Billions of dollars of goods are imported from China into the United States every week, and very little is exported to that communist monolith from small businesses in our country.
Most of our exports are from giants like: Boeing selling planes, Wall Street hawking financial services, or Hollywood offering pablum movies censored by the Chinese dictator-for-life and his all-seeing minions.
Is our huge trade deficit because entrepreneurs in China are just born smarter, work harder or are more thrifty, patient and all-seeing?
The answer is none of the above.
As usual, the problem is an always supplicant Congress, embracing big business, promoting their monopoly at the expense of the little guy or gal.
Most of us have seen pictures of cargo ships filled with China’s products unloading into our West Coast ports. Shipping containers are relatively inexpensive and cost just as much sailing from China to the U.S., as from the U.S. to China.
A small business can’t afford to fill shipping containers.
Instead, American exporters mail packages, and that’s where folks here get screwed by their own government as well as by China’s import duties and taxes.
Pretend you have a one-pound book worth $30 to mail in China to a customer in the United States. Using their mail, your package will arrive in about seven days at a cost of $7.31.
Suppose the book is damaged? You can mail it back to the sender and get a refund.
However, that means you have to pay the USPS postage – $46.71. If you are not in a hurry you can save money and it will be delivered in about seven weeks at a cost of $24.06 on a slow boat to China.
It’s not fair trade when one party is charged $46.71 and the other gets subsidized to only pay $7.31.
In 2011, Congress ordered the the U.S. Postal Service to make special agreements with the national postal carriers of China and Hong Kong to allow tracking-enabled packages not exceeding 36” or weighing more than 4.4 pounds to be sent to the U.S. at bargain basement rates. This shipping option – the ePacket – has rates so low that it’s cheaper to ship small parcels from China to an American city than it is to mail that same parcel within our country.
USPS subsequently extended the same deal to South Korea and Singapore. The plan was to increase imports into our country and help Asian countries at our expense.
Unlike the United States, China subsidizes its postal system so costs are minimal in that country. At the same time, USPS is subsidizing mail from China to keep prices low for our Far East competitor.
If the huge disparity in mailing costs doesn’t make Americans noncompetitive in the Chinese marketplace, consider the impact of taxes and fees levied by each government.
Let’s compare the approximate cost of shipping a one-pound box of gold-plated jewelry to each country.
Shipping from China to the United States
Item cost : $300
Shipment cost : $8
Total amount: $308
Shipping from United States to China
Item cost : $300
Shipment cost : $46
Customs duty rate @35% = $121
Vat rate @17% = $59
Total amount: $525
A first step in lowering costs for America’s small businesses is to reduce the rate we pay to mail to China and raise the rate we charge them to deliver here. The current imbalance of $8 to $46 to mail the same package is almost 6 to 1 – an unbelievable gift to Chinese exporters.
This change alone will help small business compete, plus impact the nearly $4 billion in so-called “loses” that will be incurred this year by the post office.
Next week: We examine the De Minimis import value threshold, and how some slimy members of Congress want it to continue benefiting China’s exporters and restricting American business.