TALKING BUSINESS: A representative of the Canada Asia Business Network presents investment opportunities in Canada to a Chinese businessman at a consumer goods fair in Ningbo, Zhejiang Province, on July 9, 2008 (TAN JIN)

In 1998, then Chinese Premier Zhu Rongji referred to Canada as China's "best friend in the world." His statement reflected what many observers often described as a "special relationship" between the two countries, one that dated back to the mid-19th century.

During toasts at bilateral meetings, Chinese and Canadian officials were sure to mention Chinese immigration to Canada, Canadian missionary work in China, the sacrifice of Dr. Norman Bethune during the War of Resistance Against Japanese Aggression, the Canadian wheat sales that eased famine conditions in the early 1960s, Canadian Prime Minister Pierre Trudeau's decision to establish diplomatic relations in 1970, and the expanding economic relationship that developed in the 1990s.

Today, however, no one would describe Canada and China as "best friends." The relationship is confusing at best, frosty at worst. What happened?

The short answer is the election of a Conservative government in Canada in January 2006. A longer and more complex explanation has to do with broad trends and conflicting priorities in Canadian foreign policy. The main conflict has been between an emphasis on autonomy and multilateral engagement on one hand, and a close identification with traditional allies and an emphasis on the promotion of what is often called "Canadian values" on the other.

Autonomy and multilateralism were priorities of Jean Chrétien, the Liberal Prime Minister who governed from 1993 to 2003. The free trade agreement signed with the United States in the late 1980s had led to a dramatic surge in cross-border trade to the point that more than 80 percent of Canadian exports were going to the American market by the mid-1990s. This intensification of the Canada-U.S. economic relationship raised concerns about the future of Canada's political independence, especially since the collapse of the Soviet Union and the end of the Cold War had created what some analysts referred to as a "unipolar" American-dominated world.

As a result, the Chrétien government sought to create some distance-even if only symbolically most of the time-from Washington. In 1994, Canada adopted a policy of active engagement with Beijing based on four pillars: peace and security; sustainable development; human rights and the rule of law; and economic partnership. Although each pillar was supposed to be equal, the economic dimension overshadowed the others, driven partly by the rapid growth of the Chinese economy during the 1990s. Chrétien twice led large "Team Canada" trade missions to China, and bilateral trade reached $17.5 billion by 2001, up almost 900 percent from 1989.

On the political front, Canada broke with the United States and ceased to support the annual resolution at the UN Commission on Human Rights criticizing China's human rights record, choosing instead to enter into a "human rights dialogue" with Beijing in 1997. Chrétien also publicly criticized what he called the Americans' "cowboy-style attitude" during the 2001 Hainan Island Incident. A U.S. military surveillance plane rammed into and destroyed a Chinese military aircraft over south China's Hainan Island on April 1, 2001.

Chrétien retired in 2003 but his successor, Paul Martin, continued to emphasize warm relations with China. In late 2005, he and Chinese President Hu Jintao announced a new "strategic partnership" between the two countries.

The Liberal Party's China policy was not without its critics. They felt Canada was subordinating human rights and democracy promotion to trade, and that the country was drifting too far from its traditional American ally. These ideas became part of the platform of the new federal Conservative Party that was founded in 2003. Stephen Harper, the party's leader, said, "There is now no more important foreign policy interest than maintaining the ability to exercise effective influence in Washington so as to advance unique Canadian policy objectives."

Harper's preference was to tilt Canadian policy in Asia toward other Western-style democracies and to put greater emphasis on human rights. After winning the January 2006 election, he made no effort to flesh out the Martin-Hu "strategic partnership" and his government took a number of actions sure to irritate Beijing, such as renewing public criticism of China's human rights record, suspending the bilateral human rights dialogue, loosening restrictions on contacts with Taiwan and reviving accusations of industrial espionage. He topped it off in late 2007 by greeting the Dalai Lama on Parliament Hill-other Canadian leaders had met with the Dalai Lama but never at an official government location.

Unrepentant stance

Asked whether he was concerned about the impact of his pugnacious approach on Sino-Canadian relations, Harper was unrepentant: "I think Canadians want us to promote our trade relations worldwide, and we do that. But I don't think Canadians want us to sell out important Canadian values. They don't want us to sell that out to the almighty dollar."

But significant elements of the Canadian business community were concerned, worried that Canadian companies would be handicapped in the Chinese market. In the short term, that seems not to have been the case as trade continued to expand until the recent worldwide economic crisis. But Canada's share of the Chinese market has been shrinking and Canadian exports remain dominated by the sale of commodities. According to a report in Canadian Business magazine, in 2006 Canada ranked 10th on the Chinese Commerce Ministry's list of China's top 10 trade partners; by 2008 Canada had fallen off the list completely.

Jim Balsillie, co-founder of Research in Motion, one of Canada's most successful hi-tech companies, publicly called on the federal government in November to "push the restart button on Canadian-Chinese relations."

Former Prime Minister Chrétien has also criticized Harper's policy as both ineffective and shortsighted. In a speech last summer to the Canadian Bar Association, he said: "There are always consequences in what you do. If you think that attacking them [the Chinese] would be positive, what do you gain? It is the second biggest economy in the world, and in 50 years, it will be the biggest economy. Suddenly, you break the bridge.

"We are at the bottom of the ladder in terms of having any influence with China," Chrétien added. "Ask any businessman who has been to China, and he will tell you the same thing."

In fact, there have been some slight signs of warming. For one thing, Harper and his ministers have muted their outspoken criticism. Harper has even suggested he might visit Beijing, although no trip has been scheduled. And the government has expanded Canada's diplomatic presence in China, announcing six new consular bureaus in regional cities.

But new irritants have also appeared, most recently the Canadian decision to grant a work permit to Lai Changxing, a fugitive who is wanted in China on smuggling and corruption charges. "We are extremely concerned about the Canadian side's behavior," Chinese Foreign Ministry spokesperson Jiang Yu said on February 10. "The Chinese Government is unwavering and consistent in its position that the fugitive Lai Changxing return to face trial under Chinese law. We have already made serious representations to the Canadian side."

Ironically, the Canadian Government supports sending Lai back for trial but has been blocked by its own courts, which have not accepted Chinese assurances that Lai will not face execution if he returns.

The Lai case has been dragging on since 1999. Back then, when China and Canada were "best friends," it was a minor issue. Now it is another disagreement in the no longer "special relationship."

The author is an editor at The Toronto Star. In 1989-90 and 2000-01 he was a member of the editorial staff of Beijing Review