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What’s behind Canadian reluctance to do business in Asia?

Canadians who aren't in the business of peddling natural resources are often demonized for their reluctance to embrace all those wonderful business opportunities in China and other promising emerging Asian countries.

In fact, if the latest national sounding is anything to go by, we are growing ever more leery of these fast-growing markets, even as our preferred traditional partners, the U.S. and Western Europe, continue to stumble along the rock-strewn path to economic recovery.

"Our poll points to a population that is inward-looking, fearful of foreign influence, competition and resistant to change," says Yuen Pau Woo, CEO of the Asia-Pacific Foundation of Canada (APFC), which commissions an annual online survey of Canadian attitudes toward China and other countries in the world's fastest-growing region.

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The poll showed that only 35 per cent of Canadians rate China as an important economic partner, down a remarkable 10 percentage points in just one year, while one out of two respondents oppose free-trade pacts with major countries in the region. Another surprising finding is that about twice as many people consider Australia more important to Canada's economic well-being than South Korea, even though the latter accounts for three times as much of our trade.

The non-profit APFC, which is devoted to boosting trade, investment and cultural relations with the region, regards these results with a sense of some alarm.

But there are plenty of good reasons for the tepid response. Canadians, particularly those operating smaller businesses, have simply concluded that the potential risks far outweigh the advantages and so are passing on the purported joys of establishing toeholds in China and other markets in the region.

For one thing, there are all sorts of costly impediments to trade and investment in manufacturing and services. And then there are legitimate worries about getting a fair shake in markets known for serious corruption and sometimes only a nodding acquaintance with the rule of law when it comes to foreigners and their business dealings.

Transparency International's Corruption Perceptions Index, which ranks countries based on how corrupt their public sector is perceived to be, puts China below such beacons of rectitude as Senegal and Cuba in its 2013 survey. India comes in even lower.

Language differences are easy enough to overcome. Unfair treatment by the courts, regulators and local officials is another matter.

Asia's wealthiest magnate, Li Ka-shing, who knows a thing or two about investing in the region, once declared that he preferred markets that embraced British-style legal systems and had clear laws governing contracts and transactions.

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If you're a gazillionaire with good political connections in high places, you can probably handle the stresses and strains of operating just about anywhere. But if you lack that clout, things can get awfully sticky.

Noting that China, for example, treats foreign and Chinese-owned companies differently, one pseudonymous blogger once observed that "the laws are not intended to be enforced fairly. They're there to be interpreted and enforced as local government sees fit to protect their clan, kin and cash cows."

It's true that emerging Asia is where the best growth stories will continue to reside in coming years and that Canada ignores that fact to its future peril.

But even the Bank of Canada worries that a banking crisis in China – a growing possibility in a sector that has been steered more by political interests than sound economic policy – could drive that huge economy off the rails. That's yet another concern for foreign-owned businesses and investors hoping to cash in on the country's next great transformation to a more consumer-focused economy.

Mr. Woo acknowledges the chilly reception to some of his comments comparing Canada unfavourably with Australia when it comes to recognizing the importance of closer economic ties with China and other rising Asian economies. But that's better than ignoring what he regards as a disturbing trend in Canada toward greater insularity, complacency and fear of change.

Still, criticizing Canadians for being wary of certain markets ignores the fact that these remain perilous places in which to conduct business.

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About the Author
Senior Economics Writer and Global Markets Columnist

Brian Milner is a senior economics writer and global markets columnist. In a long career at The Globe and Mail, he has covered diverse business beats, including international trade, the automotive industry, media, debt markets, banking and the business side of sports. More

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