Why it's so much cheaper to ship stuff from China than within Canada

Cost of Living8:40All about the Universal Postal Union

When Neil Pitman was trying to buy a new piece for his pressure cooker, he couldn't believe the price difference between getting it shipped from the United States to his home in Sherbrooke, Que., compared to the cost of it coming from China. 

The part would have cost him less than $1 to ship from China. But if he had ordered it from the U.S., it would have cost $22.99 to ship.

"I buy stuff off of eBay reasonably often, and I'm always surprised how much it costs to ship things from the U.S. as compared to from China," Pitman told Cost of Living.

"It costs almost nothing to ship from China. And I'd like to buy American or Canadian. But even from the next province, it costs way more."

Serasu Duran, a University of Calgary assistant professor of operations and supply chain management in the Haskayne School of Business, says it can cost about $5 or $6 per kilogram to ship a package from China to Canada. 

"Which is quite cheap," said Duran. 

According to Canada Post's shipping rate calculator, it can cost about $24 to send a one-kilogram package between provinces. And it would cost $28.50 to send a one-kilogram package from Canada to China, depending on its size.

The reason for that dates all the way back to 1874 and an international agency called the Universal Postal Union. 

The history of post

It used to be quite difficult to send a letter from one country to another, according to Paulus Schoorl, program manager and policy and regulatory adviser for the Universal Postal Union in Bern, Switzerland.

If you sent a letter through multiple countries, you'd have to pay big bucks, he said. Each time mail crossed a border, it would incur an additional cost for the sender.

"It was awfully complex and difficult to send a letter from one country to another country, actually, sometimes across different jurisdictions or administrative areas," said Schoorl.

That led to representatives meeting in Bern, Switzerland, in 1874 and signing the Treaty of Bern, leading to the creation of the Universal Postal Union. It was an agreement that countries would carry other countries' letters and small parcels for free.

"At that point, it was decided that all the [postal] services are universal service," said Schoorl. 

The idea was it would all balance out, with each country helping the other.

An imbalance

After 100 years, there was a change. 

Schoorl says that Italy felt there was an imbalance. Italian postal carriers were delivering more international mail, as people there were ordering heavy magazines. Meanwhile, the country wasn't sending out nearly as much mail as it was receiving. 

In the 1960s, countries that were a part of the Universal Postal Union came to a new agreement. If a country was receiving more international mail than it was sending, it would be paid for the difference.

At the time, that was one half of 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 up a fee so richer countries would pay more to have their international mail delivered than countries with developing economies. 

"The central idea is that any citizen or business should be able to send mail packages through the Global Postal Network to any destination," said Schoorl.

At the time, China was considered a country with a developing economy, meaning the country would be charged less for international mail than other countries. And that went unchanged for decades. 

Where we are now

As e-commerce took off in the 2010s, China found itself with a major competitive advantage. It could ship to North America at a cheap rate. Canada Post and the U.S. Postal Service were delivering packages and not being compensated very well, says Schoorl.

In 2018, U.S. President Donald Trump pushed back on the rates 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 deal withing the Universal Postal Union. 

According to Mindaugus Cerpikin, an economist who studies the postal system in Copenhagen, the U.S. was able to land the biggest concessions. Canada was able to increase its rates over time, but Cerpikin says there is still a big gap.

"The U.S. was allowed to raise its fees and they were allowed to do it faster than other industrialized countries."

Canada and other countries can raise their fees about 16 per cent annually, Cerpikin said.

"While 16 per cent may sound like a lot, one must consider that some countries like Canada need between [a] 200 to 400 per cent increase to close the gap between domestic rates and international rates." 

The CBC reached out to Canada Post about the cost of shipping in Canada. It declined an interview, but sent an emailed response. 

"Parcel rates are non-regulated and fully competitive within the industry," spokesperson Lisa Liu said.

"Canada Post determines shipping rates based on several factors, including the origin and destination, which also consider population densities. The parcel weight and size, costs of processing and transportation and delivery are factored into the rate."

In the meantime, Pitman would like to support local and buy from sellers in North America. But as long as shipping costs are as high as they are, it's hard for him to justify it. 

"I would like to prefer Canadian and our American suppliers, but it really doesn't make any sense."