Canada at a Crossroads…Again
- Russ Cooper
- 11 hours ago
- 9 min read
Editor's note: Referring to the current tense state of affairs between Canada and the United States, Capt. Barry Sheehy reminds us that we’ve been through this before. Following the US Civil War, tensions between the US and British North America were high and some of the concerns of the latter, notably about trade with the US, internal trade barriers, defence, sovereignty over sparsely populated areas, and the possibility of parts or all of its territory merging with its much larger neighbour, are similar to those of our times. Today, Canada is confronted with a US president whose “America First” policies stand squarely in opposition to globalization, a policy that Canada has embraced, along with most European countries, including Britain. But with 70% of its trade tied directly to US markets, Canada is much more vulnerable economically than other countries to President Trump’s policies. The way out of this conundrum, Capt. Sheehy says, is a story that remains to be written.
Going beyond the scope of Capt. Sheehy’s article, Canada is now caught between its de facto economic integration with the US and its desire to expand its trade with other partners, especially in Europe. However, governments in those countries have become increasingly tyrannical, as they seek to keep in check citizens who are rising up against the mass immigration and multiculturalism that have come with globalization and have profoundly disrupted their societies. Many now feel like strangers in their own countries. As described in many of our Updates and our “One Stop Tyrant Shop,” Canada itself is no slacker in creating freedom-crushing legislation. Only one thing is certain: the world as we knew it is no more. We can take nothing that we thought we knew for granted.
By Capt. Barry Sheehy CD
“History does not always repeat itself, but it often rhymes.”
Anon
Canada at a Crossroads…Again
In looking at Canada’s current headlines, the themes are certainly alarming, including fragmented governance and conflicting regional priorities unleashing centrifugal forces pulling at Confederation. This as the country searches for a semblance of national unity. In the background, is the shadow of Canada’s powerful neighbor, the United States of America.
The truth is that Canada has been here before. The national questions being asked today are eerily like those faced by British North America in 1867. Here are some of those 1867 questions:
How will Canada deal with US trade pressure and loss of American markets?
How do we dismantle internal trade barriers that inhibit east-west trade between regions?
Where does Canada expand investments in defense?
How should Canada exert sovereignty in vast parts of the country long neglected?
How can Canada address US concerns about cross border criminality?
Should Canada (or parts of it) consider affiliating with the United States?
These questions should sound familiar to Canadians in 2025. Is this perhaps history rhyming?
With the end of the US Civil War in 1865, Canada found itself on the horns of a dilemma. Great Britain, having done the heavy lifting militarily since the 18th century, had finally had enough. In British governing circles there was growing irritation with Canada’s reluctance to spend money on its own defense. Every promise and proposed military appropriation came up short, leaving the British to close the gap. This theme of parsimony on military spending would return to Canada’s debate in 2024/25.
Both today and in 1867, Canada faced hard choices about its future. In 1865-67, Britain was determined Canada must come together at least regarding its own defense. Becoming an independent country allied to Great Britain was a preferred option but not a given. Most of the population in the colony was in Canada West and Canada East (Ontario and Quebec) but language and cultural differences attenuated policy coordination between the two.
Meanwhile, the Atlantic region was closely tied economically and culturally to the New England States. Maritime trade drew them east and south rather than west. This east coast economic affiliation was sufficiently strong to keep large parts of Atlantic Canada effectively out of the War of 1812, which was fought primarily along the Great Lakes, Niagara, and the upper St Lawrence.
For the Atlantic region, Confederation meant entering a union dominated by central Canada where Atlantic interests would not be prioritized. Opposition to Confederation in the region was fierce and the question would not have survived a referendum. In local elections anti-confederation parties dominated. In the end, Atlantic participation in Confederation was determined less by the ballot box than in political backrooms.
As for the sparsely populated west, including the vast prairie regions, Rocky Mountains and Pacific, they were afterthoughts--until it was suggested they might opt to affiliate with the United States for lack of options. This was sufficiently alarming for the Fathers of Confederation to commit to linking the country via a trans-continental railroad stretching 3000 miles from Montreal to Vancouver. This was not just a massive logistical and investment challenge but represented one of the great engineering challenges of the 19th century.
In the background, Great Britain quietly encouraged British North America’s move toward Confederation while strengthening east-west Canadian trade. British influence was subtle and not overbearing. They wanted Canadian leaders to sort this out for themselves, so long as Britain didn’t have to pick up the bill.
The American Option
By the end of the Civil War, British North American relations with its powerful southern neighbor were strained. During the Trent Crisis in 1862 and again following the St Albans Raid in October 1864, Britain and US had come close to war. The St Albans Vermont raid was particularly vexing as it was orchestrated by Confederate Secret Service operatives in Canada, and there was no hiding it. The US viewed these Confederate raiders as criminals rather than soldiers and blamed Canada for harboring them. Meanwhile at sea, British crewed vessels decimated the US merchant marine—for which they would ultimately pay fifteen million dollars in compensation.[1]
Britain was officially neutral in the struggle but Confederate victories early in the war were not unwelcomed in London or Montreal. When Washington complained they were battling an illegal rebellion, the argument was considered rich coming from a country founded on rebellion against Britain. The bottom line is that Britain and its North American colony quietly favored the Confederacy during the war. This support had nothing to do with endorsing slavery which the British had combated fiercely off the west African coast since 1808. It was simply realpolitik in action; a divided America was less of a threat to British interests in North America than a unified one.
Against this background, Canada, and particularly Montreal (British North America’s banking center), served as a venue for illicit trade negotiations with the Confederacy. For example, Montreal banks supported efforts to undermine America’s fledgling fiat currency, the “Greenback.” Montreal hosted the largest Confederate Secret Base anywhere outside of Richmond. This nest of spies cooked up any number of conspiracies to undermine the US war effort, including raids, bank robberies, POW escapes, and outright insurrections. Even the assassination of Abraham Lincoln traced its roots to Montreal, where John Wilkes Booth turns up in October 1864 and very likely again in 1865. Here he was in daily contact with agents of the Confederacy advocating Lincoln’s assassination.[2]
In 1865, American feelings toward Great Britain and British North America were bitter--at one time they had nearly a million men under arms. This anger was tempered by war exhaustion in the United States. In the background, there was also the involvement of a litany of American bankers, businessmen, and political leaders in schemes involving trading with the enemy. By war’s end, Washington’s war effort was riddled with corruption, much of which played out in neutral Canada, especially Montreal. Naturally, there was a general unease in Washington about discussing the goings-on in Canada in 1864/65. Even Lincoln, by now dead and effectively canonized, risked being tainted. Meanwhile, in British North America an elaborate cover-up was orchestrated by the government with parliamentary inquiries and elaborate hearings to obfuscate government tolerance of Confederate operations in Canada during the war.
Everyone had something to hide at a time when there was little stomach for another war. An easy way for the US to hit back was cancellation of the Reciprocity Agreement between BNA and the US, which facilitated free trade in a host of categories. This cancellation hit Canada hard at the very time it was considering its future and contemplating Confederation. Suddenly powering up east-west trade within the BNA colonies became a matter of urgency. Each of the British colonies in North America had constructed a host of barriers to inter-colonial trade.
The economic arguments for affiliating with the United States were strong, especially when cultural issues were subordinated to raw numbers. Two thirds of Canada’s trade went north-south rather than east-west, dictated largely by geography. Transportation infrastructure connecting Britain’s Canadian colonies was weak and fragmented. Western regions rooted in agriculture and ranching had economies intertwined with neighboring states--the border was effectively invisible. In contrast, economic ties to the Atlantic region were negligible. The ties that bind were simply not there, at least not economically.
Deciding Wedge
The deciding wedge separating Canada from the United States In 1867 was the Civil War itself. America’s quick resort to violence to address a regional political problem shocked Canadians, governed as they were by an uneasy but working set of compromises. For Canadians, when all else failed just keep talking, or better still kick the can down the road. This political reality underpinned what would become Canada.
The manic level of violence unleashed by the US during the Civil War even today is hard to comprehend. It resulted in three quarters of a million dead soldiers and untold civilian deaths caused by sickness and privation, particularly in the South. The equivalent of the country’s entire GDP was destroyed during this cataclysm.[3] These numbers were sufficient to give anyone pause.
Referring to the Civil War, Thomas D’Arcy McGee, one of the Fathers of Confederation, wrote in 1862 that the reasons for avoiding entanglement or affiliation with the United States were “as numerous as the leaves on the trees in bloody Virginia.” McGee was an Irish nationalist and no friend of Great Britain, but his warning about US entanglements reflected a common revulsion regarding the wholesale slaughter brought on by the Civil War.
So Here We Are…Again
Canada is grappling today with many of same issues faced leading up to Confederation. The characters may have changed but the themes certainly rhyme including:
managing our economic and military relationship with our powerful US neighbor and restoring access to US markets;
holding the country together amidst growing regional tensions;
addressing American concerns about cross border criminality;
finally, investing in long neglected national defense and exerting sovereignty in far flung regions. In 1867 this was the west, today it is the Arctic.
It appears we may have come full circle. Relations between Ottawa and Washington are at a nadir. Causes of this breakdown are complex and beyond the scope of this paper. Suffice to say our relationship has clearly soured. The present US administration appears to have abandoned any thought of a “special” relationship with Canada. American self-interest is driving policy, not just with Canada but many existing and former allies. The problem is that these other allies do not have 70% of their trade tied directly to US markets. In this sense, Canada is uniquely vulnerable.
Canada faces this crisis at a time when its economy has been weakening for a decade. The comparative ratio of the Canadian economy to that of the United States has always been about 10 percent or ten to one. Today it is down to about 7.5 percent, and our negotiating leverage has shrunk accordingly.
Regional alienation is also a problem. The Canadian parliamentary system is designed to concentrate power were the most votes are found, i.e., in and around Montreal and Southern Ontario. This is where Canadian governments are elected, often long before the polls close in western Canada. The electoral balance in Canada has remained unchanged but the economic balance has shifted dramatically. Today, the two richest provinces in Canada (based on per capita income) are Alberta and Saskatchewan, not Ontario and Quebec. This problem could have been ameliorated with an elected Senate designed to protect regional interests, much like the US Senate. This would have provided a needed balance much like an “expansion joint” in a structure under stress. But the opportunity was missed. Instead, the Senate became a backwater for political appointments and petty sinecures.
The bottom line is economic power has shifted west but political powered remains firmly anchored in the center. Something must give.
Is there a way out of this conundrum? Yes, but it will require bold leadership and a little luck. This a story that remains to be written and is best left for another day and another paper.
About the author
Originally from Montreal, Canada, Captain Barry Sheehy (Ret’d) holds degrees from Loyola and McGill Universities and the Canadian Armed Forces Decoration. After leaving the military, Mr. Sheehy entered the entrepreneurial world of business consulting, advising multinational corporate executives in more than a dozen countries throughout Europe, Japan, North America, the Middle East and the Pacific Rim. Throughout his successful business career, he has progressed a love of history to become ranked as #3 among notable Canadian historians.
His written works have appeared along side of those of Presidents Clinton and Bush, Alan Greenspan, Robert Rubin and business leaders such as Lou Gerstner, Jack Welch, and Michael Dell, Edwards Deming, Stephen R. Covey, Rosabeth Moss Kanter, Gary Hamel, Peter Senge and Tom Peters. His speaking tours have taken him to Europe, Latin America, the Middle East, India, Singapore, Hong Kong, Mexico, Canada, and the United States. He is the author of six books. in the areas of supply chain management, investment optimization and quality improvement.
[2] Barry Sheehy. (2017). Montreal, City of Secrets. Baraka Books, Montreal.
Julian Sher ( 2017). The North Star. Knopf Books, Toronto.
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