If you are an influential, high-ranking business person, have you ever asked yourself this question: Should my business decisions be influenced by my: place of birth, my residency, or my citizenship? Unlikely, unless you are an immigrant. But it is a rational question, although it’s not particularly interesting or relevant in normal times.

Economic Theory First

But these are not normal times, far from it. Before we get to what makes our times different, let’s examine the question and the answers historically. Ever since Adam Smith described capitalism as an economic system he called “free market”, his theory held that markets work best based on the division of labor where each nation or country produces economically what it is good at and buys the rest from other countries or producers. This has settled the “patriotism” issue in capitalist economics for good. However, it’s useful to point out that Adam Smith’s definition of capitalism, which is still valid today, was in part a reaction to the previous economic theory called “mercantilism”. Mercantilism holds that it’s in the interest of the state and the country to export as much and import as little as possible. That’s how countries become wealthy; they sell more and buy less, and the difference is what creates the wealth.

So here we have it in simple terms: capitalism promotes wealth in general regardless of nationality, whereas mercantilism is a system that promotes a single country’s well-being at the expense of other countries because it’s logically not possible for every country to export to other countries and import nothing. It’s not that mercantilism is not possible at all; it is, and many countries still practice it, such as China. But it’s not possible as a universal economic system in which every country is mercantilist; only a few countries can be mercantilist at any given time.

Therefore, based on the theory, patriotism is not economically useful in a capitalist economy in good times or normal times; in fact, it’s the opposite.

The “Enemy” List

But today and in the foreseeable future, times are not normal. When our country’s biggest trading partner for most of our history turns on us overnight and starts barking at us like we are its economic and political menace, we must change our strategic outlook, the country, the corporations, and the people.

With regards to the USA, don’t assume that this is just temporary insanity that will pass at worst in four years. Remember, the temporary insanity already existed in 2016-2020. In was repudiated in 2020 but came back even stronger in 2024. Therefore, it’s unlikely to go away quickly and likely to become worse in the future.

And USA is not the only problem. We have other countries that are not friendly to us, such as India and China. Yet we do significant business with them. I will not go into specific details and political issues, and it’s not my intention to argue one way or the other about who is at fault.

Strategic Pivot For Canadian Businesses

The point is that Canadian businesses need to start thinking strategically about their foreign partners, and that should include a dose of patriotism in deciding with whom and how they do business.

The basic strategic consideration should be: Always prefer domestic partners and vendors. Don’t assume that just because the foreign vendors promise you a better price and/or service they will deliver. Do your research and due diligence; there might be at least as good or better domestic alternatives if you invest the time to find out. But even if the foreign partners provide a cheaper alternative to domestic vendors, is a small saving worth the strategic risk of engagement?

And under no circumstances should you think that business and politics don’t mix. ”Au contraire”, the political risks are always present. It’s just that they are small, mostly negligible with regards to friendly foreign countries. But occasionally can explode overnight. This typically happens when there is a regime change, as happened in the USA.

However, risks are exponentially higher when dealing with non-friendly countries like the USA, India, and China. In Canada, the government and the private business are two distinct groups, which often have different goals and priorities. In the other countries, which are usually autocratic, including the USA, business often works with or for the government, and hence getting into business relationship with these firms is essentially abetting the unfriendly government. While this may not yet have happened in the USA to a significant degree, they are well on the way and it’s only a matter of time before the government starts dictating to businesses how to conduct themselves. If a foreign government is unfriendly to your home country, do you believe that it will be friendly to your business?