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More than five years after negotiations began, Canada has failed to obtain a potentially lucrative tourism deal with China, even though 63 other countries have concluded the same agreement in much less time.

Sources say the Communist government is quietly punishing Canada for failing to hand over China's most wanted fugitive, Lai Changxing, the alleged crime kingpin who fled to Canada in 1999, after accusations that he bribed officials and evaded customs duties in a multibillion-dollar smuggling ring in the bustling port city of Xiamen.

The tourism deal, which would make Canada an approved destination for Chinese tour groups, could be worth billions to the Canadian tourism industry. By some estimates, it could eventually bring one million extra tourists to Canada every year, spending an average of several thousand dollars each.

The deal's failure has become a symbol of Canada's fading influence in the world's fastest-growing market, and will be a focus for the delegations led by Prime Minister Paul Martin and International Trade Minister Jim Peterson in Beijing this week.

The issue also highlights China's willingness to use its economic clout for political and diplomatic goals.

Mr. Lai, who has claimed refugee status in Canada, has fought a lengthy legal battle to resist Canada's efforts to deport him to China.

He is China's most wanted fugitive and his stay in Canada has annoyed the Communist country's top leaders. The case is considered one of China's biggest corruption scandals since the Communist takeover in 1949. More than a dozen people have already been executed for their role in the alleged scheme.

Mr. Lai says he is the victim of political persecution and merely followed existing business practices in China. He lost his claim for refugee status in Canada but is appealing the decision to the Federal Court of Appeal.When Ottawa began seeking the tourism pact in 1999, it would have been one of the first Western governments to obtain the deal. Now, if the deal is rescued, Canada will be one of the last.

"One-quarter of the UN membership has leapfrogged our place in the queue," said Yuen Pau Woo, chief economist of the Asia Pacific Foundation of Canada.

"Regardless of how you feel about sending Mr. Lai back to China, the fact that a tussle over a single corrupt businessman can trump an agreement on tourism perhaps says something about Canada's standing with the Chinese."

Howard Balloch, a former ambassador to China who now heads the Canada China Business Council, said the federal government should not tolerate Beijing's continued efforts to delay the tourism deal because of the Lai case.

"They're drawing this linkage and it's not a logical linkage and we should try to unlink it," he said.

Tourism from China has surged dramatically with that country's economic boom. With 24 million tourists travelling abroad last year, China overtook Japan as the biggest Asian tourism source. The World Tourism Organization has predicted that China will send 100 million people abroad by 2020, making it the world's fourth-largest source of tourists.

Canada is already home to one million Chinese immigrants, and should be a natural destination for these tourists. One study estimated that 1.9 million Chinese tourists would be keen to visit Canada if permitted, but the absence of a tourism deal has left Canada with only 0.4 per cent of the Chinese market, only about 75,000 visitors a year, usually travelling on business visas.

Chinese tourism flows to Canada actually declined from 2002 to 2004, while rising to most other countries. Without an agreement on Approved Destination Status (ADS) from the Chinese government, Canada cannot advertise in China and cannot receive most types of Chinese tour groups. It adds to the lingering perception that Canada is not receptive to these tourists, Mr. Woo said.

Joseph Caron, the Canadian ambassador to China, has been worried about the lack of a deal.

"Clearly, China presents significant untapped potential as a source of tourists to Canada," he wrote in an e-mail last year to Michele McKenzie, president of the Canadian Tourism Commission.

"Canada has been seeking ADS . . . for several years but China remains unprepared to enter into serious discussions on this issue," Mr. Caron wrote in the leaked e-mail.

Richard Liu, who headed the Beijing office of the Canadian Tourism Commission from its founding in 2000 until last spring, said the Chinese government was ready to sign an ADS agreement with Canada in the summer of 2001. But the deal was scrapped at the last minute because of the Lai case, he said.

He recalled an angry telephone call in August, 2001, from a senior Chinese official who asked, "Why is Canada protecting the criminal Lai?"

The tourism issue became "very touchy" after that, he said. "I was struggling to persuade the Chinese government to change its mind. It was very tough."

While the Lai case was the main reason for Beijing's refusal to sign an ADS agreement with Canada, there were other problems, he said.

Canadian immigration authorities were suspicious of the deal, fearing it could open the doors to illegal migrants. And the Canadian tourism commission failed to give a proper budget or proper support to its Beijing office, according to Mr. Liu and other sources.

"I never had any trust from the Canadian head office," Mr. Liu said in an interview. "They treated me like crap. We are gradually losing the Chinese market. We had such a wonderful opportunity and we destroyed it."

With a report from Rod Mickleburgh in Vancouver

Touring Canada

A comparison look at tourists to Canada from the Asia-Pacific region for 2002 and 2004. The SARS outbreak of 2003 makes that year a poor comparison. 2002 figures are listed first, followed by 2004. Percentage increases are in parentheses

New Zealand: 4,178, 4,470 (7%)

China: 9,956, 9,688 (-2.7%)

S.Korea: 16,446, 18,983 (15.4%)

Australia: 17,778, 22,160 (24.6%)

Japan: 38,817, 44,515 (14.7%)

Chinese tourists to Canada from 2001 to 2004

8,712, 2001; 9,956, 2002; 5,248, 2003; 9,688, 2004

SOURCE: CANADIAN TOURISM COMMISSION

CORRECTION

A chart in yesterday's editions misstated the number of tourists who visited Canada from selected Asian countries between 2001 and 2004. The figures given were for the month of June in the years shown, not the entire year.

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