The courier company UPS has filed a claim under NAFTA’s Chapter 11 against Canada Post, in which it claims that the government-owned corporation is using its profits from its first-class mail business – for which it has a government-mandated monopoly – to unfairly subsidise its courier division.
Today’s Toronto Star – the connaisseur’s preferred choice for Horribly Stupid Economic Analysis – has this article, which reproduces without comment this incredibly self-serving analysis:
If UPS wins, Canada Post may opt to get out of the courier business and that would be disastrous for the corporation, said union president Deborah Bourque.
"The corporation needs the profits it gets from the courier business to provide universal service," she said in a statement.
Yes, dear reader, you read that right. She’s claiming that Canada Post’s profits from its courier business – where it is one competitor among many – are subsidising the operations in which it holds a legal, artificial, monopoly.
And what’s worse, she expects us to swallow it. And why wouldn’t she? The Toronto Star did.
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My reaction when I read that was to wonder how the two could possibly reconciliable. Either Canada Post is taking government subsidies and pricing its courier business below market rates or it runs the courier business as a market-oriented, profitable enterprise. In the first case, there’s unfair competition. In the second, there isn’t. But yes, the latter does seem rather implausible.
What accounts for the wide spread in price between sending a small envelope by first class mail vs sending it via courier? In other words, why is postage so (relatively) cheap?
True, the posties’ daily rounds are subsidized by delivery of junk mail, but 50 cents or so for delivering an envelope to a specific address still seems remarkably low by comparison with the price a courier charges for the same service (admittedly, with pick-up and faster delivery).
If conventional mail service is an unconstrained monopoly, surely Canada Post could do a better job of gouging us.
In fact, I suspect first-class mail service is a highly constrained monopoly, despite Canada Post’s apparent independence of the government. If Canada Post began operating its mail service like a classic monopoly, there’d be political hell to pay, not just from grannies mailing birthday cards, but from corporations mailing bills.
So it seems to me that Bourque’s position is, at least, not implausible, because Canada Post isn’t acting like a monopolist when it comes to delivering first-class mail.
did you mean to spell “connoisseur” wrong?