The Canadian government's little-examined role in the building of China's Three Gorges Dam sheds light on how foreign governments and companies helped China move forward with one of the most controversial engineering projects in history.

Many Western governments, including the U.S., initially refused to support China's plan to build the world's largest hydroelectric dam. Canada was the first Western country to break ranks and back the massive project. That opened the door for Western companies to sell lucrative high-technology equipment to China, while certain governments pledged taxpayer dollars in export credits.

The News: China's controversial Three Gorges Dam is causing unprecedented population resettlement. The Background: Some foreign governments had a hand in helping build the dam. In the case of Canada, it disregarded its own engineers and backed a bigger dam than was thought feasible. What's at Stake: Already 1.4 million people have had to relocate; millions more may have to make way, driving up the dam's costs and causing trouble for China's government.

The decision to build the Three Gorges Dam was ultimately Beijing's. But a big part of how events played out occurred thousands of miles away in the Canadian province of Quebec. In the midst of a domestic political crisis, the Canadian government offered important assistance for the dam, despite warnings from Canadian engineers about how high the dam could be.

Nearly two decades ago, China picked a consortium funded by Canada to conduct an official study to determine whether it should build a dam around the canyons of the Yangtze River's Three Gorges. At the time, Canada was a strong backer of hydroelectric power, which had played a key role in the country's early industrialization.

The 1988 report largely supported the idea of the dam, but with one caveat: Its waters shouldn't exceed a depth of 160 meters (525 feet).

"We thought 150 to 160 was feasible," says Pierre Senecal, a Hydro-Quebec engineer who worked on the project. "But we could not definitely say that 170 or 180 were feasible or infeasible, so we did not recommend going beyond 160."

Three years later, China decided to build the dam -- at 180 meters, disregarding advice from its own official feasibility study. Today, the waters behind the dam have reached 156.6 meters, and continue to rise, even as earth slides increase and the number of people to be relocated soars. With more than 20 meters yet to go, concern is growing that the problems could get worse. The water's height has become one of the defining problems with the dam, triggering millions of resettlers, spiraling costs and serious pollution.

And, thanks to technology transfer from the few Western countries that supported the project, it has led to the creation of Chinese companies that are now aggressively building dams in other developing countries around the world, even as developed countries have largely abandoned giant hydropower projects.

"The problems at the Three Gorges aren't just a Chinese problem, as it's often portrayed," says Pat Adams of Probe International, a Canadian-based environmental advocacy group. "It's a world-wide issue, with responsibility in other countries, too."

The Chinese cabinet's Three Gorges Project Construction Committee, which holds primary responsibility for the dam, declined to comment specifically on the Canadian feasibility study and its height recommendations. But the committee says foreign experts from previous decades had endorsed building it 180 meters or higher. Li Feng, head of the public-relations department for the committee, said the final height was deemed "appropriate" by Chinese planners given the dam's various functions.

When China began to implement market overhauls in the 1980s, a group of engineers gained influence. In the excitement of the early reform era, they pushed a gargantuan vision: The dam would create a reservoir as long as Lake Superior and generate more power than any hydro project in the world. But the proposed project spurred unprecedented opposition among leaders and ordinary citizens.

China's engineers turned to Canada, a trusted international friend and a leader in hydroelectric energy that boasts some of the world's largest dam projects. The Canadian International Development Agency agreed to foot the $14 million study.

The study was undertaken by Canada's more prestigious energy companies, including the utility and power generator Hydro-Quebec. They were based in Montreal, the biggest city in the French-speaking province of Quebec -- a location that would have implications later.

The multivolume study, which was the only official feasibility report on the dam, was submitted to the Chinese government in 1988. The Canadians backed most of the Chinese engineers' assumptions -- even supporting the idea that one dam could achieve the disparate goals of flood control, power generation and improved shipping.

But the study's caveat about height remained little noticed. Chinese engineers wanted to fill the reservoir to 180 meters in order to generate more power and give the country the option of siphoning off water to its water-starved north.

"When you've done this for a while it's easy to predict what will happen," Mr. Senecal, the Canadian engineer, says today. "It is a point of diminishing returns."

At first, the debate over the water's height seemed academic. In 1989, China's Parliament blocked government efforts to build the dam, recommending that it be put on hold for five years.

In 1992, however, a hard-charging premier named Li Peng revived the project. Mr. Li, himself a hydroelectric engineer, backed the plan to build a multipurpose dam at 180 meters. He pushed the project through Parliament. Construction was scheduled to start in 1994.

At the time, China had relatively low foreign-currency reserves and no expertise in building such a complex dam. It lacked the technology for the huge turbines needed to generate electricity, or the high-tension power cables to transmit it.

Initially, Western countries and international organizations balked at the project. Canada's development agency, which had funded the feasibility study, decided in 1992 against participating, citing concerns over the project's viability and social impact. The World Bank didn't provide funding, saying the project wasn't economically viable. The U.S. withdrew its support, ending its 50-year-old interest in the project, with Washington saying in 1993 it no longer believed that such dams were a good idea for Americans and thus couldn't recommend building them overseas.

Then Canada did an about-face. In 1994, recently elected Prime Minister Jean Chrétien led a trade mission to China. Mr. Chrétien's Liberal Party, which had won power a year earlier, had been on record opposing a Canadian role in Three Gorges. But by the time of the China trip, Mr. Chrétien was facing political upheaval in his home province of Quebec, where support for a movement to separate from Canada was surging ahead of a referendum on the subject. Quebec's biggest city, Montreal, was the headquarters of Canada's hydroelectric industry and home to many global power-generating companies.

The trade mission was meant to show Canadians that their future was stronger together than apart, says Sergio Marchi, a member of Mr. Chrétien's cabinet and later trade secretary. During it, Mr. Chrétien surprised people back home and announced his government's support for the Three Gorges Dam.

Sales followed. In 1997, China awarded turbine contracts valued at $320 million to General Electric Canada, based in Montreal, and two German companies. (GE Canada and its parent company, General Electric Co. of the U.S., declined to comment.) A few months later, Canada's government-run Export Development Corp. guaranteed $160 million of the deal.

This opened the door for other companies to sell to China more than $1.5 billion of crucial high-technology products for the dam. Almost all the amount was underwritten by foreign governments through export credits -- low-interest or interest-free loans to Beijing to help pay for the products. Besides Canada, Germany, Switzerland, Sweden and France all pledged such taxpayer support for the sales -- essentially a subsidy on the dam's total costs.

Canada's reversals left China building a dam based on the 1980s Canadian feasibility study but without any follow-up support from Canada. It sold the equipment, but when its aid agency pulled its support, that meant technical help was curtailed. Follow-up studies might have shown that some of the Canadian assumptions were wrong. Most of the engineers had just spent a decade on Hydro-Quebec's gargantuan James Bay dam. Built on the sparsely populated, rocky terrain of northern Quebec, the dam was different from the Three Gorges, with its silty soil and heavily populated surroundings. Canadian officials today decline to comment on the project, saying it was decided by another government.

The Canadian engineers had anticipated that only 700,000 people would have to move if the dam was built to 160 meters. Already, 1.4 million have been displaced and the dam is only at 156.6 meters. Recently announced plans could require millions of others in the Three Gorges area to move again.

Write to Ian Johnson at ian.johnson@wsj.com