Maybe - but why do you think the USPS won’t just pocket the difference? Are they in a competitive market for the class of packages they ship in the US? I don’t think I understand the competitive landscape for shipping well enough to understand your assumption.
For packages the USPS is in a very competitive market, against UPS, DHS, and Fedex. The only market they have something approaching a monopoly on is regular letters. This ruling affects (IIRC) only small packages, but that's still a place where USPS competes.
Also note that where USPS has a monopoly it's often where it is required by law to sell below costs. For example, delivering mail to Alaska and Hawaii is quite expensive, but US law requires uniform postage costs.
The USPS is hampered by law in other ways. The UPU decision is one example; they also have fairly strict pension laws and they cannot raise prices without agreement from overseers (a price increase to 55¢ was just struck down in court). It's not totally clear that it's possible for USPS to run in the black while also being the mailer of last resort that it is today. (That said, perhaps mail is a government service worth subsidizing, though we can debate how much, and running in the black would be preferable.)
That last paragraph is a great summary. I wanted to add: This was done with the intent of preventing USPS from being competitive. The law that forced it to pre-fund retirement also put enormous restrictions on its ability to increase prices.
USPS pension funding gets brought up quite a bit as some kind of a conspiracy, but that doesn't appear to be accurate.
The issue for the postal service is that the law was changed so that the USPS would start funding their retirement health care costs since they are promised to the workers and the projected costs had exploded. This was supported by a bipartisan commission, the GAO, and the Postal Service itself:
>...Although retiree health benefits are often unfunded or poorly funded, two considerations suggested the Service’s retiree health care obligations should be funded: they are as firm a commitment as the Service’s pensions, and they had become enormous (about $75 billion by 2006). In 2003, the presidential commission suggested establishing a reserve fund for these obligations, and the Postal Service itself sent Congress a proposal for creating such a fund.
>Prior to 2006, the Service simply paid retirees’ health benefit premiums when they came due. The Service put aside no money when it promised the future benefits. Paying benefits when they come due rather than funding them in advance is known as the pay-as-you-go or unfunded approach.
>Early this century, Congress, the Administration, the U.S. General Accounting Office (GAO), and a bipartisan presidential commission expressed concern about the lack of funding. Although retiree health benefits are often unfunded or poorly funded, two considerations suggested the Service’s retiree health care obligations should be funded: they are as firm a commitment as the Service’s pensions, and they had become enormous (about $75 billion by 2006). In 2003, the presidential commission suggested establishing a reserve fund for these obligations, and the Postal Service itself sent Congress a proposal for creating such a fund.
>In 2002-2003, it was discovered that the Service was contributing far more than necessary to fully fund its pensions, and Congress allowed the Service to contribute less. Congress decided the pension “savings” could help patch the retiree health benefit underfunding. In 2006, as part of the Postal Accountability and Enhancement Act (PAEA), the Postal Service Retirement Health Benefits Fund (RHBF) was established. Most of the Service’s contributions to the new fund could be paid using the pension “savings.” PAEA was bipartisan legislation with broad support.
It's not that there's anything wrong with the model, it's that the fiscal situation of the USPS doing right by it's workers was then used by various groups to argue they should dismantle it entirely (and thus wipe out an important government service).
I don't see why the UPS should need to run in the black. It's a public service to have very accessible postal service around the country. Admittedly this was much more crucial when much communication took place this way, so it is less so today. But I think the public service aspect still stands. Many small businesses do lots of small, lightweight shipping of packages around the country that would be prohibitively expensive with UPS/FedEx. (I'm one of them: I run a small Etsy business that sells low-cost lightweight items that would be a lot harder if I couldn't ship for ~$3.50. UPS @ $11.00 would nearly double the cost of many items, and I don't sell enough for any sort of volume discount with FedEx or UPS)
Are FedEx and UPS subject to the UPU? Will this decision affect them? And are they currently shipping packages at a price that is comparable to USPS? If USPS is subsidizing international shipping from China by keeping domestic shipping charges high, how are they competing with FedEx and UPS?
(BTW I agree with the other responders - this was an excellent summary for those of us not in the US)
The USPS also seems fairly cognizant that they need to embrace parcel delivery with the decline of first-class mail; for instance, they are continually expanding their Sunday parcel delivery.
Unless you do incredible volume, USPS is very competitive on package pricing for items under 1 lb. For an item going from the east coast to the west, UPS is about twice the price for such packages. Closer destinations are a little cheaper, but not less than USPS.
If USPS is subsidizing international shipping from China by overcharging for domestic shipping, as some here are suggesting they are, how do they successfully compete with UPS and FedEx? Or are UPS and FedEx also subject to the UPU?
I don't think they subsidize through other rates. They tend to lose money every year, and their rates for packages under 1 lb are significantly better than UPS or FedEx.
They do subsidize through rates. The UPU is set up so that the last mile of a receiving country is charged to the sender as if it were in the sender's country. This is made up from other revenue the carrier in the receiving country makes.
I mean I don't think they increase other rates to cover those costs, because they don't actually cover their costs at all. They spend more than they take in and their rates are still, for lighter packages anyway, significantly better than either FedEx or UPS.
What do you mean spend more than they take in? The USPS is in the black, save for some strange law that they must prefund pensions 50 years in advance (any company would be running a loss if they had to do this).
The USPS can't increase their domestic prices but there is good indication that they are charging more to offset this. There are complaints in this thread even about the cost of shipping abroad, as international shipping is not regulated like domestic postage rates if I remember right. So the USPS uses outbound international shipments as a cost center to make up for the subsidy to China.
The article states there is a ~$500M subsidy to China through UPU rates.
