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It's a scary time in Canada these days, and not because of Halloween. A mysterious new investment treaty with China has people spooked. On top of that, the government is about to decide whether CNOOC, a Chinese state-owned oil company, can plant its big red boots in our oil patch. Watch out! We're signing our sovereignty away. Before you can say boo, the rapacious foreigners will turn us into global coolies.

Does all of this seem eerily familiar? Why, yes. Good old-fashioned Canadian nationalism has come back to haunt us. Back in the 1980s, the people who fought the trade deal with the U.S. said the very same things about the Americans. It didn't turn out that way, of course. Free trade made us prosperous and rich.

There's a load of irony in all this. The people who used to be anti-American and pro-Chinese seem to have changed sides. But now that Barack Obama is in office (for the moment, at any rate), anti-Americanism isn't quite as fashionable as it used to be. The Chinese are now the bad guys. And the more they act like capitalists, the more they're demonized for being Communists. "We're not dealing on an even playing field with Communist China," the NDP's Thomas Mulcair warns. "Why in heaven's name would we give up our own resources that way to another country?" The one thing that never goes out of fashion in this country is moral superiority.

The disappointing truth about this investment deal is that it's an incremental step ahead. It won't allow the Chinese to rampage through the land. Canada already has 24 similar agreements with other countries. According to trade lawyer Lawrence Herman, there are 2,500 such agreements in force around the world, and many of them are signed by China.

The real risk to Canada isn't that the Chinese are coming, it's that they'll say to hell with it and take their money somewhere else. And that would be disastrous. We need vast pools of capital to develop our oil and gas fields – hundreds of billions of dollars within the next decade. Where will that money come from? The U.S.? Europe? Fat chance. The people with the money are emerging markets with huge capital surpluses, such as Malaysia and China.

At the same time, we have to diversify our customer base because we're being profoundly screwed by the Americans. So long as they're our only customer for crude oil, they can set the price. The American discount is costing us $18-billion this year alone, according to an estimate by the Canadian Imperial Bank of Commerce.

Yet, the Harper government can't figure this thing out. It's acting like its own worst enemy. After announcing to the world that Canada is open for business, it turned down a perfectly respectable takeover offer from the state oil company of Malaysia. In other words: Maybe we're open for business, unless we're not. Meantime, the cabinet is bitterly divided between the pro-China faction and the anti-China faction. Immigration Minister Jason Kenney, for example, thinks that, because the Chinese run sweatshops and abuse human rights, we shouldn't let them near our oil patch. But our oil is here, not there. The Chinese have no doubt figured out that, in Canada, they have to play by our rules.

China is rapidly becoming a sophisticated player that operates around the world. We look like local yokels who don't know what we're doing. We need to make up our minds and get on with it. That doesn't mean we shouldn't bargain hard. The proposed CNOOC-Nexen deal offers us a good chance to negotiate better access in China for Canadian firms, and we should use it.

As the government hems and haws, it has ceded the field to the Sinophobes. Yet, fears that the Chinese will take over our oil industry are ridiculous. As Carleton University's Fen Hampson, an expert on global security, points out, the oil sands are so vast that "it is difficult to see how any one firm could dominate production."

It's easy to figure out why NDP Leader Thomas Mulcair and Green Party Leader Elizabeth May want to tell us scary stories about China. It's not really China they want to stop – it's any more development of the oil sands. So far as they're concerned, bitumen is the devil's creation, and they'll fight it with everything they've got. Those of us who think that responsible development of the oil sands is crucial to our prosperity are just puzzled. For Canada, this is the most important game in the world today. And we're playing it like amateurs.