Canada, independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of St. Pierre and Miquelon. It is bounded on the E by the Atlantic Ocean, on the N by the Arctic Ocean, and on the W by the Pacific Ocean and Alaska. A transcontinental border, formed in part by the Great Lakes, divides Canada from the United States; Nares and Davis straits separate Canada from Greenland. The Arctic Archipelago extends far into the Arctic Ocean.
Canada is a federation of 10 provinces— Newfoundland and Labrador, Nova Scotia, New Brunswick, Prince Edward Island, Quebec, Ontario, Manitoba, Saskatchewan, Alberta, and British Columbia —and three territories— Nunavut , the Northwest Territories, and the Yukon Territory. Canada's capital is Ottawa and its largest city is Toronto. Other important cities include Montreal, Vancouver, Edmonton, Calgary, Winnipeg, Hamilton, and Quebec.
Canada has a very long and irregular coastline; Hudson Bay and the Gulf of St. Lawrence indent the east coast and the Inside Passage extends along the west coast. The ice-clogged straits between the islands of N Canada form the Northwest Passage. During the Ice Age all of Canada was covered by a continental ice sheet that scoured and depressed the land surface, leaving a covering of glacial drift, depositional landforms, and innumerable lakes and rivers. Aside from the Great Lakes, which are only partly in the country, the largest lakes of North America—Great Bear, Great Slave, and Winnipeg—are entirely in Canada. The St. Lawrence is the chief river of E Canada. The Saskatchewan, Nelson, Churchill, and Mackenzie river systems drain central Canada, and the Columbia, Fraser, and Yukon rivers drain the western part of the country.
Canada has a bowl-shaped geologic structure rimmed by highlands, with Hudson Bay at the lowest point. The country has eight major physiographic regions—the Canadian Shield, the Hudson Bay Lowlands, the Western Cordillera, the Interior Lowlands, the Great Lakes-St. Lawrence Lowlands, the Appalachians, the Arctic Lowlands, and the Innuitians.
The exposed portions of the Canadian Shield cover more than half of Canada. This once-mountainous region, which contains the continent's oldest rocks, has been worn low by erosion over the millennia. Its upturned eastern edge is indented by fjords. The Shield is rich in minerals, especially iron and nickel, and in potential sources of hydroelectric power. In the center of the Shield are the Hudson Bay Lowlands, encompassing Hudson Bay and the surrounding marshy land.
The Western Cordillera, a geologically young mountain system parallel to the Pacific coast, is composed of a series of north-south tending ranges and valleys that form the highest and most rugged section of the country; Mt. Logan (19,551 ft/5,959 m) is the highest point in Canada. Part of this region is made up of the Rocky Mts. and the Coast Mts., which are separated by plateaus and basins. The islands off W Canada are partially submerged portions of the Coast Mts. The Western Cordillera is also rich in minerals and timber and potential sources of hydroelectric power.
Between the Rocky Mts. and the Canadian Shield are the Interior Lowlands, a vast region filled with sediment from the flanking higher lands. The Lowlands are divided into the prairies, the plains, and the Mackenzie Lowlands. The prairies are Canada's granary, while grazing is important on the plains.
The smallest and southernmost region is the Great Lakes-St. Lawrence Lowlands, Canada's heartland. Dominated by the St. Lawrence River and the Great Lakes, the region provides a natural corridor into central Canada, and the St. Lawrence Seaway gives the interior cities access to the Atlantic. This section, which is composed of gently rolling surface on sedimentary rocks, is the location of extensive farmlands, large industrial centers, and most of Canada's population. In SE Canada and on Newfoundland is the northern end of the Appalachian Mt. system, an old and geologically complex region with a generally low and rounded relief.
The Arctic Lowlands and the Innuitians are the most isolated areas of Canada and are barren and snow-covered for most of the year. The Arctic Lowlands comprise much of the Arctic Archipelago and contain sedimentary rocks that may have oil-bearing strata. In the extreme north, mainly on Ellesmere Island, is the Innuitian Mt. system, which rises to c.10,000 ft (3,050 m).
Canada's climate is influenced by latitude and topography. The Interior Lowlands make it possible for polar air masses to move south and for subtropical air masses to move north into Canada. Hudson Bay and the Great Lakes act to modify the climate locally. The Western Cordillera serves as a climatic barrier that prevents polar air masses from reaching the Pacific coast and blocks the moist Pacific winds from reaching into the interior. The Cordillera has a typical highland climate that varies with altitude; the western slopes receive abundant rainfall, and the whole region is forested. The Interior Lowlands are in the rain shadow of the Cordillera; the southern portion has a steppe climate in which grasses predominate. S Canada has a temperate climate, with snow in the winter (especially in the east) and cool summers. Farther to the north, extending to the timberline, is the humid subarctic climate characterized by short summers and a snow cover for about half the year. The huge boreal forest, the largest surviving remnant of the extensive forests that once covered much of North America, predominates in this region. On the Arctic Archipelago and the northern mainland is the tundra, with its mosses and lichen, permafrost, near-year-round snow cover, and ice fields. A noted phenomenon off the coast of E Canada is the persistence of dense fog, which is formed when the warm air over the Gulf Stream passes over the cold Labrador Current as the two currents meet off Newfoundland.
About 40% of the Canadian population are of British descent, while 27% are of French origin. Another 20% are of other European background, about 10% are of E or SE Asian origin, and some 3% are of aboriginal or Metis (mixed aboriginal and European) background. In the late 1990s, Canada had the highest immigration rate of any country in the world, with more than half the total coming from Asia. Over 75% of the total population live in cities. Canada has complete religious liberty, though its growing multiculturalism has at times caused tensions among ethnic and religious groups. About 45% of the people are Roman Catholics, while some 40% are Protestant (the largest groups being the United Church of Canada, Anglicans, and Presbyterians). English and French are the official languages, and federal documents are published in both languages. In 1991, about 61% of Canadians cited English as their mother tongue, while 24% cited French.
Since World War II the development of Canada's manufacturing, mining, and service sectors has led to the creation of an affluent society. Services now account for 66% of the GDP, while industry accounts for 31%. Tourism and financial services represent some of Canada's most important industries within the service sector. However, manufacturing is Canada's single most important economic activity. The leading products are transportation equipment, pulp and paper, processed foods, chemicals, primary and fabricated metals, petroleum, electrical and electronic products, wood products, printed materials, machinery, clothing, and nonmetallic minerals. Industries are centered in Ontario, Quebec, and, to a lesser extent, British Columbia and Alberta. Canada's industries depend on the country's rich energy resources, which include hydroelectric power, petroleum, natural gas, coal, and uranium.
Canada is a leading mineral producer, although much of its mineral resources are difficult to reach due to permafrost. It is the world's largest source of nickel, zinc, and uranium, and a major source of lead, asbestos, gypsum, potash, tantalum, and cobalt. Other important mineral resources are petroleum, natural gas, copper, gold, iron ore, coal, silver, diamonds, molybdenum, and sulfur. The mineral wealth is located in many areas; some of the most productive regions are Sudbury, Ont. (copper and nickel); Timmins, Ont. (lead, zinc, and silver); and Kimberley, British Columbia (lead, zinc, and silver). Petroleum and natural gas are found in Alberta and Saskatchewan.
Agriculture employs about 3% of the population and contributes a similar percentage of the GDP. The sources of the greatest farm income are livestock and dairy products. Among the biggest income-earning crops are wheat, oats, barley, corn, and canola. Canada is one of the world's leading agricultural exporters, especially of wheat. Manitoba, Saskatchewan, and Alberta are the great grain-growing provinces, and, with Ontario, are also the leading sources of beef cattle. The main fruit-growing regions are found in Ontario, British Columbia, Quebec, and Nova Scotia. Apples and peaches are the principal fruits grown in Canada. More than half of the total land area is forest, and Canadian timber production ranks among the highest in the world.
Fishing is an important economic activity in Canada. Cod and lobster from the Atlantic and salmon from the Pacific have been the principal catches, but the cod industry was halted in the mid-1990s due to overfishing. About 75% of the take is exported. The fur industry, once vitally important but no longer dominant in the nation's economy, is centered in Quebec and Ontario.
A major problem for Canada is that large segments of its economy—notably in manufacturing, petroleum, and mining—are controlled by foreign, especially U.S. interests. This deprives the nation of much of the profits of its industries and makes the economy vulnerable to developments outside Canada. This situation is mitigated somewhat by the fact that Canada itself is a large foreign investor. Since the free trade agreement with the United States (effective 1989), Canadian investment in U.S. border cities, such as Buffalo, N.Y., has increased dramatically.
The United States is by far Canada's leading trade partner, followed by Japan and Great Britain. Manufactured goods comprise the bulk of imports; crude petroleum and motor vehicles and parts rank high among both the nation's largest imports and exports. Other important exports are newsprint, lumber, wood pulp, wheat, machinery, aluminum, natural gas, hydroelectric power, and telecommunications equipment.
Canada is an independent constitutional monarchy and a member of the Commonwealth of Nations. The monarch of Great Britain and Northern Ireland is also the monarch of Canada and is represented in the country by the office of governor-general. The basic constitutional document is the Canada Act of 1982, which replaced the British North America Act of 1867 and gave Canada the right to amend its own constitution. The Canada Act, passed by Great Britain, made possible the Constitution Act, 1982, which was passed in Canada. The document includes a Charter of Rights and Freedoms, which guarantees the rights of women and native peoples and protects other civil liberties.
The Canadian federal government has authority in all matters not specifically reserved to the provincial governments. The provincial governments have power in the fields of property, civil rights, education, and local government. They may levy only direct taxes. The federal government may veto any provincial law. Power on the federal level is exercised by the Canadian Parliament and the cabinet of ministers, headed by the prime minister. (See the table entitled Canadian Prime Ministers since Confederation for a list of Canada's prime ministers.) Canada has an independent judiciary; the highest court is the Supreme Court, with nine members.
The Parliament has two houses: the Senate and the House of Commons. There are generally 104 senators, apportioned among the provinces and appointed by the governor-general upon the advice of the prime minister. Senators may serve until age 75; prior to 1965 they served for life. The 301 members of the House of Commons are elected, largely from single-member constituencies. Elections must be held at least every five years. The Commons may be dissolved and new elections held at the request of the prime minister. There are four main political parties: the Liberal party, the Conservative party (formed in 2003 by the merger of the Canadian Alliance and the Progressive Conservative party), the Bloc Quebecois (aligned with the Parti Quebecois of Quebec), and the New Democratic party.
Early History and French-British Rivalry
Prior to the arrival of Europeans in Canada, the area was inhabited by various peoples who came from Asia via the Bering Strait more than 10,000 years ago. The Vikings landed in Canada c.AD 1000. Their arrival is described in Icelandic sagas and confirmed by archaeological discoveries in Newfoundland. John Cabot , sailing under English auspices, touched the east coast in 1497. In 1534, the Frenchman Jacques Cartier planted a cross on the Gaspe Peninsula. These and many other voyages to the Canadian coast were in search of a northwest passage to Asia. Subsequently, French-English rivalry dominated Canadian history until 1763.
The first permanent European settlement in Canada was founded in 1605 by the sieur de Monts and Samuel de Champlain at Port Royal (now Annapolis Royal , N.S.) in Acadia . A trading post was established in Quebec in 1608. Meanwhile the English, moving to support their claims under Cabot's discoveries, attacked Port Royal (1614) and captured Quebec (1629). However, the French regained Quebec (1632), and through the Company of New France (Company of One Hundred Associates), began to exploit the fur trade and establish new settlements. The French were primarily interested in fur trading. Between 1608 and 1640, fewer than 300 settlers arrived. The sparse French settlements sharply contrasted with the relatively dense English settlements along the Atlantic coast to the south. Under a policy initiated by Champlain, the French supported the Huron in their warfare against the Iroquois; later in the 17th cent., when the Iroquois crushed the Huron, the French colony came near extinction. Exploration, however, continued.
In 1663, the Company of New France was disbanded by the French government, and the colony was placed under the rule of a royal governor, an intendant, and a bishop. The power exercised by these authorities may be seen in the careers of Louis de Buade, comte de Frontenac , Jean Talon , and Francois Xavier de Laval , the first bishop of Quebec. There was, however, conflict between the rulers, especially over the treatment of the indigenous peoples—the bishop regarding them as potential converts, the governor as means of trade. Meanwhile, both missionaries, such as Jacques Marquette , and traders, such as Pierre Radisson and Medard Chouart des Groseilliers, were extending French knowledge and influence. The greatest of all the empire builders in the west was Robert Cavelier, sieur de La Salle , who descended the Mississippi to its mouth and who envisioned the vast colony in the west that was made a reality by men like Duluth, Bienville, Iberville, and Cadillac.
The French did not go unchallenged. The English had claims on Acadia, and the Hudson's Bay Company in 1670 began to vie for the lucrative fur trade of the West. When the long series of wars between Britain and France broke out in Europe, they were paralleled in North America by the French and Indian Wars . The Peace of Utrecht (1713) gave Britain Acadia, the Hudson Bay area, and Newfoundland. To strengthen their position the French built additional forts in the west (among them Detroit and Niagara). The decisive battle of the entire struggle took place in 1759, when Wolfe defeated Montcalm on the Plains of Abraham , bringing about the fall of Quebec to the British. Montreal fell in 1760. By the Treaty of Paris in 1763, France ceded all its North American possessions east of the Mississippi to Britain, while Louisiana went to Spain.
British North America
The French residents of Quebec strongly resented the Royal Proclamation of 1763, which imposed British institutions on them. Many of its provisions, however, were reversed by the Quebec Act (1774), which granted important concessions to the French and extended Quebec's borders westward and southward to include all the inland territory to the Ohio and the Mississippi. This act infuriated the residents of the Thirteen Colonies (the future United States). In 1775 the American Continental Congress had as its first act not a declaration of independence but the invasion of Canada. In the American Revolution the Canadians remained passively loyal to the British crown, and the effort of the Americans to take Canada failed dismally (see Quebec campaign ).
Loyalists from the colonies in revolt (see United Empire Loyalists ) fled to Canada and settled in large numbers in Nova Scotia and Quebec. In 1784, the province of New Brunswick was carved out of Nova Scotia for the loyalists. The result, in Quebec, was sharp antagonism between the deeply rooted, Catholic French Canadians and the newly arrived, Protestant British. To deal with the problem the British passed the Constitutional Act (1791). It divided Quebec into Upper Canada (present-day Ontario), predominantly British and Protestant, and Lower Canada (present-day Quebec), predominantly French and Catholic. Each new province had its own legislature and institutions.
This period was also one of further exploration. Alexander Mackenzie made voyages in 1789 to the Arctic Ocean and in 1793 to the Pacific, searching for the Northwest Passage. Mariners also reached the Pacific Northwest, and such men as Capt. James Cook , John Meares, and George Vancouver secured for Britain a firm hold on what is now British Columbia. During the War of 1812, Canadian and British soldiers repulsed several American invasions. The New Brunswick boundary (see Aroostook War ) and the boundary W of the Great Lakes was disputed with the United States for a time, but since the War of 1812 the long border has generally been peaceful.
Rivalry between the North West Company and the Hudson's Bay Company erupted into bloodshed in the Red River Settlement and was resolved by amalgamation of the companies in 1821. The new Hudson's Bay Company then held undisputed sway over Rupert's Land and the Pacific West until U.S. immigrants challenged British possession of Oregon and obtained the present boundary (1846). After 1815 thousands of immigrants came to Canada from Scotland and Ireland.
Movements for political reform arose. In Upper Canada, William Lyon Mackenzie struggled against the Family Compact. In Lower Canada, Louis J. Papineau led the French Canadian Reform party. There were rebellions in both provinces. The British sent Lord Durham as governor-general to study the situation, and his famous report (1839) recommended the union of Upper and Lower Canada under responsible government. The two Canadas were made one province by the Act of Union (1841) and became known as Canada West and Canada East. Responsible government was achieved in 1849 (it had been granted to the Maritime Provinces in 1847), largely as a result of the efforts of Robert Baldwin and Louis H. LaFontaine.
Confederation and Nationhood
The movement for federation of all the Canadian provinces was given impetus in the 1860s by a need for common defense, the desire for some central authority to press railroad construction, and the necessity for a solution to the problem posed by Canada West and Canada East, where the British majority and French minority were in conflict. When the Maritime Provinces, which sought union among themselves, met at the Charlottetown Conference of 1864, delegates from the other provinces of Canada attended. Two more conferences were held—the Quebec Conference later in 1864 and the London Conference in 1866 in England—before the British North America Act in 1867 made federation a fact. (In 1982 this act was renamed the Constitution Act, 1867.)
The four original provinces were Ontario (Canada West), Quebec (Canada East), Nova Scotia, and New Brunswick. The new federation acquired the vast possessions of the Hudson's Bay Company in 1869. The Red River Settlement became the province of Manitoba in 1870, and British Columbia voted to joined in 1871. In 1873, Prince Edward Island joined the federation, and Alberta and Saskatchewan were admitted in 1905. Newfoundland (now Newfoundland and Labrador) joined in 1949.
Canada's first prime minister was John A. Macdonald (served 1867-73 and 1878-91), who sponsored the Canadian Pacific Railway . In the west, religious tension and objections to lack of political representation and unfair land-grant and survey laws produced rebellions of Metis, led by Louis Riel in 1869-70 and 1884-85. The Metis were French-speaking Roman Catholics who had considered themselves a new nation combining the traditions and ancestry of Europeans and native peoples.
Under the long administration (1896-1911) of Sir Wilfrid Laurier , rising wheat prices attracted vast numbers of immigrants to the Prairie Provinces. Between 1891 and 1914, more than three million people came to Canada, largely from continental Europe, following the path of the newly constructed continental railway. In the same period, mining operations were begun in the Klondike and the Canadian Shield. Large-scale development of hydroelectric resources helped foster industrialization and urbanization.
Under the premiership of Conservative Robert L. Borden , Canada followed Britain and entered World War I. The struggle over military conscription, however, deepened the cleavage between French Canadians and their fellow citizens. During the depression that began in 1929, the Prairie Provinces were hard hit by droughts that shriveled the wheat fields. Farmers, who had earlier formed huge cooperatives, sought to press their interests through political movements such as Social Credit and the Co-Operative Commonwealth Federation (now the New Democratic party).
World War II to the Present
With W. L. Mackenzie King as prime minister, Canada played a vital role on the Allied side in World War II. Despite economic strain Canada emerged from the war with enhanced prestige and took an active role in the United Nations. Canada joined the North Atlantic Treaty Organization in 1949. Following the war, uranium, iron, and petroleum resources were exploited; uses of atomic energy were developed; and hydroelectric and thermal plants were built to produce electricity for new and expanded industries.
King was succeeded by Louis St. Laurent , the first French-speaking prime minister. John G. Diefenbaker , a Progressive Conservative, came to power in 1957. The St. Lawrence Seaway was opened in 1959. The Liberals returned to office in 1963 under Lester B. Pearson . After much bitter debate, the Canadian Parliament in 1964 approved a new national flag, with a design of a red maple leaf on a white ground, bordered by two vertical red panels. The new flag symbolized a growing Canadian nationalism that de-emphasized Canada's ties with Great Britain. The Pearson government enacted a comprehensive social security program. The Montreal international exposition, Expo '67, opened in 1967 and was applauded for displaying a degree of taste and interest far superior to that of most such exhibitions.
Pearson was succeeded by Pierre Elliot Trudeau , a Liberal, in 1968. The Trudeau government was faced with the increasingly violent separatist movement active in Quebec in the late 1960s and early 70s. In 1968, Trudeau's government introduced the Official Languages Bill, which encouraged bilingualism in the federal civil service. In elections in Oct., 1972, Trudeau's Liberal party failed to win a majority, but he continued as prime minister, dependent on the small New Democratic party for votes to pass legislation; in July, 1974, the Liberals reestablished a majority, and Trudeau remained prime minister. Except for a brief period (June, 1979-Mar., 1980) when Conservative Joe Clark gained office, Trudeau was prime minister until 1984. Increased government spending and slowed industrial growth were Canada's main problems, in addition to the continuing threat of Quebec separatism.
After Quebec voted (1980) not to leave the Canadian federation, Trudeau began a constitutional debate that culminated with the Canada Act of 1982, which made Canada fully independent from Great Britain by giving it the right to amend its own constitution. Quebec's provincial government, however, did not accept the new constitution.
With the country reeling from the effects of a recession, Trudeau resigned (1984) and was succeeded as head of the Liberal party and prime minister by John Turner . In the elections later that year, Brian Mulroney led the Progressive Conservatives to victory in a landslide. Mulroney's first major accomplishment was the Meech Lake Accord , a set of constitutional reforms proposed by Quebec premier Robert Bourassa that would have brought Quebec into the constitution by guaranteeing its status as a "distinct society." However, aggressive measures by the Quebec government to curtail the use of English, such as forbidding the use of any language other than French on public signs, caused a wave of resentment in Canada's English-speaking population. The accord died on June 22, 1990, when Newfoundland and Manitoba failed to ratify it, leaving Canada in a serious constitutional crisis. In Oct., 1992, Canadian voters rejected a complex package of constitutional changes (the Charlottetown Accord) intended to provide alternatives that would discourage the separatist movement in Quebec.
Canada's new constitution also opened the way for native land claims that have changed the political appearance of N Canada and had effects elsewhere as well. In 1992, as part of the largest native-claim settlement in Canadian history, the Inuit-dominated eastern portion of the Northwest Territories was slated to be separated as the territory of Nunavut, which was completed in 1999. The subsequent years saw the signing of a series of similar self-government agreements with various aboriginal groups to settle additional native claims; none of these agreements, however, established separate province-level territories. In 1998 the federal government issued a formal apology to its indigenous people for 150 years of mistreatment and established a fund for reparations.
The most significant accomplishment of Mulroney's first government was a free-trade agreement with the United States, which was ratified by parliament after Mulroney and the Progressive Conservatives returned to power in 1988 reelection; the agreement came into effect in Jan., 1989. In his second term this pact formed the groundwork for the broader North American Free Trade Agreement (NAFTA), signed in 1992. NAFTA came into effect in Jan., 1994, establishing a free-trade zone that consisted of Mexico, Canada, and the United States.
In 1993, Mulroney resigned and was succeeded by fellow Conservative Kim Campbell , who became (June, 1993) Canada's first woman prime minister.
Widespread anger over recession and high unemployment led to a Progressive Conservative rout in the elections of Oct., 1993, sweeping the Liberals to power and making Jean Chretien prime minister. The Conservatives were left with only two seats, having lost a total of 151. Two relatively new parties, the Bloc Quebecois (a Quebec separatist party) and the Reform party (based in western Canada), won nearly all the remaining parliamentary seats. In Oct., 1995, Quebec voters again rejected independence from Canada in a referendum, but this time the question was only narrowly defeated.
Chretien's Liberal party held onto 155 seats following the June, 1997, parliamentary elections, and he remained prime minister. The majority of the opposition seats went to the Reform party (60), which in 2000 reconstituted itself as the Canadian Alliance , and the Bloc Quebecois (44). In the late 1990s the low Canadian dollar and relatively high unemployment were among the country's chief concerns, but the government made progress in paying down the national debt.
In July, 2000, Chretien won passage of a bill designed to make it harder for Quebec to secede, by requiring that a clear majority support a clearly worded proposition and that such issues as borders and the seceding province's responsibility for a share of the national debt be resolved by negotiations. In the elections of Nov., 2000, Chretien led the Liberals to a third consecutive victory at the polls, winning 172 seats in the House of Commons; the Canadian Alliance (66) and Bloc Quebecois (38) remained the principal opposition parties. Although the country suffered an economic slowdown in 2001, the government rejected the stimilus of deficit spending, adhering instead to the fiscal discipline established in the late 1990s, and by the end of the year economic conditions had improved. Following the Sept., 2001, terrorist attacks against the United States, a contingent of Canadian forces participated in operations against Al Qaeda and the Taliban in Afghanistan.
In 2002, Chretien's cabinet was hurt by charges of lax ethical standards, resulting in a shakeup; Finance Minister Paul Martin, a likely challenger to Chretien's leadership, was also forced out. Increasingly active Liberal opposition to Chretien's continuation as party leader led him to announce announce that he would not seek a fourth term as prime minister. In the weeks before the U.S.-led invasion of Iraq (Mar., 2003) Canada attempted to negotiate a compromise Security Council resolution; the failure of the council to reach agreement led the Canadian government not to participate in the invasion. Beginning in May, 2003, the country's livestock industry was hurt when other nations banned imports of Canadian beef after an occurrence of "mad cow" disease in Alberta. The situation was not ameliorated later in the year when a cow with the disease was found in the United States and was discovered to have been imported from Canada several years before.
Late in 2003 Liberals elected Paul Martin to succeed Chretien as party leader and prime minister, and Chretien resigned in December. Meanwhile, conservatives moved to end the divisions on the right by merging the Canadian Alliance and Progressive Conservative party in the Conservative party of Canada. In the ensuing June, 2004, elections, Martin and the Liberals were hurt by scandals, but they retained sufficient parliamentary seats to form a minority government as voters did not rally to the Conservatives' socially conservative positions.
A scandal originating in a federal advertising sponsorship program begun in the mid-1990s and designed to promote national unity in Quebec increasingly undermined Paul Martin's government in 2005, though he appeared not to have been involved personally. Under Chretien Quebec advertising firms aligned with the Liberal party received millions of dollars but apparently did little or no work, and some money was funneled illegally to Liberal party coffers. It was unclear whether the former prime minister knew of the scandal, but one of his brothers was implicated in testimony in 2005. The scandal was first uncovered in 2002, and hurt the Liberals in the 2004 elections.
New, detailed revelations about the scandal in 2005 threatened to bring down the government, which narrowly survived a confidence vote in May, 2005. Parliament subsequently passed an appropriations bill and a gay-marriage bill by more comfortable majorities. Michaelle Jean, a journalist whose family emigrated from Haiti when she was young, became governor-general in Sept., 2005. In Nov., 2005, Martin's government finally collapsed after the New Democrats joined the Conservatives and Bloc Quebecois in a no-confidence vote; the vote had been preceded by the release of an investigative report into the advertising sponsorship scandal that called it an elaborate kickback scheme designed to funnel money to individuals and the Liberal party.
The Jan., 2006, elections saw the Conservatives, led by Stephen Harper , win a plurality of the seats in parliament and 36% of the vote, but the results did not indicate a significant rightward shift in Canadian attitudes, as the majority of the vote (and seats) went to left of center parties (the Liberals, the Bloc Quebecois, and the New Democrats). Issues concerning the extent of Canadian sovereignty in the Arctic and Canadian control over the Northwest Passage became more prominent in 2006 as Harper's government sharply rejected U.S. assertions that Canada was claiming international waters. In June, 2006, Canadian officials arrested 17 people accused of participating in a Islamic terror plot involving possible attacks against the Parliament Building in Ottawa and other sites in Toronto.