Policy Brief – Postal Consumers Will Benefit From a Level Playing Field

The explosion in internet commerce of the past few years has given American households and businesses unprecedented opportunities to benefit from the international marketplace. But the cost of the tilted playing field in international mail provision severely compromises those opportunities, largely at the consumer’s expense. The advantages that flow from mail monopolies are often not maintained for the benefit of consumers, but are instead siphoned off to underwrite postal activities in competitive markets.

Many countries currently employ policies that give their own government post offices major advantages not enjoyed by their private competitors. In addition, uneven and preferential treatment by customs services, and other red tape requirements, disproportionately increase costs and add delays for consumers using private shippers. Internationally, other barriers used to favor government post offices include exemptions from some customs duties and cumbersome paperwork requirements. These factors often result in higher prices, and inferior service, for many consumers.

But without establishing a level playing field at home, it is problematic to push for one abroad, as much benefit as that would hold for U.S. consumers. The final report of the President’s Postal Commission, released a month ago, includes a number of provisions that would benefit postal consumers to that end. The U.S. Postal Service has proven that it would much rather raise the price of stamps than cut costs, a fact that is evidenced by its failure to improve overall productivity. The Commission’s report describes how it then manipulates its monopoly, shifting postage stamp revenue to compete unfairly with private companies in other areas. Not only do those companies pay taxes and hire workers, but the fair competition they produce benefits postal consumers.

The Commission found that preventing such harmful subsidies is one important way to force the Postal Service to compete fairly. It also recommended that the Postal Service comply with the same Securities and Exchange Commission requirements for financial reporting as its private-sector competitors. As Postal Rate Commissioner Ruth Goldway and others have noted, the Post Office’s current financial reporting offers very little incentive for it to improve its efficiency.

Unfortunately, these and other Commission findings lack many important details needed to ensure their effectiveness. It is now up to Congress, the Bush Administration, and other policymakers to resist the formidable political pressures already being demonstrated by many opposed to meaningful reform for this crucial sector of our U.S. economy. Furthermore, leadership is needed to ensure these important principles can be translated into international trade policy. Current discussions within the WTO’s General Agreement on Trade in Services (GATS) provide the opportunity to advance these goals. It is essential that trade officials embrace the principles of fair competition between a government monopoly and a private actor. Leveling the playing field will substantially benefit postal consumers, both here and abroad.