Thursday, March 11, 2010

The Importance of a Viable Competitive Postal Sector

In its report "Economic Policy Reforms: Going for Growth 2010," the Organization for Economic Co-operation  and Development (OECD) suggested that Canada could enhance its economic prospects if Canada liberalized its "postal services by eliminating legislated monopoly protections and privatising Canada Post."  Canada's minister for transportation Rob Merrifield in response restated the Harper government's policy that Canada Post will retain its monopoly.

The OECD concern for the post reflects its position that a vibrant and competitive postal sector can promote sustainable economic growth.   The OECD's first developed its position over a decade ago, in a report entitled "Promoting Competition in the Postal Sector."  At that time, the OECD began raising the concern that member nations were not paying sufficient attention to updating the ownership, business objectives and corporate governance of national postal operators and regulation of the postal sector.  The OECD's work implied that retaining outmoded business models and regulatory structures hindered economic growth and the development of those sectors of a nation's economy that rely on the mail to expand their business or deliver the products that they sell.

The challenges that the Postal Service faces today were the challenges that most national posts faced at the end of the prior century.  These challenges included:

  • First, meeting the growing competitive threat from electronic communication, on the one hand, and express and parcel carriers, on the other
  • Second, internal reform and restructuring to improve efficiency and customer responsiveness and to reduce losses.
While in 2000, the "growing competitive threat from electronic communications," appeared to be far in the future, that is no longer the case. Today, no party is likely to make arguments similar to those presented to Presidential Commission on the Postal Service that implied that concerns about digital diversion were overblown.  Many of these presentations compared those that warned about digital diversion to the boy who cried wolf who had previous opined the end of the Postal Service as the telegraph, telephone, and facsimile machine became ubiquitous. 

OECD countries that prepared their national posts by advancing reforms and restructuring have weathered the combined impact of a severe economic downturn and a rapid shift in consumer preferences for digital delivery of documents.   While profits are down, most posts in these countries remained profitable in 2009.   These posts are successfully adjusting to the new competitive environment that in addition to digital competition, now may include a viable physical delivery competitor.

As Congress and the Obama look for ways to more rapidly grow the economy and create private sector jobs, it is time to take a serious look at how reforming the postal sector of the economy could speed economic growth and private sector job formation.

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