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Prime Minister Stephen Harper, left, and China's Premier Wen Jiabao

JASON LEE

Long before Prime Minister Stephen Harper received an unprecedented public rebuke from his tell-it-like-it-is Chinese counterpart, the absence of serious political engagement between the two countries had been damaging Canadian business interests.

Two-way trade between the countries has steadily increased in dollar terms, reaching $24.7-billion in the first half of this year, a 2.9-per-cent rise over the same period a year ago. But that's largely a result of higher commodity prices, not an improved partnership.

Canada's share of China's trade has actually fallen to about 1 per cent from more than 2 per cent a few years ago. Meanwhile, smaller Australia's share has expanded and is now nearly twice Canada's.

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True, Australia enjoys much closer proximity to the Chinese market, but its political leaders have also assiduously fostered closer links to Beijing's rulers. Both Labor Prime Minister Kevin Rudd, who speaks fluent Mandarin, and his conservative predecessor John Howard, who doesn't speak a word of Chinese, have been frequent visitors to China and have managed to lecture its leaders, over tea, about their abysmal human rights record without damaging the expanding trade and investment pipeline.

Meanwhile, Mr. Harper allowed China to drop off the radar screen, after winning power in 2006, leaving the Chinese perplexed. "It's unprecedented for any G8 leaders to simply stop engaging the Chinese at the highest levels," said Wenran Jiang, a public policy fellow at the Woodrow Wilson International Center in Washington.

Other countries have serious trade disputes with China, or are just as upset over its human rights record, "but they have come to the conclusion you need to engage with the Chinese to get those problems resolved or to promote bilateral relations," Prof. Jiang said.

Some of the costs of the tattered relationship to the Canadian economy can be spied in a single agreement announced Thursday by Mr. Harper and Chinese Premier Wen Jiabao.

The deal adds Canada to a list of countries qualifying for more open travel by Chinese tour groups. It will mean tens of millions of dollars in added revenue for Canadian tour operators and others in the hospitality industry, particularly in western Canada.

But it sat languishing for nearly a decade. Visits by several cabinet ministers failed to budge the Chinese, and at one point, Canada threatened to take the issue to the World Trade Organization.

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It could have been signed two years ago, if Mr. Harper had made the effort to visit Beijing, Prof. Jiang said. "These are real economic costs. At the political level, somebody has to be responsible."

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Part of the problem is that Mr. Harper and his closest advisers had reached the mistaken conclusion that they could play their political cards for domestic consumption, because the business relationship with China would take care of itself. In that theory, China so coveted Canadian raw materials that it could not afford to give Canada the economic cold shoulder.

"The widely shared view across China … is that Canada simply went AWOL since Stephen Harper became prime minister," said investment banker Ken Courtis, founding partner of Themes Investment Management in Hong Kong.

"Our major competitors have loved it, particularly in a context where China has been barrelling ahead and our companies have not had the benefit of strong diplomatic relations to help them with the extra edge that is very often the difference between getting a deal done and not getting a deal done in China."

By the time Mr. Harper chose to skip the Beijing Olympics in 2008 and the opportunity that high-profile event might have afforded to mend fences, the Chinese had already adopted a wait-and-see approach to Canada.

"We have to be in the game, engaged at every second, and in every aspect of this powerful shift of the centre of gravity of the world economy to Asia, led by China," Mr. Courtis said. "If we are not, the loser will not be China. There is a view about that Canada can charm China, and everything will be smoothed over. Well let me tell you, China is too old to be charmed, and too big to be bullied."

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