere in the world. The big carrot is still another. If you buy from overseas you are in fact pretty much guaranteed a relatively nice shipping price. How nice shipping price is depends a little on how things are sent.
If you order small electronics directly from China, you can get very cheaply from it. Goods are basically reasonable, and shipping charges are usually a joke. Many times you get free shipping, even if the course is baked into the price. This low shipping cost, you can thank the Universal Postal Convention for, since Norway has committed to deliver the item to you without any additional premium.
Overall, Norway recieves way more mail than it send from us. This means that Posten Norway gets more terminal charges than what we have to pay in terminal charges to other countries. The problem is that these fees are underpriced compared to what Posten Norway spends to deliver the mail.
How much Posten Norway lose on these mailings, they refuse to tell:
> The details are confidential, but as a net importer of mail Posten Norway gets more from the terminal taxes than we pay for exports to others. Our distribution costs are not taken into account in this calculation. Unmet costs we have on international mail must necessarily be covered from other revenue in postal operations, said press officer at Posten Norway, Hilde Ebeltoft Skaugrud.
So far we are assured of low freight rates from abroad, but there may be changes in time. There is no denying that many countries are experiencing that the money isn't enough and quickly disappears. In a few years this may change.
> The Convention is revised every four years, next in 2016, and in this connection we discussed the changes. Posten Norway are working to achieve better alignment between terminal charges and distribution costs, Ebeltoft Skaugrud tell us.
As of today, Posten Norway gets a variety of packages and letters from abroad to be handed out. They get paid for the job, but nowhere near what the job is costing them. The cost will be subsidized by the other mail clients, those who send packages and letters in Norway.
When two countries are sending mail to each other the weight of the mail from the country that sent the least mail to the other country is counter-accounted. For all the excess the terminal fee has to be pain, which is related to the general economic situation in each country. The result is that Norway will pay a higher fee for their excess kilogram of mail than countries such as China and the United States does. The Chinese have a right to send parcels abroad for an amount considered fair in China, the problem is that the sum is terribly low in a Norwegian perspective.
In a survey made by the German consulting company Wissenschaftliche Institut für Infrastructure und Kommunikationsdienste GmbH in 2011, there were several interesting findings related to terminal charges. There Norway comes out as one the biggest losers due to large net imports and high internal expenses.
The consulting company also shows that several other have also advocated for a change. The (American) Department of Justice stated, among other things, in 1990 that the terminal fees that differ from the actual cost of delivery has an ability to disrupt the competition. The European Commission said something similar in 1992, when they stated that the terminal fees should be based on what it costs to deliver the consignments in the recipient country.
In fact the Universal Postal Union itself makes a statement on the issue a few years later, in 1997; and makes it clear that terminal charges not based on the real costs within the recipient country will create incentives for trade that is not financially sustainable with the great flow across borders.
We should be very cautious about predicting anything, but we can not envisage that the current situation will continue forever. Various foreign online stores of various sizes are nearest subsidized shipping to Norway, and considering the increase in imports is probably only a matter of time before something is done. The first opportunity to make a change is 2016 and we will be surprised if it's not going to be a good deal more expensive to receive packets from the rest of the world then."
// Article from HW.no (Norway's Ars Technica) translated with Google Translate and with the language fixed manually.
I had no idea how they could possibly have shipped them to me, in just about 10 days time, when the cost of the bulb seemed lower than the cost of the shipping. So I guess this is another reason why USPS is bankrupt, because they are legally obligated to deliver the parcel, basically for free, after a few cents were paid in China to put a stamp on it. Amazing!
This is potentially a double negative for you, 1. if you labor or other costs are higher, you lose more, 2. your carriers try to make up for it by increasing your outbound shipping costs, affecting your exports
Instead of doing real-cost rebalancing, the "fairness" balancing, is susceptible to be pulled down to zero and runs the risk of a disconnection with labor, energy and environnement costs. Further, this type of market mechanism favors a runaway dynamic ie. if a country ships a lot, it gets even better and better for them, as they develop economies of scale.
Sounds like whatever made the multi-stamp system too complicated before 1969 might now be feasible with technology, as it may have been the more market-true, and thus future-proof approach.
Which only further incentivizes people to buy the item from China instead of domestically.