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A cargo ship loaded with containers bound for Vancouver's port makes its way under the Lions Gate Bridge.

An eight-person team of engineering, sales and marketing staff at Monarch Industries Ltd. is tackling a critical mission for the Winnipeg manufacturer: Crack China.

The 74-year-old maker of hydraulic cylinders and other products has long done most of its business in the U.S. But within a decade, Monarch Industries wants to completely reverse that, aiming to do 80 per cent of its sales outside North America, starting with China.

"We've had solid growth up until this year. We've had no growth this year," says Gene Dunn, chief executive officer of privately held Monarch, which wants to more than triple annual sales to $300-million in the next 10 years.

Monarch's China team has a head start: The company already makes some products in China for the North American market. But with the U.S. economy still flagging, the company now knows it must look globally for new sales opportunities.

"We're looking at poking our noses in all corners of the world," Mr. Dunn says.

Monarch, like many Canadian companies, has discovered that success in the U.S. is no longer a guarantee of long-term prosperity. This year, shockingly, Canada has lost its long-entrenched position as the top exporter to the U.S., decisively overtaken by China.

After years of holding a huge lead, Canada found itself tied with China for exports to the U.S. in 2007 and 2008. Canada is now a distant second, with the value of Canadian exports at just three-quarters of China's.

Now, Canadian exporters are adjusting to a stark new reality. The loss of the No. 1 spot among sellers of goods to the U.S. may not be a temporary symptom of recession but a permanent structural change. It is forcing fundamental changes, including establishing overseas sales offices, hiring multilingual staff and working closely with Canadian government representatives in fast-growing regions such as Asia.

At stake is the long-term health of the Canadian economy, where jobs in the past three decades have been dependent on export success, mostly products made for American destinations.

"The U.S. has been a blessing and curse," said economist Todd Hirsch at ATB Financial in Calgary. "We've grown wealthy exporting to the U.S. but the curse is it's been too easy. Our business culture is not orientated to hustling for international customers."

Resource companies in British Columbia are at the forefront of the drive to build new overseas markets, as they have watched business in the U.S. implode.

The B.C. forestry industry has suffered an extended recession because of a too-great reliance on American customers, and next month it will make a second trade mission to China with about 40 people, led by Forests Minister Pat Bell and CEOs of four of the province's largest forestry firms. The first foray last November to strengthen ties with top Chinese leaders has helped the province's foresters to roughly double the amount of wood sold to China this year compared with 2008.

With all exporters fighting for a smaller trade market this year, the importance of additional buyers for goods has become more urgent. Forecasts for a tepid recovery in the U.S. compound the situation.

"We expect the U.S. market to struggle for a while," said Duncan Davies, CEO of Vancouver-based International Forest Products Inc.

Mr. Duncan is among the contingent on the Nov. 6-14 trip and his company has increased its business in China in the past year, supported by a number of Chinese-speaking sales employees to connect with buyers in China.

Part of the reason Canada has fallen behind China in the U.S. is that demand for the low-cost goods China makes - from bargain-rate DVD players to value-priced clothing - has remained relatively strong during a recession that has seen consumers hunt for the cheapest product available. "China has truly begun to flex its muscle on the international trade landscape," said economist Derek Burleton at Toronto-Dominion Bank. "Canada has to diversify."

Meanwhile, demand for many of Canada's key exports to the U.S. - energy products like natural gas and manufactured goods such as auto parts - has fallen sharply. On top of that, the Canadian dollar has surged.

A potential salve for Western Canada's suffering natural gas industry is emerging in the form of a proposed gas export terminal on the northwest coast of B.C.

Canadian diplomats have moved to calm fears among Asian buyers that the U.S. could lay claim to resources in Canada and not allow them to go to Asia. This concern is often raised by would-be buyers in Asia, who mull deals for gas exports as well as a proposed oil sands export pipeline.

"The government can't endorse our project but they have done a lot to quell anxieties and get us contacts," said Alfred Sorensen, CEO of Galveston LNG Inc., whose proposed $3-billion export facility near Kitimat, B.C., is backed by the world's largest gas importer, Korea Gas Corp., and large producers such as EOG Resources Inc.

In B.C., the provincial government has worked the home side, helping convince Asian buyers that new gas discoveries in the province's northeast can be depended on to deliver on 20-year supply contracts.

South Korea imports about 26 million tonnes of liquefied natural gas each year and has a preliminary deal for two million tonnes from Kitimat's planned five million tonnes a year. Japan imports about 60 million tonnes, but as in many sectors, China is where the real action is. It has capacity to import about 20 million tonnes of gas a year and has plans to more than double that.

So, for Canada to really capitalize on the potentially massive gas fields in northeastern B.C., which face competition from equally large pools in Texas and Louisiana and a proposed gas pipeline from Alaska, a way to move product to Asia appears essential to the country's exporting future.

"The Canadian government wants to see China play a role and we see China as a really big opportunity," Mr. Sorenson said.

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