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The canal's purpose is to connect the north and south of France with a navigable waterway. As the Alpine mountains have forced the rivers to flow from the center of France to the North, South or West, no river flows from the North to the South. (See the maps for more information).
To over come this geographical problem the canal was built, and connects the rivers Yonne and Saôe. The Yonne, flows into the Seine, which empties in the Atlantic Ocean. The river Saône flows into the Rhone at Lyon, which amputees into the Mediterranean Sea. Please view the map below.

The red arrows indicate the downhill flow of water with regards to the lay of the land, the green line indicates the watershed line.
The historical reasons behind the construction and desire for a canal are multiple. One must remember that the construction began in the dawn of the industrial revolution. There was no mechanical form of heavy transport available, crossing hill ranges and peaks with tonnes of load on horse cart was impossible. River craft may have already been carrying many tons of merchandise, but the natural topography meant that rivers became streams, water flows down hill and droughts dry up river beds. Hence going "up and then down" a hill via rivers was impossible. The only other choice was horse and cart. Two hundred tons of cargo requires many horses and carts...
With the development of canals and the mastering of simple hydraulics by the use of sluice gates, the canal proved to be a huge advancement in transport technology. The construction of the canal was a means for a whole region to step out of the middle ages into modern times. Politically the desire was also very important. Eccomonically, the changes for small rural villages and hamlets where dramatic. With the arrival of the canal, there was a need for new work skills, horses, carpenters and much more. This created in influx of imigration from other parts of Europe. Perhaps the construction of the canal could be compared to the development of a huge "silent" airport in today's world...
Suggested reading : the history of the canal, history of Burgundy