Silent partner

It was nearly two years ago that the Canadian business community was euphoric about the prospect of an opening Chinese marketplace.

There was non-stop talk about a new market of billions of new customers, of manufacturing deals and resource sharing. Trade missions were set up, city twinning was encouraged, and joint agreements signed with big smiles and shaking hands. The possibilities were endless.

But the excitement fizzled as quickly as it began. Now, it's starting to look like the more opportunities are given, the more Canadian investors are ignoring them.

In fact, after watching US investment banks hit it rich by taking early minority stakes in Chinese state banks, Canadian Finance Minister Jim Flaherty had to publicly urge the country's lenders to be more aggressive in China. Only one Canadian bank – Scotiabank – has taken the plunge, buying a small portion of Xi'an City Commercial Bank.

Many Canadian businesses have found success in China but just as many have tried and failed.

Even worse, a significant number have been approached but turned down the opportunity. This includes the likes of iconic coffee-and-donut chain Tim Hortons and houseware and auto parts retailer Canadian Tire.

Controversial agenda

There are a number of excuses – the king of which is the quickly cooling relationship between the Canadian and Chinese governments.

Canadian Prime Minister Stephen Harper – arguably to counter critics who feared his Conservative government would cater to the whims of greedy big business at any cost – has made it his duty to call out China on its human rights record every chance he can get even since he was elected in early 2006.

After years of bridge-building between the two countries, Harper may have been a one-man wrecking ball. But with limited progress pre-Harper, it's difficult to dump all trade woes on the prime minister's lectures on rights and dignity.

One widely subscribed view is that Canadian business timidity and fear of the unknown are really to blame. Historically, the country has been economically tied to the US and quite contentedly so. The world – and the business practices – outside Canada's North American bubble are vastly different. And, to be frank, that's scary.

As a result, the country branches out in baby steps, such as the 2001 free trade agreement with Costa Rica, a stable Central American country and a vacation spot for many Canadians.

The ongoing free trade talks with India represent a much bolder move – but, unlike China, India is a democracy with a British colonial past similar to Canada's and a legal system rooted in English common law.

Baby steps, maybe. But at least it's outside of Canada's present economic range.

Stepping out

If this does signal an easing into the international marketplace, it could come at no better time in terms of re-exploring China. The recent decision by the Bush administration to hit Beijing with tariffs on paper exports and seek WTO action on intellectual property rights looks suspiciously like the opening shots of a potential trade war.

It was only a matter of time before American frustration at China's refusal to rein in its currency and trade deficits reached breaking point. Washington's argument that China can no longer be perceived as a developing county in need of help from the West may be partially justified, but lobbing these kinds of salvos at major trading partner is potentially damaging.

For nations not keen on joining a new US coalition of the willing, though, it could spell opportunity.

Those hundreds of small and medium-sized Canadian businesses that have been overshadowed by larger US firms may at last find themselves in demand. Enbridge's proposed 400,000 barrels-a-day pipeline from Canada to China, hamstrung by simple disinterest for months, might return to the top of the agenda.

Even the smaller lumber companies that have slipped beneath the radar of international partnerships may be on the receiving end of some much-needed Chinese attention.

Canadians have always been perceived as the good guys, the fair players on the international stage. They are welcomed almost everywhere they go, and that will be especially true and possibly beneficial if economic relations cool with the US.