Trading Places

China said this week that it would impose tariffs of up to 36% on some imported nylon products from the U.S. to protect its domestic industry from alleged dumping—the latest in a series of trade disputes between the two countries. In this edition of Drucker Apps, you’ll find tools to help you understand why the “protection” in protectionism is a misnomer, the importance of regional trading blocs, how nostalgia can get in the way of progress, and why Alexander Hamilton had it right on these issues. These insights—at once timely and timeless—are based on the ideas and ideals of the late Peter F. Drucker, the father of modern management.

The walls of the world

“In all likelihood, we face a protectionist wave throughout the world in the next few decades. For the first reaction to a period of turbulence is to try to build a wall that shields one’s own garden from the cold winds outside.”

— Peter F. Drucker, Management Challenges for the 21st Century

  • Why protectionism no longer protects. Read more here.
  • Watch Rajat Gupta, Senior Partner Worldwide of McKinsey & Co., discuss the leadership role the U.S. must play in keeping markets open.

Bloc-ing and tackling

“Adversarial trade…challenges the conventional assumptions. Clearly, protectionism that shuts off one’s economy is the wrong answer. It can only make one’s own industry less competitive.”

— Peter F. Drucker, The New Realities

  • Why “regionalism” and “reciprocity” may be the answer. Read more here.

The sin of subsidies

“The new protectionism is driven as much by nostalgia and deep-seated emotion as by economic self-interest and political power.”

— Peter F. Drucker, “The Manufacturing Paradox,” The Economist

  • How “policies that pay old industries to hold on to redundant people can only do harm.” Read more here.
  • Listen to Costco CEO Jim Sinegal talk about why the company buys blueberries from Chile.

How investment trumps trade

“What makes these old ideas attractive is that Hamilton, Clay, and List did not focus on trade. They were neither free traders nor protectionists. They focused on investment.”

— Peter F. Drucker, Managing in the Next Society

  • Hear Peter Drucker explain why information, not imports, lies at the heart of global competition.