The Importance of Postal Reform to the Paper Products Industry

Since 2000, the U.S. paper industry has shut down 8% of its printing and writing papers capacity, while employment at the pulp and paper mills has decreased by more than one quarter over the last four years.

Paper companies have had to close their facilities and lay off workers in large part because U.S. shipments of printing-writing papers have fallen considerably in recent years. Much of that decline can be attributed to the 2001 recession, electronic substitution and increased import penetration.

However, the postal rate increases of 2001-2002, which were the largest since the early 1990s, have also contributed significantly to the curtailment of paper shipments in recent years – and therefore to the displacement of workers in the U.S. paper industry. One-third of all printing-writing paper consumed in the United States flows through the Postal Service. Q: What are some of the trends in the industry that have necessitated it?

Because mail shipments dropped in response to the large rate hikes, Postal Service revenue gains have been quite modest in recent years. Between 2000 and 2003, for example, revenue increased by just 6%, despite postal rate hikes for some mail classes that were three or four times greater than this. Furthermore, despite a rapidly growing economy, postal revenue increases were only fractional in 2004.

Without postal reform, the Postal Service later this year will once more need to initiate proceedings to request double-digit increases in postal rates for the beginning of 2006. Again this will lead to a reduction in U.S. postal volumes, U.S. paper shipments and U.S. mill workers.

In essence, the major problem for the Postal Service – and the paper industry and its workers – is electronic substitution. It will reduce mail volume per delivery point but will have no appreciable reduction in mail costs per delivery point. But because the number of delivery points will be rising, in line with economic and population growth, total postal costs will inevitably continue to rise. Without reform, the Postal Service will be forced to respond by increasing postal rates again and again. And this in turn will encourage electronic substitution even more, creating a declining financial spiral that will greatly undermine the demand for paper in the United States.

Given an ever-increasing competitive environment from electronic substitution, as well as significant benefit obligations for current and future retired employees, it is clear that the Postal Service cannot restore its financial health through a continual series of substantial rate increases. Rather, the revitalization of a viable postal service – and of the printing and writing industry – is dependent on the development of a postal reform plan that increases efficiencies, reduces costs and maximizes volume and revenue.

At this time, messages are being delivered to a business audience only. There are no plans to expand the campaign for strictly consumers.

AF&PA and NPTA Alliance Support Postal Reform

The strength of the Postal Service is very important to the paper products industry

• AF&PA, NPTA Alliance members and the allied paper products industry (composed of pulp, paper and paperboard mills as well as plants that convert primary paper into envelopes, stationery, and boxes) provide the raw materials for paper-based communications – much of which is transmitted via the Postal Service.
• More than 10 million tons of printing and writing paper – about a third of U.S. demand – is shipped through the U.S. Postal Service (USPS).

Decreased volume and demand for mail services have had negative consequences on the paper products industry

• Decreased demand for mail and subsequently printing and writing paper has indirectly affected the upstream portions of our industry.
• As the Postal Service has experienced a recent decline in mail volumes, industry members and their customers have felt the upstream impact. Since 1997, paper companies have closed over 100 mills and lost more than one quarter of its jobs. The decline in paper mail processed through the Postal Service is one factor accounting for these losses.
• The more the Postal Service has raised rates the more volume it has lost, creating a declining financial spiral. USPS data shows that shipments of mail trend downward as a result of postal rate increases.

AF&PA and the NPTA Alliance strongly support postal reform initiatives that will foster stability in the USPS

• A rate setting process that offers both stability and predictability in future rate increases so that private industry reliant on the Postal Service can adjust their business plans accordingly.
• Enhancement of the Postal Service’s ability to reduce costs and achieve the lowest combined cost for processing and delivering mail including opportunities for expanding work-sharing and pursuing additional private sector partnerships.
• Improvement in productivity to encourage employee incentives. The Postal Service should have the flexibility to pay competitive wages, measure job performance, and reward and penalize accordingly.
• Improvement of financial transparency and measurability to support a less onerous and expensive rate process and to support employee incentives.
• Investment in technology to enhance operational efficiency.
• The responsibility for funding Civil Service Retirement System benefits relating to the military service of Postal Service retirees should be returned to the Department of the Treasury, and excess funds should be released from escrow account to mitigate size of future rate increases.
• Support for universal service, continuing delivery to every household in the country.

What You Can Do

Provided below are links that will take you to a form letter that will make it easier for you to correspond with your local Representative/Senator regarding the importance of Postal Reform. Please select the appropriate WORD document and save it on your system so that you can fill in the missing information (noted in boldface).

Two versions of each letter are included so that you can pass the second set of letters to employees in your company.

Completing and mailing these letters should take no more than 5 minutes of your time but the impact can be enormous. Please join us in this effort. Your voice—together with the rest of the members of our industry—will make a difference.

Letter to Representative from company owner/manager
Letter to Senator from company owner/manager

Letter to Representative from company employee
Letter to Senator from company employee