It was on 4 October 1904 announced that King Edward VII had, by commission under the royal sign-manual and signet, approved the recommendation of his British prime minister, Arthur Balfour, to appoint Grey as his representative, replacing Grey's brother-in-law, the Earl of Minto. (Minto was married to Grey's sister, Mary Caroline Grey.) The appointment came at a good time for Grey, as a series of failed investments in South Africa had left him penniless; a gift from his wife's aunt, Lady Wantage (widow of the Lord Wantage), was used to supplement his salary as governor general.
The time during which Grey occupied the viceregal office was one of increasing immigration, industrialisation, and economic development in Canada. A sign of Canada's increasing independence from Britain, Grey was on 16 June 1905 designated as "Governor General of Canada and Commander-in-Chief of the Dominion of Canada," which followed on the passing of the Militia Act in 1904. At the request of Sir Robert Baden-Powell, Grey also undertook the role of Chief Scout of Canada. Further, it was with Grey's granting of Royal Assent to the appropriate Acts of Parliament that Alberta and Saskatchewan joined Canadian Confederation, also in 1905—the Governor General writing to the King at the time: " a new leaf in Your Majesty's Maple Crown"—and he travelled extensively around the ever-growing country. He also journeyed abroad to the Dominion of Newfoundland (then not yet a part of Canada) and several times to the United States to visit President Theodore Roosevelt, with whom Grey developed a strong bond.
Grey often exercised his right, as representative of a constitutional monarch, to advise, encourage, and warn. He desired social reform and cohesion, putting his support behind prison reforms in Canada to provide greater social justice. He also encouraged his prime minister, Sir Wilfrid Laurier, to support the Imperial Federation he had long championed, but Laurier was uninterested. However, Grey's years of urging Laurier to get the Cabinet and parliament to agree to the idea of a Canadian navy proved themselves to be more fruitful. At the Governor General's urging, the Canadian and British governments agreed to have Canada assume control of the former British garrisons at Halifax, Nova Scotia, and Esquimalt, British Columbia, after which the Royal Canadian Navy was created by the Naval Service Act of 1910. The Act was so identified with Grey that, in Quebec, it was referred to as Grey's Bill and opposed by Henri Bourassa and his Ligue nationaliste canadienne. Another of Grey's suggestions was a railway hotel for the federal capital, which eventuated in the Chateau Laurier, completed in 1912.
Though Grey strongly promoted national unity among French and English Canadians, as well as advocating unity within the entire British Empire, his causes frequently raised the ire of Bourassa and the Quebec nationalists. Grey was involved in the planning for the tercentennial of Quebec in 1908, marking the 300th anniversary of the landing of Samuel de Champlain at what later became Quebec City. At Grey's suggestion, the Cabinet agreed to Grey's plan to have the Plains of Abraham designated as a national park; this would be done to coincide with the Quebec celebrations and Grey saw the official ceremony as being an event that would promote Franco-Anglo-American friendship. The government arranged for the attendance of the Prince of Wales (later King George V), American and French warships, and a host of visiting dignitaries. Still, the Ligue saw this as solely a tribute to the Empire; Bourassa and other nationalists complained that Grey had transformed a day intended to celebrate Samuel de Champlain into a celebration of James Wolfe.
At other times, and unlike future viceroys, the Governor General's influence expanded more blatantly into government policy: Grey opposed the head tax imposed by the Chinese Immigration Act of 1885 on Chinese immigrants to Canada and, at one point, was invited to visit the province of British Columbia, but declined in protest of what he thought to be exclusionary measures implemented by the provincial cabinet under premier Richard McBride. Grey also initially supported Asian immigration to Canada, though, following the Japanese victory in the Russo-Japanese War, he became concerned about the so-called Yellow Peril and worked with the federal Cabinet to explore alternatives to the head tax as a restriction on Asian immigration. He was nevertheless appalled by the 1907 anti-Asian riots in Vancouver, organised by the Asiatic Exclusion League, and, later in the same year, arranged a visit to Canada by Prince Fushimi Sadanaru of the Empire of Japan.
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