The Postal Illuminati – How Some Postal Services are Subsidising Taobao or Aliexpress Items

For those who are interested in conspiracy theories that actually are true, check out this podcast episode on Planet Money – the Postal Illuminati.

The Premise

The premise: When you order stuff online, could it cost less to ship it across the world than across the street?

The example was this Mighty Mug that cost around USD 5 to buy from eBay (ships from China), but costs around USD 6 to post it across the street.

Crazy stuff.

Is it true? The Too Long; Didn’t Read version

It turns out that the theory’s true. This price difference comes up because there’s a secretive meeting to fix international rates for shipping. It costs around 3 times lesser to ship to the US from China than across the street in the US.

This distorts prices because under the secret international agreements, the US Postal Service handles the last mile delivery services and effectively subsidises the postal services for stuff coming from China. This is a problem when countries receive many parcels from overseas (and therefore have to honour lower rates of postage negotiated with the originating country) and send out very few. The US used to be a beneficiary until the e-commerce boom, particularly from China.

The end result is artificial postage rates that encourage consumers to buy from Chinese manufacturers/retailers. So it’s true that artificially low postage rates for Chinese goods are harming US small businesses.

Does this affect Singaporeans?

It’s not clear whether this affects Singapore and Taobao stuff. Singpost’s postage rates are pretty cheap, but it’s not clear whether and how we’re a part of this Postal Illuminati. In addition, private courier companies are mainly the ones shipping Taobao or Qoo10 items into Singapore. These shouldn’t fall under the Postal Illuminati.

In any case, consumers don’t seem to lose out in the short run. Perhaps it’s bad in the long run when local retailers and businesses go bust. And it’s always interesting to hear about conspiracy theories that somehow are true!

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