The construction of the Inter-Colonial railway as a connecting link between the provinces on the seaboard and those along the St Lawrence and the Great Lakes was a part of the federation compact, a clause of the British Inter-Colonial railway. North America Act providing that it should be begun within six months after the date of union. The guarantee of the imperial government made easy the provision of the necessary capital, but as this was coupled with a voice in the decision of the route, it complicated the latter question, about which a keen contest arose. The most direct and therefore commercially most promising line of construction passed near the boundary of the United States. Recent friction with that country made this route objected to by the imperial and many Canadian authorities. Ultimately the longer, more expensive, but more isolated route along the shores of the Gulf of St Lawrence was adopted. The work was taken in hand at once, and pressed steadily forward to completion. It has since been supplemented by other lines built for more distinctly commercial ends. Though not for many years a financial success, the Inter-Colonial railway, which was opened in 1876, has in a marked way fulfilled its object by binding together socially and industrially widely separated portions of the Dominion.

Within a month of the meeting of the first parliament of the Dominion a question of vast importance to the future of the country was brought forward by the Hon. W. McDougall in a series of resolutions which were adopted, and on Hudson’s Bay Company territories. which was based an address to the queen praying that Majesty would unite Rupert’s Land and the North-West Territories to Canada. A delegation consisting of Sir G.E. Cartier and the Hon. W. McDougall was in 1868 sent to England to negotiate with the Hudson’s Bay Company (q.v.) for the extinction of its claims, and to arrange with the imperial government for the transfer of the territory. After prolonged discussions the company agreed to surrender to the crown, in consideration of a payment of £300,000, the rights and interests in the north-west guaranteed by its charter, with the exception of a reservation of one-twentieth part of the fertile belt, and 45,000 acres of land adjacent to the trading posts of the company. For the purposes of this agreement the “fertile belt” was to be bounded as follows:—“On the south by the U.S. boundary, on the west by the Rocky Mountains, on the north by the northern branch of the Saskatchewan river, on the east by Lake Winnipeg, the Lake of the Woods, and the waters connecting them.” An act authorizing the change of control was passed by the imperial parliament in July 1868; the arrangement made with the Hudson’s Bay Company was accepted by the Canadian parliament in June 1869; and the deed of surrender from the Hudson’s Bay Company to Her Majesty is dated November 19th, 1869. In anticipation of the formal transfer to the Dominion an act was passed by the Canadian parliament in the same month providing for the temporary government of Rupert’s Land and the North-West Territories. On the 28th of September the Hon. W. McDougall was appointed the first governor, and left at once to assume control on the 1st of December, when it had been understood that the formal change of possession would take place.

Meanwhile a serious condition of affairs was developing in the Red river settlement, the most considerable centre of population in the newly acquired territory. The half-breeds regarded with suspicion a transfer of control concerning Red river rebellion. which they had not been consulted. They resented the presence of the Canadian surveyors sent to lay out roads and townships, and the tactless way in which some of these did their work increased the suspicion that long-established rights to the soil would not be respected. A population largely Roman Catholic in creed, and partly French in origin and language, feared that an influx of new settlers would overthrow cherished traditions. Some were afraid of increased taxation. A group of immigrants from the United States fomented disturbance in the hope that it would lead to annexation. Louis Riel, a fanatical half-breed, placed himself at the head of the movement. His followers established what they called a “provisional government” of which he was chosen president, and when the newly appointed governor reached the boundary line he was prevented from entering the territory. Several of the white settlers who resisted this rebellious movement were arrested and kept in confinement. One of these, a young man named Thomas Scott, having treated Riel with defiance, was court-martialled for treason to the provisional government, condemned, and on the 4th of March 1870, shot in cold blood under the walls of Fort Garry. This crime aroused intense excitement throughout the country, and the Orange body, particularly, to which Scott belonged, demanded the immediate punishment of his murderer and the suppression of the rebellion. An armed force, composed partly of British regulars and partly of Canadian volunteers, was made ready and placed under the command of Colonel Garnet Wolseley, afterwards Lord Wolseley. As a military force could not pass through the United States, the expedition was compelled to take the route up Lake Superior, and from the head of that lake through 500 m. of unbroken and difficult wilderness. In August 1870, the force reached Fort Garry, to find the rebels scattered and their leader, Riel, a fugitive in the neighbouring states. Meanwhile, during the progress of the expedition, an act had been passed creating Manitoba a province, with full powers of self-government, and the arrival of the military was closely followed by that of the first governor, Mr (later Sir) Adams G. Archibald, who succeeded in organizing the administration on a satisfactory basis. Fort Garry became Winnipeg, and there were soon indications that it was destined to be a great city, and the commercial doorway to the vast prairies that lay beyond. Meanwhile, till adequate means of transportation were provided, it was seen that city and prairie alike must wait for any large inflow of population.

Provision was made in the British North America Act to receive new provinces into the Dominion. Manitoba was the first to be constituted; in 1871 British Columbia, which had hitherto held aloof, determined, under the persuasion of a sympathetic governor, Mr (later Sir) Antony New provinces. Musgrave, to throw in its lot with the Dominion. Popular feeling in British Columbia itself was not strongly in favour of union, and the terms under which the new province was to be received were the subject of much negotiation with the provincial authorities, and were keenly debated in parliament before the bill in which they were embodied was finally carried. The clause on which there was the widest divergence of opinion was one providing that a trans-continental railway, connecting the Pacific province with the eastern part of the Dominion, should be begun within two, and completed within ten years. To a province which at the time contained a population of only 36,000, and but half of this white, the inducement thus held out was immense. The Opposition in parliament claimed that the contract was one impossible for the Dominion to fulfil. The government of Sir John Macdonald felt, however, that the future of the Dominion depended upon linking together the Atlantic and the Pacific, and in view of the vast unoccupied spaces lying between the Great Lakes and the Rocky Mountains, open to immigration from the United States, their audacity in undertaking the work was doubtless justified. The construction of the Canadian Pacific railway, thus inaugurated, became for several years the chief subject of political contention between opposing parties.

Anticipating the order of chronology slightly, it may be mentioned here that in 1873 Prince Edward Island (q.v.), which had in 1865 decisively rejected proposals of the Quebec conference and had in the following year repeated its rejection of federation by a resolution of the legislature affirming that no terms Canada could offer would be acceptable, now decided to throw in its lot with the Dominion. The island had become involved in heavy railway expenditure, and financial necessities led the electors to take a broader view of the question. In the end the federal government assumed the railway debt, arrangements were made for extinguishing certain proprietary rights which had long been a source of discontent, and on the 1st of July 1873 the Dominion was rounded off by the accession of the new province.

Finally in 1878, in order to remove all doubts about unoccupied territory, an imperial order in council was passed in response to an address of the Canadian parliament, annexing to the Dominion all British possessions in North America, except Newfoundland. That small colony, which had been represented at the Quebec conference, also rejected the proposals of 1865, and, in spite of various efforts to arrange satisfactory terms, has steadily held aloof, and so has proved the only obstacle to the complete political unification of British North America.

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A signal proof was soon furnished of the new standing in the empire which federation had given to the Canadian provinces. A heritage of differences and difficulties had been left to be settled between England, Canada and the Difficulties with the United States. American Union as the result of the Civil War. In retaliation for the supposed sympathy of Canadians with the South in this struggle the victorious North took steps to abrogate in 1866 the reciprocity treaty of 1854, which had conferred such great advantages on both countries. It followed that the citizens of the United States lost the right which they had received under the treaty to share in the fisheries of Canada. American fishermen, however, showed so little inclination to give up what they had enjoyed so long, that it was found necessary to take vigorous steps to protect Canadian fishing rights, and frequent causes of friction consequently arose. During the progress of the Civil War American feeling had been greatly exasperated by the losses inflicted on commerce by the cruiser “Alabama,” which, it was claimed, was allowed to leave a British port in, violation of international law. On the other hand, Canadian feeling had been equally exasperated by the Fenian raids, organized on American soil, which had cost Canada much expenditure of money and some loss of life. In, addition to these causes of difference there was an unsettled boundary dispute in British Columbia, and questions about the navigation of rivers common to the United States and Canada. In 1869 the government of Canada sent a deputation to England to press upon the imperial government the necessity of asserting Canada’s position in regard to the fisheries, and the desirability of settling other questions in dispute with the republic. The outcome of this application was the appointment of a commission to consider and if possible settle outstanding differences between the three countries. The prime minister of the Dominion, Sir John Macdonald, was asked to act as one of the imperial commissioners in carrying on these negotiations. This was the first time that a colonist had been called upon to assist in the settlement of international disputes. The commission assembled at the American capital in February 1871, and after discussions extending over several weeks signed what is known as the treaty of Washington. By the terms of this treaty the “Alabama” claims and the San Juan boundary were referred to arbitration; the free navigation of the St Lawrence was granted to the United States in return for the free use of Lake Michigan and certain Alaskan rivers; and it was settled that a further commission should decide the excess of value of the Canadian fisheries thrown open to the United States over and above the reciprocal concessions made to Canada. Much to the annoyance of the people of the Dominion the claims for the Fenian raids were withdrawn at the request of the British government, which undertook, to make good to Canada any losses she had suffered. To some of these terms the representative of Canada made a strenuous opposition, and in finally signing the treaty stated that he did so chiefly for imperial interests, although in these he believed Canadian interests to be involved. The clauses relating to the fisheries and the San Juan boundary were reserved for the approval of the Canadian parliament, which, in spite of much violent opposition, ratified them by a large majority. Under the “Alabama” arbitration Great Britain paid to the United States damages to the amount of $15,500,000, while the German Emperor decided the San Juan boundary in favour of the United States. The Fishery Commission, on the other hand, which sat in Halifax, awarded Canada $5,500,000 as the excess value of its fisheries for twelve years, and after much hesitation this sum was paid by the United States into the Canadian treasury. An imperial guarantee of a loan for the construction of railways was the only compensation Canada received for the Fenian raids.

The second general election for the Dominion took place in 1872. It was marked by the complete defeat of the Anti-Unionist party in Nova Scotia, only one member of which secured his election, thus exactly reversing the Canadian Pacific railway question. vote of 1867. While Sir John Macdonald’s administration was supported in Nova Scotia, it was weakened in Ontario on account of the clemency shown to Riel, and in Quebec by the refusal to grant a general amnesty to all who had taken part in the rebellion. Two important members of the cabinet, Sir G. Cartier and Sir F. Hincks, were defeated. Opposition to the Washington treaty and dread of the bold railway policy of the government also contributed to weaken its position. But a graver blow, ending in the complete overthrow of the administration, was soon to fall as the result of the election. In 1872 two companies had been formed and received charters to build the Canadian Pacific railway. Sir Hugh Allan of Montreal was at the head of the one, and the Hon. David Macpherson of Toronto was president of the other. The government endeavoured to bring about an amalgamation of these rival companies, believing that the united energies and financial ability of the whole country were required for so vast an undertaking. While negotiations to this end were still proceeding the election of 1872 came on with the result already mentioned. Soon after the meeting of parliament, a Liberal member of the House, Mr L.S. Huntingdon, formally charged certain members of the cabinet with having received large sums of money, for use in the election, from Sir Hugh Allan, on condition, as it was claimed, that the Canadian Pacific contract should be given to the new company, of which he became the head on the failure of the plan for amalgamation. These charges were investigated by a royal commission, which was appointed after it had been decided that the parliamentary committee named for that purpose could not legally take evidence under oath. Parliament met in October 1873, to receive the report of the commission. While members of the government were exonerated by the report from the charge of personal corruption, the payment of large sums of money by Sir Hugh Allan was fully established, and public feeling on the matter was so strong that Sir J. Macdonald, while asserting his own innocence, felt compelled to resign without waiting for the vote, of parliament. Lord Dufferin, who had succeeded Lord Lisgar as governor-general in 1872, at once sent for the leader of the Opposition, Mr Alexander Mackenzie (q.v.), who succeeded in forming a Liberal administration which, on appealing to the constituencies, was supported by an overwhelming majority, and held power for the five following years.