John A. Macdonald
First majority, 1867–1871

Macdonald and his government faced immediate problems upon the formation of the new country. Much work remained to do in creating a federal government. Nova Scotia was already threatening to withdraw from the union; the Intercolonial Railway, which would both conciliate the Maritimes and bind them closer to the rest of Canada, was not yet built. Anglo-American relations were in a poor state, and Canadian foreign relations were matters handled from London. The withdrawal of the Americans in 1866 from the Reciprocity Treaty had increased tariffs on Canadian goods in US markets. American and British opinion largely believed that the experiment of Confederation would quickly unravel, and the nascent nation absorbed by the United States.

In August 1867, the new nation's first general election was held; Macdonald's party won easily, with strong support in both large provinces, and a majority from New Brunswick. By 1869, Nova Scotia had agreed to remain part of Canada after a promise of better financial terms – the first of many provinces to negotiate concessions from Ottawa. Pressure from London and Ottawa failed to gain the accession of Newfoundland, whose voters rejected a Confederation platform in a general election in October 1869.

In 1869, John and Agnes Macdonald had a daughter, Mary. It soon became apparent that Mary had ongoing developmental issues; she was never able to walk, nor did she ever fully develop mentally. Hewitt Bernard, Deputy Minister of Justice and Macdonald's former secretary, also lived in the Macdonald house in Ottawa, together with Bernard's widowed mother. In May 1870, John Macdonald fell ill with gallstones; coupled with his frequent drinking, he may have developed a severe case of acute pancreatitis. In July, he moved to Prince Edward Island to convalesce, most likely conducting discussions aimed at drawing the island into Confederation at a time when some there supported joining the United States. The island joined Confederation in 1873.

Macdonald had once been tepid on the question of westward expansion of the Canadian provinces; as prime minister, he became a strong supporter of a bicoastal Canada. Immediately upon Confederation, he sent commissioners to London who in due course successfully negotiated the transfer of Rupert's Land and the North-Western Territory to Canada. The Hudson's Bay Company received £300,000 (CA$1,500,000) in compensation, and retained some trading posts as well as one-twentieth of the best farmland. Prior to the date of acquisition, the Canadian government faced unrest in the Red River Colony (today southeastern Manitoba, centred on Winnipeg). The local people, including the Métis, were fearful that rule would be imposed on them which did not take into account their interests, and rose in the Red River Rebellion led by Louis Riel. Unwilling to pay for a territory in insurrection, Macdonald had troops put down the uprising before the formal transfer; as a result of the unrest, the Red River Colony joined Confederation as the province of Manitoba, while the rest of the purchased lands became the North-West Territories.

Macdonald also wished to secure the colony of British Columbia. There was interest in the United States in bringing about the colony's annexation, and Macdonald wished to ensure his new nation had a Pacific outlet. The colony had an extremely large debt that would have to be assumed should it join Confederation. Negotiations were conducted in 1870, principally during Macdonald's illness and recuperation, with Cartier leading the Canadian delegation. Cartier offered British Columbia a railway linking it to the eastern provinces within ten years. The British Columbians, who privately had been prepared to accept far less generous terms, quickly agreed and joined Confederation in 1871. The Canadian Parliament ratified the terms after a debate over the high cost that cabinet member Alexander Morris described as the worst fight the Conservatives had had since Confederation.

There were continuing disputes with the Americans over deep-sea fishing rights, and in early 1871, an Anglo-American commission was appointed to settle outstanding matters between the British, the Canadians and the Americans. Canada was hoping to secure compensation for damage done by Fenians raiding Canada from bases in the United States. Macdonald was appointed a British commissioner, a post he was reluctant to accept as he realised Canadian interests might be sacrificed for the mother country. This proved to be the case; Canada received no compensation for the raids and no significant trade advantages in the settlement, which required Canada to open her waters to American fishermen. Macdonald returned home to defend the Treaty of Washington against a political firestorm.
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