Canada Post does not cross-subsidize

A lot has been written and said in recent weeks about the efforts by United Parcel Service of America (UPS) to sue the government of Canada under Chapter 11 of NAFTA.

Canada Post's competitors have seized on UPS's lawsuit as further "proof" that Canada Post competes unfairly. The post office, they argue, should be forced to focus on delivering letters and kept out of activities that compete with the private sector — even though Canada's post office offered many of these "competitive" services long before UPS or Canada's 2,000 other private courier companies were in business. (Indeed, the existence of more than 2,000 courier companies in Canada strongly suggests that the post office has not prevented anyone from competing in this business.)

In truth, the NAFTA lawsuit is part of a long-standing campaign by UPS to undermine Canada Post's involvement in the parcel and courier business. For most of the past decade, UPS has argued that Canada Post engages in anti-competitive behaviour that will only stop if the post office is forced out of competitive services or if Canada adopts U.S.-style postal regulation.

Twice during that time, the U.S. courier giant has made formal accusations to the federal Competition Bureau, claiming that Canada Post uses predatory pricing, cross-subsidization and other improper means to limit competition. On both occasions, after extensive (and expensive) investigations, UPS's accusations were found to be entirely baseless.

Furthermore, in an effort to ensure transparency, Canada Post is required to have an independent auditor annually examine its books to verify that lettermail does not cross-subsidize its competitive products.

Having twice received fair hearings from Canada's competition authorities, UPS has resorted to a when-all-else-fails-sue strategy via NAFTA. By taking this third action, UPS is clearly demonstrating that it will push its narrow agenda until it gets the answer it wants — no matter what the cost or how many times the company's claims are rejected.

It is reasonable to ask how many times must Canada Post prove itself to be a fair competitor before UPS's legal harassment ends? If this were a criminal matter, it would have passed double jeopardy long ago.

In the United States, the use of the courts and other judicial processes are often part of a corporation's strategic arsenal. Importing this practice into Canada is neither needed, nor welcomed.

In my view, UPS is attempting to recreate in Canada the skewed conditions the company enjoys in the United States. The U.S. system of postal regulation moves at a tortoise-like pace. It compels the U.S. Postal Service to expose all of its business workings to competitors like UPS, who then use that information to ensure that postal products are priced out of the market to the disadvantage of consumers. UPS has used this system to achieve a hugely dominant position in the U.S. parcel and courier market.

The results of this system are there for all to see: The U.S. post office is expected to lose US$2-billion in 2001, is looking at cutting service and has applied for an increase in stamp prices (almost immediately after the last increase).

The situation now is so grave that the board of governors of the U.S. Postal Service sent an open letter to President Bush last month calling for an overhaul of the system, claiming "the present statutory scheme puts at serious risk our ability to provide consistent and satisfactory levels of universal service to the American people."

When UPS came to Canada it sought to replicate the U.S. system and lobbied hard for a postal regulator. As the Minister responsible for Canada Post at the time, I had the concept of a postal regulator thoroughly evaluated, and by no reasonable cost-benefit analysis could the idea pass muster. UPS should not expect that the conditions that exist to its advantage in its home territory would be duplicated for its benefit wherever else it chooses to do business in the world.

Canada Post is regulated by various oversight mechanisms that balance the commercial freedom needed for success with meaningful government review. This has allowed Canada Post to be self-sufficient for over a decade while meeting the ever-growing needs of Canadians. By any standard, Canada's system has worked better than the alternative south of the border.

As the NAFTA hearing process moves ahead, we will doubtless hear more from UPS about the need to increase the regulation of Canada Post. The federal government need only look south to see where that will lead.

Harvie Andre, a former minister in the Mulroney government, was responsible for Canada PostA lot has been written and said in recent weeks about the efforts by United Parcel Service of America (UPS) to sue the government of Canada under Chapter 11 of NAFTA.

Canada Post's competitors have seized on UPS's lawsuit as further "proof" that Canada Post competes unfairly. The post office, they argue, should be forced to focus on delivering letters and kept out of activities that compete with the private sector — even though Canada's post office offered many of these "competitive" services long before UPS or Canada's 2,000 other private courier companies were in business. (Indeed, the existence of more than 2,000 courier companies in Canada strongly suggests that the post office has not prevented anyone from competing in this business.)

In truth, the NAFTA lawsuit is part of a long-standing campaign by UPS to undermine Canada Post's involvement in the parcel and courier business. For most of the past decade, UPS has argued that Canada Post engages in anti-competitive behaviour that will only stop if the post office is forced out of competitive services or if Canada adopts U.S.-style postal regulation.

Twice during that time, the U.S. courier giant has made formal accusations to the federal Competition Bureau, claiming that Canada Post uses predatory pricing, cross-subsidization and other improper means to limit competition. On both occasions, after extensive (and expensive) investigations, UPS's accusations were found to be entirely baseless.

Furthermore, in an effort to ensure transparency, Canada Post is required to have an independent auditor annually examine its books to verify that lettermail does not cross-subsidize its competitive products.

Having twice received fair hearings from Canada's competition authorities, UPS has resorted to a when-all-else-fails-sue strategy via NAFTA. By taking this third action, UPS is clearly demonstrating that it will push its narrow agenda until it gets the answer it wants — no matter what the cost or how many times the company's claims are rejected.

It is reasonable to ask how many times must Canada Post prove itself to be a fair competitor before UPS's legal harassment ends? If this were a criminal matter, it would have passed double jeopardy long ago.

In the United States, the use of the courts and other judicial processes are often part of a corporation's strategic arsenal. Importing this practice into Canada is neither needed, nor welcomed.

In my view, UPS is attempting to recreate in Canada the skewed conditions the company enjoys in the United States. The U.S. system of postal regulation moves at a tortoise-like pace. It compels the U.S. Postal Service to expose all of its business workings to competitors like UPS, who then use that information to ensure that postal products are priced out of the market to the disadvantage of consumers. UPS has used this system to achieve a hugely dominant position in the U.S. parcel and courier market.

The results of this system are there for all to see: The U.S. post office is expected to lose US$2-billion in 2001, is looking at cutting service and has applied for an increase in stamp prices (almost immediately after the last increase).

The situation now is so grave that the board of governors of the U.S. Postal Service sent an open letter to President Bush last month calling for an overhaul of the system, claiming "the present statutory scheme puts at serious risk our ability to provide consistent and satisfactory levels of universal service to the American people."

When UPS came to Canada it sought to replicate the U.S. system and lobbied hard for a postal regulator. As the Minister responsible for Canada Post at the time, I had the concept of a postal regulator thoroughly evaluated, and by no reasonable cost-benefit analysis could the idea pass muster. UPS should not expect that the conditions that exist to its advantage in its home territory would be duplicated for its benefit wherever else it chooses to do business in the world.

Canada Post is regulated by various oversight mechanisms that balance the commercial freedom needed for success with meaningful government review. This has allowed Canada Post to be self-sufficient for over a decade while meeting the ever-growing needs of Canadians. By any standard, Canada's system has worked better than the alternative south of the border.

As the NAFTA hearing process moves ahead, we will doubtless hear more from UPS about the need to increase the regulation of Canada Post. The federal government need only look south to see where that will lead.

Harvie Andre, a former minister in the Mulroney government, was responsible for Canada Post