The city was first settled in 1788 by the United Empire Loyalists. In 1814, Canadian forces led by George Hay, 8th Marquess of Tweeddale, met American invaders near the present-day town site during the Battle of Cook's Mills. After two days of combat, the Americans retreated to Buffalo, New York, ending the War of 1812 on Canadian soil.
The Welland Canal is involved in the history of the area ever since the First Welland Canal was extended to reach Lake Erie in 1833. A wooden aqueduct was built to carry the Welland Canal over the Welland River at what is now downtown Welland, and the area became known as simply Aqueduct. A lock to cross from the canal to the river and vice versa was also built. A small shantytown soon developed around the facility, providing essential services in what was a convenient stop-over location.
The growing town was later named Merrittsville, after William Hamilton Merritt, the initiator of the Welland Canal project. This name is still reflected today in the name of the Merrittville Highway (Niagara Road 50), which served as the primary north-south route in central Niagara before the construction of Highway 406. Welland gained its present name when it was incorporated on July 25, 1858. It became a city in 1917.
In addition to the presence of the canal itself, one of the few railway crossings across the canal was also located near Welland. The two factors contributed greatly to the development of heavy industry in Welland. The Plymouth Cordage Company was the first major industrial company to open a plant in Welland in 1906. By 1930s, Welland was an important industry location in the region and was developing rapidly.
In 1960s, the city was starting to outgrow the canal passing through its core. The Welland By-Pass project, started in 1967 and finished in 1973, provided a new, shorter alignment for the Welland Canal by removing it from downtown Welland to the outskirts of the city.
Originally, this was viewed with enthusiasm as the constant traffic on the canal was interfering heavily with transportation within the city. The old alignment of the canal was renamed the Welland Recreational Waterway with the purpose of developing several recreational facilities and tourist attractions along its shores. The plans called for fishing platforms, water slides, boat rental points, as well as marine and rail historical exhibits. Eventually, most of these never came to be.
The effects of the canal relocation were compounded by the gradual, but steady move of industry out of Welland as a trend for global manufacturing was developing. As a result, downtown Welland has seen much deterioration in the years following the project. Stores moved out to the north end of the city, where a retail hub was being developed in and around the Seaway Mall. Downtown became a mix of a ghost town and a ghetto. Local residents looked with envy at Port Colborne, which although still saddled with a canal cutting the city in two, has enjoyed greater success attracting tourists to its happenings such as the Tall Ships Challenge.
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