How did this become a reason for federal union (Confederation) in the colonies of British North America?
The end of the Reciprocity Treaty was as much a symptom of events as it was a cause. USA had a bloody war between the states in the preceding five years. Britain had given tacit support for the rebellious south. In the reconstruction aftermath, USA protectionists were able to leverage the lost trust, and deals with Britain were off. The federal union was supposed to make Lower and Upper Canada more seamless, much as state lines in USA had traditionally been only inconsequential non-barriers to commerce. In such union a common pool of opportunities would open within Canada in which the whole would become something greater than the sum of its parts. Canada could then stand better on its own, economically and politically. The issue of reciprocity became revisited periodically thereafter. A treaty was signed in 1911 but abrogated in a subsequent Canadian election charged with anti-USA sentiment. GATT in 1945 brought the phasing-out of tarriffs between the two countries. After another time
