The contagion that’s debilitated markets for two years originated with the old-school G7 members–the US, the UK, Australia, Japan, Germany, Italy, and, to a much lesser, extent, Canada. But the emerging economies among the G20 have also been hurt, some much more than their developed counterparts.

In a remarkable step further underscoring the changes that have already taken place and foreshadowing those to come, the BRIC countries issued a joint communiqué following the recent meeting of finance ministers called to establish the agenda for the full G20 summit in London April 2. Brazil, Russia, India and China, making their first such statement, called for more lending to emerging economies hit by the collapse of private capital and for urgent reforms to improve their representation in the International Monetary Fund.

What does the rise of the BRIC countries mean for Canada over the long term? Canada’s trade relationship with the four major emerging markets has certainly evolved during the past decade, and the future promises more of the same: Brazil, Russia, India and China are projected to grow significantly in coming decades, resulting in higher incomes and more purchasing power for their respective nascent middle classes. According to Goldman Sachs (NYSE: GS), the annual increase in US dollar spending by the BRICs could surpass that of the world’s top six economies in 2009.

That increased spending power means increased demand that could offset slowing demand from aging developed nation populations such as Canada’s. The opportunity for Canada rests with the “-IC” part of the BRIC acronym.

Canada’s relationship with China has certainly flowered during the 2000s. China is now Canada’s second-largest trading partner, trailing only to the US. In the first Canada China Business Forum, held in 2005 during a visit by President Hu Jintao to Canada, the two governments set a target to increase bilateral trade to USD30 billion by 2010. That goal was met in 2007, when trade between the two countries climbed to USD30.38 billion.

According to statistics from the General Administration of Customs of the People’s Republic of China, the volume of bilateral trade between China and Canada reached USD34.52 billion in 2008, a year-over-year increase of 13.8 percent. Canada’s exports to China reached USD12.73 billion, a 16 percent increase over 2007, while Canada’s imports from China stood at USD21.79 billion USD, a 12.6 percent increase over 2007.

According to a recent Fraser Institute study of the economic relationship between China and Canada, “There are unexploited opportunities for further gains from trade that can enrich both countries.” That statement is applicable as well to India, which is becoming increasingly open to international investment and is home to a younger population.

Amid the global slowdown, Canada is actually intensifying its efforts vis a vis its fellow Commonwealth nation; high-level Canadian officials are pushing for negotiations on a comprehensive trade agreement.

According to Canada’s Department of International Trade, in 2007 two-way merchandise trade increased 4 percent to an all-time high of USD3.74 billion, and two-way direct investment reached USD652 million. However, India is only the 14th largest export market for Canada, suggesting plenty of room for improvement. There are market opportunities for Canadian companies in agriculture and oil and gas, as well as service industries, infrastructure, information and communications technology, electrical power and the aerospace and defense sectors.

China’s and India’s rising exports give them more money to spend on imports from developed countries. Growing middle-class populations in both emerging nations are boosting demand for products worldwide, and should translate into terms of trade gains for Canada; India and China are both resource hungry, and Canada is resource rich. Increased demand for resources means higher resource prices.

While most of Canada’s imports from China are manufactured goods, direct Canadian exports to China are primarily resources: Almost 35 percent of exports comprise pulp, organic chemicals and non-ferrous metals.

More than two-thirds of Canada’s exports to India are resource-based. India significantly ramped up its imports of Canadian wheat in 2006 because it can’t meet its needs from domestic-based crops. Wheat is now Canada’s largest export to India. Other top Canadian exports to India include copper and fertilizers.

Interestingly, oil and gas exports from Canada to both China and India represent relatively small shares of total exports. But whether the emerging economies get their fuel from Canada or not, their rising appetites equal rising demand, and rising demand, again, equals rising prices. Canada does benefit from increased fossil fuel consumption in China and India, albeit indirectly. That, however, is another area for improvement.

As has been said often since mid-September 2008, the key to restoring growth is fixing the global financial system. The recent G20 ministers meeting once again resulted in a general commitment to do what’s necessary, and we’ll hopefully have more clarity after the G20 leaders meet in April. Nevertheless, there are small signs, despite the continuing grandiose statements of solidarity, of hope.

Recent data suggest China has in fact begun to rebound, news that drove a short-lived rally for global equity markets in early March.

China’s manufacturing Purchasing Managers’ Index (PMI) strengthened for a third consecutive month in February, climbing to 49.0 percent from 45.3 the previous month, and marking a three-month rebound from November’s low of 38.8.

All sub-indexes were higher than their respective levels in the previous month, though many were still lower than the critical level of 50; a reading below 50 indicates contraction, while a figure north of 50 indicates growth.

In particular, both the Output Index and the New Orders Index rebounded to the expansionary zone of higher than 50 for the first time since September 2008. In addition, the New Export Orders Index grew strongly by 9.7 points to 43.4 in February.

Andrew Pyle of ScotiaMcLeod noted: “Estimates for the country’s growth outlook in 2009 have also started to levitate from the alarming 5 to 6 percent suggestions earlier this year back to 8 percent. Not as lofty as what we have been used to, but firm enough to put a floor under commodity prices …”

The improved PMI numbers, together with the possibility of further stimulus spending by the Chinese government, likely mark a trough in China’s GDP growth cycle. And Premier Wen Jiabao said in early March his government will “significantly increase” investment to boost the economy, on top of the USD586 billion stimulus package announced in November.

The prospects for resource-focused economies such as Canada’s are strong in the long term because of the enormous potential demand from an emerging Chinese middle class. For example, Su Shulin, the chairman of China Petroleum & Chemical Corp, China’s biggest oil refiner, said domestic oil demand has shown signs of recovery. Daily fuel sales have risen to about 310,000 metric tons, compared with a record low of 280,000 barrels in December.

And the Chinese government plans to tap its USD1.95 trillion currency reserves to secure resources. Chinese state-run companies have been told to acquire resources abroad as prices of commodities, led by energy and industrial metals, decline.

Note that even during years of recent global recession (2001-02), China’s import growth remained fairly strong. In fact, imports increased by almost 20 percent between 2001 and 2002, suggesting that the strength of Chinese demand for imports may have reduced the severity of the global downturn on various economies. It’s possible that this will occur again in the present global recession, with China’s relatively faster economic growth supporting economic activities elsewhere.