After the Act of Union in 1840, all was not smooth sailing for the Canadian economy. Radical change was in progress within the structure of the British Empire. In 1846, the British Corn Laws were repealed and the Baltic Timber Tariff, which had favoured Canadian timber over Baltic timber in the interests of security during the Napoleonic Wars, was significantly reduced. This led to the extremely severe recession of 1848-1849. In response to this, Britain negotiated the Elgin-Marcy Reciprocity Treaty with the United States on behalf of Canada.

The Treaty was meant to help in accessing new markets and to stop the spread of the Canadian Annexationist Movement, intent upon joining the Unites States. The Treaty lasted from 1854-1866. Ironically, the Crimean War and railway building had ended the recession by then. The Treaty served Upper and Lower Canada as well as New Brunswick and Nova Scotia and allowed the Americans unrestricted rights in the Gulf of Saint Lawrence Fishery. It also made all trade in natural resources and agricultural products duty-free.

The Treaty was abrogated by the United States in 1866 in response to the Cayley-Galt Tariffs of 1958-1859. These applied only to manufactured goods and represented an effort by the Canadian Government to raise funds after the severe recession of 1857.

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