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Gordon Ritchie is a former Canadian ambassador for trade negotiations and deputy chief negotiator of the Canada-U.S. free-trade agreement.

After earning high marks for managing a very difficult situation with Canada’s most important economic partner, the United States, Canada’s federal government has clearly failed to make the grade in handling our second-most important economic partner: China.

The stage was set when the World Trade Organization admitted China as a member in 2001. In the intervening years, China has taken extraordinary advantage of the resulting opportunities to flood richer markets with low-cost consumer goods, while importing, borrowing or stealing technologies from more developed countries. Concern is mounting in the Asia-Pacific region that this one-way bargain is unsustainable.

Enter the Justin Trudeau government. After expressing his admiration for the Chinese system, the Prime Minister mused about some form of trade agreement with the Asian superpower. The potential benefits – China’s huge and rapidly growing new markets for our resources, in particular – were attractive. After a disruptive visit to a Vietnam summit on Trans Pacific Partnership talks, Mr. Trudeau landed in Beijing ready to make a deal – but at that point, and not before, he proposed a “progressive” trade agenda, and the Chinese rebuffed him.

Meanwhile, concern was growing in the technology community about Huawei, the Chinese telecom giant. Having carved out a substantial share of Canada’s market for its consumer products, the company went after the biggest prize: providing equipment for Canada’s 5G network, which would serve as the foundation for the next generation of telecommunications. Bell, one of Canada’s largest telecom companies, quickly came on board, proposing to make Huawei central to its expansion plans, while the Canadian security establishment unconvincingly argued that it could keep the company under control when other countries could not. But competing companies objected, while the security establishments in the Five Eyes alliance issued warnings that under Chinese law, Huawei, like other Chinese companies, would be required to obey the orders of the state. The United States banned the company from the central core of its network, and Australia and New Zealand followed suit; the United Kingdom undertook a critical review, with a negative result widely expected.

That’s when Meng Wanzhou – a Huawei executive and the daughter of its founder – entered the picture. The Prime Minister was apprised of Ms. Meng’s plans to transit through Vancouver, and U.S. authorities demanded her detention and extradition under our bilateral treaty.

A competent government would have found a way, as former deputy prime minister John Manley has suggested, to discreetly warn Ms. Meng off. Instead, despite the ample warning, Canadian officials arrested Ms. Meng at the Vancouver airport.

To make matters worse, U.S. President Donald Trump proclaimed that he might deign to drop the extradition demand if it helped in trade talks with China. The Chinese were apoplectic, detaining two Canadians for spurious reasons, and China’s ambassador to Canada wrote a highly undiplomatic and menacing op-ed in The Globe and Mail. It appears to have caught Ottawa off guard that China, an authoritarian dictatorship, would play the bully in blatant disregard for the rule of law.

The result of this astonishing ineptitude? Canada finds itself in an impossible situation, caught between the world’s two economic superpowers as they go toe to toe in a struggle for supremacy.

It should never have been this way. We should have recognized that we do not call the shots in these kinds of situations. We should instead be alert for the occasional opportunity to maximize our gains and minimize the damage as the major powers seek some shifting accommodation.

We should have shelved naive notions of a free-trade agreement with China. That is not and never was in the cards, at least on terms that were remotely acceptable to Canada. We should instead focus on specific sectoral opportunities to expand our exports to meet Chinese requirements.

Continuing to dither over a role for Huawei in 5G networks only exacerbates the situation. Sooner or later – but at a cost to Canada’s reputation that grows every day – we will have to accept that if the United States and other Five Eyes countries are barring Huawei from their 5G networks, Canada will have no choice but to belatedly follow suit.

The timing of Ms. Meng’s case is highly unfortunate. But the bad decisions that led us to this point have left Canada with no alternative other than to let the process unfold, in the hopes that the Americans will withdraw their demand or the Canadian courts find the case unconvincing and release Ms. Meng.

A new year offers an opportunity to do better. The file is too important to continue to mishandle.