() – Canada’s two largest freight rail companies have shut down operations, according to management, putting 9,000 members of the Teamsters union that operates the trains out of work and dealing a potential blow to the Canadian and U.S. economies.
Nearly one-third of the freight handled by the two railroads, Canadian National (CN) and Canadian Pacific Kansas City Southern (CPKC), crosses the U.S.-Canada border, and the shutdown could disrupt operations in several U.S. industries, including agriculture, automotive, home construction and energy, depending on how long the shutdown lasts.
“CPKC is acting to protect Canada’s supply chains and all stakeholders from the increased uncertainty and more widespread disruption that would be created if this dispute were to drag on further and result in a potential work stoppage during the peak fall shipping period,” the company said in a statement Thursday shortly after the lockout began at 12:01 a.m. ET. “Delaying the resolution of this labour dispute will only make matters worse.”
The closure would highlight how closely linked the economies of both nations are, with many industries dependent on the free movement of goods across the border to operate efficiently.
For example, some U.S. auto plants could temporarily close if they can’t build engines, transmissions or stampings in Canadian plants. American farmers could face shortages of fertilizer, and U.S. water treatment plants near the Canadian border could run out of the chlorine they use to purify water.
This is the first time that Canada’s two major railroads have shut down at the same time due to a labor dispute. The most recent work stoppage in the industry was a 60-hour strike at Canadian Pacific in 2022. Before that, there was a nine-day strike at Canadian National in 2019.
Thursday’s action is different from a strike, in which union members refuse to show up for work. In this case, it’s management telling the nearly 9,000 Teamsters they can’t work.
CPKC spokesman Patrick Waldron said it was better to halt operations now and come to a conclusion, rather than have the union go on strike later this fall.
“We’re right in the peak fall shipping season. We have a new crop of Canadian grain coming in, the first that wasn’t affected by drought in two years,” Waldron told before the lockout. “We have Christmas gifts in containers arriving at the ports. If this extends into the fall shipping period, the consequences will be worse.”
The Teamsters union says it has been seeking a contract that both sides can live with, but that the railroads’ demands would reduce rest breaks and increase safety risks.
“Throughout this process, CN and CPKC have proven willing to compromise rail safety and tear families apart to make extra money. The railroads do not care about farmers, small businesses, supply chains or their own employees. Their only goal is to improve their bottom line, even if it means putting the entire economy at risk,” said Paul Boucher, president of the Teamsters Canada Rail Conference, in a statement released early Thursday.
But the railroads deny that the changes they seek would increase safety risks, saying all the proposals provide greater safety protections than those required by recently strengthened Canadian regulations.
The companies said the union was to blame for the failure to reach a deal before the deadline and called on the government to step in and submit the dispute to binding arbitration, something it has so far refused to do.
The U.S. and Canadian chambers of commerce issued a joint statement Tuesday calling on the Canadian government to take steps to keep the railroads running.
“Disruption of rail service would be devastating for Canadian businesses and families and would have a significant impact on the U.S. economy,” they said. “The significant two-way trade and deeply integrated supply chains between Canada and the United States mean that any significant rail disruption will jeopardize the livelihoods of workers across multiple industries on both sides of the border.”
Economists say there is not enough truck capacity available to handle the freight that Canadian railways normally carry.
A report Tuesday by the Anderson Economic Group, a Michigan research firm with expertise in estimating the economic impact of work stoppages, said a three-day strike would cause $300 million (C$407 million) in economic damage, while a seven-day strike would result in losses of more than $1 billion (C$1.4 billion).
A shutdown of just a few days would limit the economic impact but still cause problems, said Kristin Dziczek, a policy adviser in the research, policy and public engagement division of the Federal Reserve Bank of Chicago.
“It will take weeks to resolve the problems caused by a shutdown of even a few days because things will end up not where they are supposed to be,” he said.
And because of the risk of a work stoppage, both railroads stopped receiving shipments of various hazardous materials last week so that those items wouldn’t get stuck on trains that couldn’t be delivered. That’s already causing some disruption, according to John Drake, vice president of transportation, infrastructure and supply chain policy at the U.S. Chamber of Commerce.
“We are already hearing from companies that are not seeing their shipments move,” he said.
Railway spokesmen said management needed to press ahead with closure plans because they could not wait for the union to declare a strike with just 72 hours’ notice, as required by Canadian law.
“We can’t shut down a rail network by just flipping a switch,” Jonathan Abecassis, a spokesman for Canadian National, told on Wednesday before the lockout. “We needed to initiate a safe and secure shutdown.”
Canada does not have the same rail labor laws as the United States, which would allow Prime Minister Justin Trudeau to block a strike or lockout while a panel weighs the demands of both sides and makes recommendations. That’s what happened in 2022, when President Joe Biden and Congress moved to prevent a strike by 13 rail unions spread across the four major U.S. railroad companies.
Canadian Labour Minister Steve MacKinnon has met with union and management negotiators in recent days in an unsuccessful attempt to reach a deal. He has the power to refer the matter to binding arbitration, a solution sought by the railroads and opposed by unions, but the Trudeau administration has so far rejected that option.
“We hope he will reconsider his position,” CN’s Abecassis said.
This story has been updated with additional reporting and context.
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