When Neil Pitman was trying to buy a new part for his pressure cooker, he couldn’t believe the price difference between shipping it from the United States to his home in Sherbrooke, Que., compared to the cost of shipping it from China.
Shipping the part from China would have cost less than $1. But if you had ordered it from the US, shipping would have cost you $22.99.
“I buy things on eBay quite often and I’m always amazed at how much it costs to ship things from the US compared to China,” Pitman said.
“It costs almost nothing to ship from China. And I’d like to buy American or Canadian products. But even from the neighboring province, it costs a lot more.”
Serasu Duran, an assistant professor of operations and supply chain management at the University of Calgary’s Haskayne School of Business, says that shipping a package from China to Canada can cost around $5 or $6 per kilogram.
“Which is pretty cheap,” Duran said.
According to Canada Post’s shipping rate calculator, shipping a one-kilogram package between provinces can cost around $24. And it would cost $28.50 to send a one-kilogram package from Canada to China, depending on its size.
The reason for this goes back to 1874 and an international agency called the Universal Postal Union.
The history of the mail
It used to be quite difficult to send a letter from one country to another, according to Paulus Schoorl, program director and policy and regulatory adviser at the Universal Postal Union in Bern, Switzerland.
If you sent a letter through several countries, you would have to pay a lot of money, he said. Every time the mail crossed a border, it would incur an additional cost for the sender.
“It was tremendously complex and difficult to send a letter from one country to another, indeed sometimes through different jurisdictions or administrative areas,” Schoorl said.
That led to representatives meeting in Bern, Switzerland, in 1874 and signing the Treaty of Bern, which led to the creation of the Universal Postal Union. It was an agreement whereby countries would carry letters and small packages from other countries for free.
“At that time it was decided that all [postal] are universal services,” Schoorl said.
The idea was that everything would be balanced and each country would help the other.
After 100 years, there was a change.
Schoorl says Italy felt there was an imbalance. Italian postmen delivered more international mail, as people asked for heavy magazines. Meanwhile, the country was not sending as much mail as it was receiving.
In the 1960s, the countries that were part of the Universal Postal Union reached a new agreement. If a country received more international mail than it sent, it would be paid the difference.
At the time, that was equivalent to half a gold franc, a currency formerly used by international organizations, per kilogram of international mail. But not all countries could afford it.
The Universal Postal Union set a tariff so that wealthier countries would pay more to receive their international mail than countries with developing economies.
“The central idea is that any citizen or company can send postal packages through the Global Postal Network to any destination,” Schoorl said.
At that time, China was considered a country with a developing economy, which meant that the country would exchange less for international mail than other countries. And that didn’t change for decades.
Where are we now
As e-commerce took off in the 2010s, China found itself with a significant competitive advantage. You could ship to North America at a cheap price. Canada Post and the US Postal Service were delivering packages and not getting very good compensation, Schoorl says.
In 2018, US President Donald Trump rejected the tariffs and threatened to pull the country out of the Universal Postal Union.
The United States and other countries, including Canada, were able to negotiate a new agreement with the Universal Postal Union.
According to Mindaugus Cerpikin, an economist who studies the postal system in Copenhagen, the United States was able to get the biggest concessions. Canada was able to increase its fees over time, but Cerpikin says there’s still a big gap.
“The United States was allowed to raise its tariffs and was allowed to do it faster than other industrialized countries.”
Canada and other countries can raise their fees by about 16 percent a year, Cerpikin said.
“While 16 percent may sound like a lot, you have to consider that some countries like Canada need between [a] Increase from 200 to 400 percent to close the gap between national rates and international rates.”
The CBC contacted Canada Post about the cost of shipping in Canada. She declined an interview, but sent a response via email.
“Package rates are unregulated and fully competitive within the industry,” spokeswoman Lisa Liu said.
“Canada Post determines shipping rates based on several factors, including origin and destination, which also consider population density. Package weight and size, processing, transportation and delivery costs are factored into the rate”.
In the meantime, Pitman would like to support local sellers and buy from sellers in North America. But as long as the shipping costs are so high, you find it hard to justify it.
“I would like to prefer our Canadian and American suppliers, but it really doesn’t make any sense.”