Canada’s freight railways have shut down over a labour dispute with their teamsters’ union.
Canadian National (CN) and CPKC – the two biggest railroad companies in Canada – locked out their workers after a deadline to come to an agreement with the
Teamsters Canada Rail Conference which represents some 10,000 engineers, conductors and dispatchers over a new contract passed.
Experts are warning that this development could cost businesses billions of dollars and hurt consumers both in Canada and the United States.
But what happened? Why did it happen? And what could the impact be?
Let’s take a closer look:
What happened and why?
CN and CPKC had been negotiating with the union for a long time – nine months and a year respectively – to try to iron out new contracts.
The lockout went into effect at midnight on Thursday (August 22) after failing to reach an agreement.
As per The Guardian, over 9,000 workers have been locked out.
The negotiations are stuck on issues related to the way rail workers are scheduled and concerns about rules designed to prevent fatigue and provide adequate rest to train crews.
Both railroads had proposed shifting away from the existing system, which pays workers based on the kilometres in a trip, to an hourly system they said would make it easier to provide predictable time off.
The railroads said their contract offers have included raises consistent with recent deals in the industry. Engineers make about $150,000 a year on Canadian National while conductors earn $120,000, and CPKC says its wages are comparable.
But the union representing CPKC workers told The Guardian that the firm intended to “gut the collective agreement of all safety-critical fatigue provisions.”
They claim crews will be forced to stay awake longer, boosting the risk of accidents.
But the CPKC said its offer maintains the status quo for all work rules and “fully complies with new regulatory requirements for rest and does not in any way compromise safety.”
The union representing CN workers similarly claimed the company would create “a fatigue-related safety risk.”
Paul Boucher, president of the Teamsters Canada Rail Conference, told QZ, “Despite reaping billions in profits over the years, CN is demanding concessions that would drag working conditions back to another era.”
He claimed that one provision in the proposed contract would force workers to relocate to different parts of Canada for long periods to accommodate labour shortages.
“This highly profitable company is playing hardball with the Canadian economy, doing whatever it can to line the pockets of its managers and shareholders, no matter the consequences,” Boucher added.
Rail cars loaded with canadian wheat travel through the Rocky Mountains on the Canadian Pacific railway line near Banff, Alberta. Reuters
Similar quality-of-life concerns about demanding schedules and the lack of paid sick time nearly led to a US rail strike two years ago until Congress and President Joe Biden intervened and forced the unions to accept a deal.
CN said it was waiting for a response on one final offer made late Wednesday when it locked the workers out.
CN told The Guardian that the union “did not respond to another offer by CN in a final attempt to avoid a labour disruption”.
“Without an agreement or binding arbitration, CN had no choice but to finalise a safe and orderly shutdown and proceed with a lockout.”
CPKC spokesperson Patrick Waldron said the union rejected its last offer that CEO Keith Creel made at the table in person
The CPKC added, “The TCRC [union] leadership continues to make unrealistic demands that would fundamentally impair the railway’s ability to serve our customers with a reliable and cost-competitive transportation service.”
Both railroads have said they would end the lockout if the union agreed to binding arbitration.
The union told the newspaper, “Despite months of good faith negotiations on the part of the Teamsters Canada Rail Conference, parties remain far apart, and both CN and CPKC have begun their lockout of 00:01 today … Despite the lockout, the Teamsters remain at the bargaining table with both companies.”
All rail traffic in Canada and all shipments crossing the US border have stopped, although CPKC and CN’s trains will continue to operate in the US and Mexico.
Billions of dollars of goods each month move between Canada and the US via rail, according to the US Department of Transportation.
What’s the possible impact?
Experts say the impact could be devastating on Canada – and eventually the US.
As per The Guardian, CN and CPKC control nearly all of the railway track in Canada.
They also operate the bulk of the freight.
Canada has never experienced both companies having a work stoppage at the same time.
The newspaper quoted the Railway Association of Canada as saying that the railroads carry goods worth $740,000 every day.
Over half the aviation fuel at Canada’s busiest airport, Toronto’s Pearson airport, is sent by rail.
A strike would also likely affect the mining, agriculture and retail industries.
CNN quoted a report from the Anderson Economic Group as saying a three-day halt could result in $300 million of economic loss.
A seven-day stoppage could cause a loss of over $1 billion.
Kristin Dziczek, policy advisor in the Federal Reserve Bank of Chicago’s research, policy, and public engagement division, told the outlet, “It will take weeks to unwind the problems caused by a shutdown of even a few days because things will end up not where they’re supposed to be.”
Manufacturing companies may have to scale back or even shut down production if they can’t get rail service, while ports and grain elevators will quickly become clogged with shipments waiting to move. And if the dispute drags on for a couple weeks, water treatment plants all across Canada might have to scramble without new shipments of chlorine.
“If railways are not picking up the goods that are coming in by ships, then pretty soon your terminals get filled up. And at that point you cannot take any vessels at the terminal anymore,” said Victor Pang, chief financial officer at the Vancouver Fraser Port Authority.
He pointed to the 13-day strike by 7,400 British Columbia dockworkers last summer, which manufacturers said blocked the flow of $368 million worth of goods each day.
Some companies would undoubtedly turn to trucking to keep some of their products moving, but there’s no way to make up for the volume railroads deliver. It would take some 300 trucks to haul everything just one train can carry.
“If rail traffic grinds to a halt, businesses and families across the country will feel the impact,” Jay Timmons, president and CEO of the National Association of Manufacturers, said in a statement. “Manufacturing workers, their communities and consumers of all sorts of products will be left reeling from supply chain disruptions.”
A drone view shows a train arriving at the CN Rail freight depot in Hamilton. Reuters
There will be other impacts as well, including on the more than 30,000 commuters in Vancouver, Toronto and Montreal who will be scrambling to find a new way into work because their trains won’t be able to operate over CPKC’s tracks while the railroad is shut down.
Many companies across all industries rely on railroads to deliver their raw materials and finished products, so without regular rail service they may have to cut back or even close.
That’s why the US government kept rail workers from going on strike two years ago and forced them to accept a contract despite their concerns about demanding schedules and the lack of paid sick time.
The railways move an average of 69,000 tons of fertilizer product per day, equivalent to four to five trains, said Fertilizer Canada spokesperson Kayla FitzPatrick.
Disruptions will cost the industry $40 million to $46 million per day in lost revenue, not including logistical and operational costs, she said.
Canadian meat producers warned that a rail stoppage would result in millions of dollars in losses and waste.
The Canadian Meat Council and Canadian Pork Council said some processing plants expect to lose millions of dollars a week, and noted these facilities would be forced to shut down within seven to 10 days of a rail stoppage.
Once the railways resume service, it would take two to five weeks for plants to return to normal capacity.
There is concern that the movement of Ontario soybeans to export markets, primarily Japan, will completely stop just before the harvest, said Crosby Devitt, CEO of Grain Farmers of Ontario.
With crop-shipment delays lasting beyond a week, companies must pay contract penalties and demurrage for ships waiting for grain to arrive, piling significant cost onto the industry, said Wade Sobkowich, executive director of the Western Grain Elevator Association.
“We’ll be playing catch-up for the rest of the harvest year, till next July,” he said.
Impact on US
Experts say the stoppage would eventually disrupt North America’s agricultural supply chain, snarling shipments of everything from wheat to fertiliser and meat.
Canada is the world’s top exporter of canola, used in food and biofuel, and of potash fertilizer, as well as the No. 3 wheat exporter.
While a lockout or strike would directly involve 10,000 Canadian employees of the railroads, not those in the US, it would have knock-on effects on the US economy due to the countries’ criss-crossing rail lines.
As per CNN, auto plants in the US could briefly shutter for lack of engines, transmissions or stampings.
Water treatment plants near the Canada border might also fall short of chlorine.
Which is why nearly three dozen North American agriculture groups, in a joint letter to the US and Canadian governments on Monday, urged action to avoid a stoppage.
“The impact of a strike would be particularly severe on bulk commodity exporters in both Canada and the United States as trucking is not a viable option for many agricultural shippers,” the letter said, citing large volumes and vast distances.
The stoppage will halt shipments of US spring wheat from Minnesota, North Dakota and South Dakota to the Pacific Northwest for export, said Max Fisher, chief economist at the National Grain and Feed Association.
CPKC ships grain from the Dakotas and Minnesota to west-coast export terminals via Canada, according to the US government.
US farmers still have nearly two-thirds of the spring-wheat crop to harvest, the US Department of Agriculture said on Monday. Soy, corn and canola harvests are still a few weeks away in North America.
Shippers are also concerned about U.S. corn products heading to Canada. In 2023, Canada was the top destination for US ethanol exports, and almost three-quarters traveled by rail, according to USDA.
“We just can’t have the railroads not operating,” Fisher said.
The US exported $28.2 billion of agricultural products last year to Canada, its third-largest destination for agricultural exports behind China and Mexico, USDA said.
The US imported $40.1 billion of Canadian agricultural products last year, making Canada the second-largest origin of U.S. agricultural imports behind Mexico, the agency said.
About 85 per cent of the 13 million metric tons of US potash imports last year came from Canada, nearly all of which crossed by rail, according to USDA.
US corn farmers apply fertilizers in fall and spring, but potash imports from Canada are consistent throughout the year, said Krista Swanson, chief economist for the National Corn Growers Association.
“Given constant trade flows and the importance of the trade relationship between the two nations, there is no good time for this to occur,” Swanson said.
Canada’s railroads have sometimes shut down briefly in the past during contract negotiations — most recently CPKC was offline for a couple days in March 2022 — but it is rare for both railroads to stop at the same time. The impact on businesses will be magnified because both CN and CPKC have stopped.
Both CN and CPKC had been gradually shutting down since last week ahead of the contract deadline. Shipments of hazardous chemicals and perishable goods were the first to stop, so they wouldn’t be stranded somewhere on the tracks.
As the Canadian contract talks were coming down to the wire, one of the biggest US railroads, CSX, broke with the US freight rail industry’s longstanding practice of negotiating jointly for years with the unions. CSX reached a deal with several of its 13 unions that cover 25 per cent of its workers ahead of the start of national bargaining later this year.
The new five-year contracts will provide 17.5 per cent raises, better benefits and vacation time if they are ratified. The unions that have signed deals with CSX include part of the SMART-TD union representing conductors in one region, the Transportation Communications Union, the Brotherhood of Railway Carmen and the Transport Workers Union.
TCU President Artie Maratea said he’s proud that his union reached a deal “without years of unnecessary delay and stall tactics.”
‘Best interest of both sides’
Trudeau has been reluctant to force arbitration because he doesn’t want to offend the Teamsters Canada Rail Conference and other unions, but he urged both sides to reach a deal Wednesday because of the tremendous economic damage that would follow a full shutdown.
It is in the best interest of both sides to continue doing the hard work at the table,” Trudeau said to reporters in Gatineau, Quebec. “Millions of Canadians, workers, farmers, businesses, right across the country, are counting on both sides to do the work and get to a resolution.”
Numerous business groups have been urging Trudeau to act.
The Guardian quoted them as saying in a joint statement that the government “has a responsibility to protect the Canadian public and maintain national security, and it is time to act decisively to fulfil that obligation”.
Trudeau said Labor Minister Steven MacKinnon met with both sides in the CN talks in Montreal on Tuesday and would be on hand for the CPKC talks in Calgary, Alberta. MacKinnon later said he wrapped up his meetings with the rail companies and the Teamsters.
‘Workers, farmers, commuters and businesses can’t wait. Canadians need urgency at the table. The parties need to get deals done now,” he posted on the social platform X.
With inputs from agencies
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Publish date : 2024-08-22 00:01:00
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