Statement of

T.S. Chung

Acting Deputy Assistant Secretary

Office of Service Industries and Finance

U.S. Department of Commerce

before the

Subcommittee on the Postal Service

Committee on Government Reform

U.S. House of Representatives

March 9, 2000

Chairman McHugh, Congressman Fattah, Members of the Subcommittee, I would like to express my appreciation on behalf of the U.S. Department of Commerce for the invitation to appear before you today to discuss issues related to the conduct of international postal policy. The Department of Commerce recognizes that this is an opportunity to advance further the policies that will benefit all U.S. stakeholders in the postal and delivery services sector. As the Federal Government's chief agency with responsibility for promoting the interests of U.S. businesses in the global economy, the Commerce Department takes seriously and welcomes the mandate given to the Department by the Congress to cover postal and delivery services as a part of the International Trade Administration's Service Industries Development Program.

Role of the State Department

Chief among the international postal policy reforms recently brought into law by the Congress, through the leadership of this Subcommittee, is the designation to the Department of State of the responsibility for formulation, coordination and oversight of U.S. policy in this area and specifically U.S. participation in the Universal Postal Union. This change, as others also will discuss today, has meant a fundamental shift in direction for U.S. policy in the international postal services arena. From the perspective of the Department of Commerce, this change has been predominately beneficial, and has better aligned our international postal policy with U.S. international trade policy in general.

We have been impressed with the leadership and overall performance of the Department of State in its new responsibility to oversee international postal policy. Given relatively little time to prepare for the most important international meeting of postal administrators and policy makers, the Universal Postal Union (UPU) World Congress, in August 1999, Ambassador Southwick and his International Organizations (IO) staff quickly gained a high level of expertise, and established a policy process that served the development of U.S. international postal policy well.

At the UPU Congress, the State Department encountered entrenched opposition from a large number of countries to change from the status quo concerning several key issues, and, in the face of that opposition, worked to encourage the UPU members to move to more progressive positions. Through the State Department's leadership, the Postal Congress established the groundwork for convening a meeting to focus on UPU reform by 2002, after the so-called High Level Group reviews proposals for UPU reform and refers those proposals to the UPU Council of Administration for consideration.

Before, during, and after the UPU World Congress, held in Beijing, the State Department has tried to create an open and transparent process, ensuring that the views of the interested parties, including the private providers, postal users, general public, and other governmental agencies are considered when formulating U.S. positions for the UPU.

Commerce, itself assigned an enhanced role in the policy development process, participated in the Postal Congress as a member of the U.S. delegation, supported the efforts of the State Department and advocated policies at the Postal Congress designed to open competition in postal and delivery services. Commerce, also took part in the various meetings and seminars conducted during the lead-up to the Beijing Postal Congress.

I would like to note that the Commerce Department made the same views I have just outlined available to the General Accounting Office (GAO) during its research for the study on the subject of State's International Postal Responsibilities, released last week.

Commerce Department's Role in Postal and Delivery Service Matters

As has been noted, the Department of Commerce was itself assigned new responsibilities for coverage of "postal and delivery services," as a component in the redirection of the U.S. policy process for international postal services. With this new charge in mind, the Department of Commerce has worked very closely with the State Department and other U.S. Government agencies on postal and delivery service issues, coordinating our efforts and analysis in order to present the strongest and most viable possible positions at the UPU Congress. We also have been working hand-in-hand with the business community, conducting extensive outreach through export counseling, developing trade missions, and advocating U.S. commercial interests during bilateral and multilateral negotiations. Like our colleagues at the State Department, Commerce preparations for the UPU discussions required developing a greater knowledge of foreign barriers and industry's needs, sector-by-sector and country-by-country.

Even prior to the new responsibilities having been assigned, DOC had been actively working on a number of fronts to improve the international competitive position of U.S. private business providers of international postal and parcel services, as well as closely working with the users of these services, such as the direct marketing industry. We have since increased our level of participation in international fora, attending last year's UPU Congress; joined together with other USG agencies led by the State Department to develop U.S. international postal policy; developed more productive relationships with the many USG agencies involved in issues related to international postal reform, including Congressional staff and those testifying here today; and, perhaps most importantly, Commerce has increased the level of interaction and cooperation with the many U.S. private sector firms that are stakeholders in international postal reform, as well as the U.S. Postal Service. We believe that not only has Commerce raised its profile on these issues, but it has built an expertise that will better serve U.S. international commercial interests.

The Department of Commerce also consults regularly with two services-related Industry Sector Advisory Committees (ISACs), for Services (ISAC 13) and Wholesaling and Retailing (ISAC 17) on issues affecting the international trade of the United States, which include matters directly related to postal and delivery services. In December 1999, Ambassador Southwick briefed ISAC 17 concerning the issues discussed at the UPU Congress. On an ongoing basis we also work closely with leading services trade associations which are stakeholders in international postal policy, such as the Direct Marketing Association.

The Department of Commerce, as a general rule, favors measures that will facilitate the movement of goods across borders in the conduct of international trade in an efficient and timely manner. The increasingly interdependent global economy necessitates that commercial activity be conducted in such a way; modern business practices such as just-in-time delivery from a manufacturing plant to an assembly plant require this.

The objective of efficient and timely shipment of goods is one that has been clearly and frequently communicated to the U.S. Government not only by private sector express shipping operators, but by the private sector firms that use those services in global commercial activity. In order for U.S. businesses to be competitive internationally, businesses must be able to rely on shipping services that are both fast and efficient. Private sector express shipping companies commonly encounter barriers at foreign customs entry points that make difficult the delivery of time-sensitive goods. Customs facilitation should reflect the emergence of the global economy both in the need for time-sensitive shipping and through the management of economic activity by the use of electronic standards.

Reform in the UPU is critical for improving international postal services for users and making the sector more competitive for private providers. But the UPU does not exist in isolation. That is why the Commerce Department is active in other related areas and fora, working with other USG agencies and the private sector on relevant issues in the World Trade Organization/General Agreement on Trade in Services (WTO/GATS), the World Customs Organization (WCO), and in bilateral and other multilateral fora such as air services agreements. The collective effect of liberalization, removal of barriers, and reform will improve the overall international commerce of the United States.

As a facet of overall and sector-specific services trade policy development, my office has held industry sector roundtables over the past year which addressed the distribution services sector and express shipping sector (courier services in the GATS terminology). We know that industry has a strong interest in achieving liberalization in most services sectors. The U.S. express shipping industry, for example, has told us that commitments in the GATS are needed to cover extensive aspects of providing express shipping services, including intermodal transportation and trucking, air auxiliary services, distribution, warehousing, customs, telecommunications, logistics, brokerage, insurance and freight forwarding. The Commerce Department, during the interagency policy development process for the GATS negotiations, has advocated a U.S. Government policy that would give strong consideration to industry's position.

Impact of Postal and Mailing Services in the U.S. Economy

Movement of goods through the supply chain has become integral to the commercial success in the U.S. and global economies. Distribution services are a critical part of product manufacturing and marketing. No economy can be truly open and efficient if its regulatory regime unnecessarily slows the movement of goods between and among suppliers, manufacturers, wholesalers, retailers and the end users. Without the free movement of goods, many of the benefits of liberalized trade, both in goods and services, are stunted.

Services trade has become a major engine for growth in our economy. We are strongly committed to helping the services sector in this country meet its tremendous export potential. Services, such as direct marketing, and postal and delivery services, are key to the development of international commerce. Cross-border trade in services accounts for more than 22 percent of world trade, or about $1.3 trillion annually. U.S. service exports have more than doubled over the last ten years, increasing from $117 billion in 1989 to $246 billion last year.

In the worldwide mail industry, international competitors increasingly are positioning their companies to not only compete with firms from the United States in international markets, but also here in the United States. International providers of postal and delivery services intend to become leading players in the United States, and have demonstrated their intentions through investments, acquisitions and mergers. These sophisticated companies, many of them with origins as national mail services, provide a full range of high quality value-added services.

Here in the United States, as well as across international markets, we can expect to see trends such as postal deregulation, partnerships and alliances, increased competition, globalization, electronic substitution, and more product/services innovation and risk. With these trends, postal and delivery services providers will meet increased competition, and the consumers of these services should benefit from this enhanced competition and greater service options.

Conclusion

Mr. Chairman, you called today's hearing to discuss international postal services, and the role of the Department of State over the past year in developing U.S. policies and providing leadership at the Universal Postal Union Congress last August in Beijing. I hope that my testimony on behalf of the Department of Commerce has made a contribution toward those goals. International postal and delivery services must serve the global economy as the facilitator of an open and fair trading system. This will require further reforms, worldwide, such as granting private postal providers similar access to customs facilities as that given public postal service providers, and a comprehensive, global policy strategy that recognizes the need for change in several different fora.

Mr. Chairman, I would again like to thank you and the Members of the Subcommittee for the opportunity to discuss these important issues here today. I would be pleased to answer any questions.