Advances in Regulatory Economics series
Edited by Michael A. Crew and Paul R. Kleindorfer
Chapter 20: UPU Terminal Dues: Winners and Losers
* James I. Campbell Jr,† Alex Kalevi Dieke‡ and Martin Zauner§ 52 53 54 1 INTRODUCTION Modern industrialized countries have long accepted the principle that postage rates should be based on the costs of production. Yet what is taken for granted in regulating postage rates at the national level is almost wholly ignored when it comes to international postage rates. Post offices do not charge each other the same for delivery of inbound international mail as they charge their own citizens for delivery of similar mail. For example, the US Postal Service charges substantially less for delivery of German and Japanese letters than for delivery of identical American letters. Why have international postage rates resisted the otherwise universally accepted principle that postage rates should be based on costs? For more than 40 years, the Universal Postal Union (UPU), the intergovernmental organization which establishes rules for exchanging international documents and parcels, has labored to develop a fair and efficient approach towards ‘terminal dues’ – fees that a destination post office collects for delivery of inbound international mail. For at least 20 years, officials in the US government, the European Union, and the UPU itself have recognized that the only reasonable solution is to align terminal dues with already cost-based domestic postage rates. Yet little progress has been made. A primary obstacle to reform has been the system’s impenetrable complexity. A system of non-cost-based terminal dues results in winners and losers. Some post offices are underpaid for delivery of inbound international mail forcing up...
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