Nordics rally to Trump over postal rules and Chinese e-commerce

Call it a rare meeting of minds.

Nordic European countries are rallying behind Donald Trump against century-old postal rules that give Chinese e-commerce giants like Alibaba an edge over rivals in the West.

Sweden, Finland and non-EU countries Norway and Iceland are expected to side with the United States at an international gathering in Switzerland this week — by calling for a change to the rules that make industrialized countries bear the costs of shipping from developing ones.

“We are subsidizing the most competitive e-commerce market in the world: China,” said Stefan Kvarfordt, the head of the Swedish Trade Federations Brussels office. “We want to see Europe speak with one strong voice here.”

The calls for change come as top representatives from the EU and Beijing gather in Brussels Tuesday against a backdrop of escalating tensions over trade and 5G security.

“We are subsidizing the most competitive e-commerce market in the world: China” — Stefan Kvarfordt, head of the Swedish Trade Federation

The otherwise free-trading Nordics have turned against the postal treaty amid difficulties for their postal services and local e-commerce, which has been grappling with high local shipping costs and long distances.

Yet Europe is far from being united.

Other EU countries including powerhouse France are happy to adapt the current postal treaty framework rather than totally revamp it — underscoring deep divergences over China.

The current postal spat started when Trump, in August of last year, threatened to yank the United States out of the Universal Postal Union (UPU), a little-known treaty dating back to 1874. Then in October, Trump announced he was effectively pulling the U.S. out of the UPU — which became a United Nations agency in 1948 and now has 192 members.

The UPU agreement stipulates that shipping costs for small packages sent from developing countries to developed ones should be covered by the postal services of the countries of destination.

Trumps view is that the system, initially conceived to facilitate the circulation of letters, unfairly favors China, which benefits from the rules because its currently defined as a developing country, while also being the worlds top exporter.

In an interview with POLITICO, Chinas top envoy to the EU, Zhang Ming, said there was no reason to change Chinas status.

“Developing country is still a fundamental trait of China today,” he said. “It is not advisable to seek withdrawal from the treaty, or to make an issue of China or even to take China as a shield for [a] unilateral and selfish agenda.”

But Trumps argument against the rules is winning allies in Europe, namely in Denmark, Sweden, Finland, Iceland and Norway, where Chinese e-commerce sites have grabbed a substantial e-commerce market share. (The European Commission only has an observer status in the UPU, leaving it to countries to organize bilaterally.)

In Sweden, Alibabas AliExpress was the second most visited international e-commerce website in 2017, behind but in front of Amazon U.K. and Amazon Germany, while Chinese platform Wish ranked fifth. In comparison, there are no Chinese platforms in Frances top five.

“Sweden has been working for years with Nordic and European countries to reform the system,” said an official from the Swedish ministry of infrastructure.

The process to withdraw from the UPU takes one year. Washington said the U.S. would reconsider its decision if meaningful changes were made to the rules, triggering intensive work and an extraordinary meeting of the Council of Administration this week in Bern, Switzerland.

Nordic angst

After months of talks, two options for change emerged: increase international tariffs or allow countries to set their own rates.

While China — along with Western EU countries such as France — favors the first solution, the United States made it clear that self-declared tariffs, dubbed the “U.S. option,” were the way forward.

Finland and Sweden are losing €10 million a year in subsidizing costs.

Europe, meanwhile, is “split in half,” said Walter Trezek, chairman of the UPU consultative committee.

“Some are in favor of keeping the system in principle with adjustments, but others see a benefit to a change to self-declared rates,” he said. “For countries believing in self-declared rates, the topic [of remuneration rates] is high in their priorities.”

Iceland, Norway, Finland and Sweden are staunch supporters of the U.S.-backed self-declared rates solution. In Norway, Finland, Sweden and Denmark, around one quarter of goods purchased online comes from China, according to 2018 data from PostNord.

Finland and Sweden are losing €10 million a year in subsidizing costs, which represents respectively 22 percent and 19 percent of their main postal operators annual profits, according to a March 2019 study by Copenhagen Economics.

Yet France and Japan are pushing for a third way, the so-called “convergence option.” Under that solution, countries would be able to determine their own rates, but with a maximum of 70 percent of domestic tariffs, according to an internal UPU document seen by POLITICO.

Alibabas AlliExpress was the second-most visited e-commerce website in Sweden | Nicolas Asfouri/AFP via Getty Images

“What is at stake in the negotiations is to gradually adapt the system while maintaining the U.S. in the Universal Postal Union. We want to stay in a system that remains a multilateral one,” a French official said.

According to a UPU official, whether the U.S. administration agrees to the convergence option is now the “real question.” All three options will be discussed at the meeting of the CouncilRead More – Source