Canada’s two major freight railroads have shut their operations, according to management of the two companies, locking out 9,000 members of the Teamsters union who operate the trains and dealing a potential blow to both the Canadian and US economies.
For example, some US auto plants could temporarily shut down if they’re unable to get engines, transmissions or stampings done at Canadian plants.
This is the first time that both major Canadian 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.
“A stoppage of rail service will be devastating to Canadian businesses and families and impose significant impacts on the US economy,” they said.
“We can’t shut down a rail network by just flipping a switch,” Jonathan Abecassis, spokesperson for Canadian National, told CNN Wednesday ahead of the lockout.
At a press briefing Thursday, Canadian Prime Minister Justin Trudeau would not commit to that action, though.
According to the management of the two companies, Canada’s two main freight railroads have ceased operations, thereby displacing 9,000 Teamsters employees who operate the trains and potentially impacting the economies of both the US and Canada.
The US-Canada border is crossed by nearly one-third of the freight handled by the two railroads, Canadian National (CN) and Canadian Pacific Kansas City Southern (CPKC). Depending on how long the shutdown lasts, it may cause disruptions to a number of US industries, including agriculture, autos, home building, and energy.
In a statement released on Thursday, shortly after the lockout began at 12:01 am ET, the company stated that it was “acting to protect Canada’s supply chains, and all stakeholders, from further uncertainty and the more widespread disruption that would be created should this dispute drag out further resulting in a potential work stoppage occurring during the fall peak shipping period.”. “Postponing the settlement of this labor dispute will only exacerbate the situation. “.
The shutdown would highlight how tightly the economies of the two countries are entwined, as numerous industries rely on unrestricted trade across the border to function effectively.
For instance, in the event that US auto plants are unable to obtain engines, transmissions, or stampings from Canadian facilities, they may be forced to temporarily close. The US water treatment facilities close to the Canadian border may run out of the chlorine required to purify the water, and US farmers may experience shortages of fertilizer.
It is the first time that a labor dispute has caused both of Canada’s major railroads to shut down simultaneously. In the industry, a 60-hour strike at Canadian Pacific in 2022 was the most recent work stoppage. Prior to that, Canadian National saw a nine-day strike in 2019.
A strike, in which union members refuse to report for duty, is not the same as what happened on Thursday. In this instance, it is management informing the nearly 9,000 Teamsters that they are unable to work.
‘Up against it’.
Spokesman Patrick Waldron for the CPKC stated that rather than having the union go on strike later this fall, it was preferable to halt operations now and come to a decision.
“The fall shipping peak season is quickly approaching. Before the lockout, Waldron spoke with CNN about the upcoming Canadian grain crop, which is the first to be unaffected by the drought in two years. “Christmas gifts are being delivered to ports in containers. The repercussions will be more severe if this continues into the fall shipping season. “.
The Teamsters union claims that although it has been pursuing a mutually agreeable contract, the railroads’ demands would result in less downtime and greater safety hazards.
“During this process, it has become clear that CN and CPKC are prepared to jeopardize rail safety and sever families in order to make a little extra money. Traders, suppliers, small companies, and their own staff are all unimportant to railroads. According to a statement released early on Thursday, Paul Boucher, president of the Teamsters Canada Rail Conference, “their sole focus is boosting their bottom line, even if it means jeopardizing the entire economy.”.
However, the railroads refute the idea that the changes they are requesting would raise safety concerns, claiming that every proposal offers more safety precautions than those mandated by recently tightened Canadian regulations.
The companies claimed that since an agreement could not be reached before the deadline, it is the union’s fault. Both of them demanded that the government intervene and submit the disagreement to binding arbitration, something it has so far declined to do.
The Canadian government should act to keep the railroads operating, according to a joint statement released by the chambers of commerce of the United States and Canada on Tuesday.
According to them, “a stoppage of rail service will impose significant impacts on the US economy and be devastating for Canadian businesses and families.”. Because of the substantial two-way trade and intricately linked supply chains that exist between the US and Canada, any major disruption to the rail system will put the livelihoods of workers in numerous industries on both sides of the border in danger. “.
Possible financial losses. .
According to economists, there isn’t nearly enough truck capacity to handle the freight that Canadian railroads typically carry.
An economic impact of a three-day strike would be $300 million (407 million Canadian dollars), according to a report released on Tuesday by the Michigan research firm Anderson Economic Group, which specializes in estimating the effects of work stoppages. A seven-day strike would result in losses exceeding $1 billion (1 point 4 billion Canadian dollars).
According to Kristin Dziczek, a policy advisor in the Federal Reserve Bank of Chicago’s research, policy, and public engagement division, a short-term shutdown would still result in issues but have less of an impact on the economy.
“After even a few days of a shutdown, things won’t end up where they should be, and it will take weeks to unwind the problems,” she stated.
Furthermore, last week both railroads ceased accepting shipments of different hazardous materials due to the possibility of a work stoppage. This prevented those goods from becoming stuck on trains that could not be delivered. John Drake, vice president of supply chain, infrastructure, and transportation policy at the US Chamber, claims that this is already having some disruptions.
He stated, “We’re already hearing from businesses that their shipments aren’t moving.”.
Railroad representatives stated that the union could not wait to launch a strike against them with the short notice period of 72 hours mandated by Canadian law. As a result, the management had to proceed with the lockdown plans.
Speaking to CNN on Wednesday before the lockout, Canadian National spokesperson Jonathan Abecassis stated, “We can’t shut down a rail network by just flipping a switch.”. The safe and secure shutdown process had to begin. “.
In the event that a panel considers the demands of both sides and issues recommendations, Prime Minister Justin Trudeau cannot prevent a strike or lockout because Canada lacks the same railroad labor law as the United States. That is precisely what happened in 2022 when 13 rail unions operating on the four main US railroads went on strike. Both President Joe Biden and Congress intervened to stop the strike.
In an attempt to broker a settlement, Canadian Labor Minister Steve MacKinnon recently met with representatives from the union and management. He can send the case to binding arbitration, which is the railroads’ preferred resolution but the unions’ preferred course of action. However, the Trudeau government has turned down that suggestion thus far.
“We’re hoping he reconsiders his position,” Abecassis of CN stated.
However, Canadian Prime Minister Justin Trudeau refrained from committing to that course of action during a press conference on Thursday. However, he acknowledged that MacKinnon is still actively working to find a solution to end the government shutdown.
“Clearly, Canadians nationwide are concerned about this, so we are not taking it lightly,” Trudeau stated. “We’ll have more information soon about the steps we’re taking to guarantee that the economy finds the ideal solution as soon as possible. “.
Paula Newton of CNN contributed to this article.
Additional reporting and context have been added to this story.
