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CNN
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Canada’s two largest freight railroads have suspended operations, company executives said, locking out 9,000 members of the Teamsters union who drive the trains in a move that could deal a severe blow to both the Canadian and U.S. economies.
Almost a third of the freight traffic of the two railway companies Canadian National (CN) and Canadian Pacific Kansas City Southern (CPKC) crosses the US-Canadian border. Depending on how long the closure lasts, there could be disruptions in numerous US industries, including agriculture, the automotive industry, housing construction and energy.
“CPKC is acting to protect Canada’s supply chains and all stakeholders from further uncertainty and major disruption that would arise if this dispute drags on and a potential work stoppage occurs during the peak fall supply season,” The company said in a statement Thursday, shortly after the lockout began at 12:01 a.m. ET, that “delaying the resolution of this labor dispute will only make things worse.”
The shutdown would demonstrate how closely the economies of both countries are linked. Many industries depend on the free movement of goods across the border to operate efficiently.
For example, some U.S. auto plants could temporarily close if they cannot finish engines, transmissions or stampings in Canadian plants. U.S. farmers could face a shortage of fertilizers, and U.S. water treatment plants near the Canadian border could run out of the chlorine they use to purify water.
It is the first time that both of Canada’s major railways have shut down simultaneously due to a labour 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 is management telling the nearly 9,000 Teamsters they cannot work.
CPKC spokesman Patrick Waldron said it would be better to shut down operations now and reach a settlement than to send the union on strike later in the fall.
“We are coming up on the peak fall shipping season. The new Canadian grain harvest is coming up, the first in two years that is not affected by drought,” Waldron told CNN before the lockout. “Christmas presents are arriving in containers at the ports. If this gets pushed even further into the fall shipping season, the consequences will be even worse.”
The Teamsters union says it is seeking a collective agreement that both sides can live with. However, the railroad’s demands would lead to shorter rest periods and increased safety risks.
“Throughout this process, CN and CPKC have shown that they are willing to compromise rail safety and tear families apart to make a few extra dollars. The rail companies do not care about farmers, small businesses, supply chains or their own employees. Their only goal is to increase their profits, even if it means putting the entire economy at risk,” Paul Boucher, president of the Teamsters Canada Rail Conference, said in a statement early Thursday.
However, the railroad companies deny that the changes they are requesting would increase safety risks. They say all the proposals offer greater safety protections than the recently tightened Canadian regulations require.
The companies said it was the union’s fault that no agreement was reached within the deadline. They called on the government to intervene and submit the dispute to binding arbitration, which it has so far refused to do.
The Chambers of Commerce of the United States and Canada released a joint statement on Tuesday calling on the Canadian government to take action to keep railroads running.
“A loss 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 intertwined supply chains between Canada and the United States mean that any major disruption to rail service would threaten the livelihoods of workers in numerous industries on both sides of the border.”
Economists say trucking capacity is far from enough to handle the freight that Canadian railroads typically carry.
A report released Tuesday by the Anderson Economic Group, a Michigan-based research firm that specializes in assessing the economic impact of work stoppages, said a three-day strike would cost $300 million. (407 million Canadian dollars) in economic damage, while a seven-day strike would cost losses of over one billion dollars (1.4 billion Canadian dollars).
A closure of just a few days will limit the economic impact but still cause problems, said Kristin Dziczek, policy adviser in the research, policy and public engagement division of the Federal Reserve Bank of Chicago.
“It will take weeks to fix the problems caused by even a few days of downtime because things will end up going differently than they should,” she said.
And because of the risk of a work stoppage, both railways stopped the delivery of various dangerous goods last week so that they would not are stuck on trains that cannot be delivered. According to John Drake, vice president of transportation, infrastructure and supply chain policy at the U.S. Chamber of Commerce, this is already causing some disruptions.
“We are already hearing from companies whose deliveries are not progressing,” he said.
Railway spokespeople said management had to go ahead with lockdown plans because it could not wait for the union to call a strike, which would only require the 72-hour notice required by Canadian law.
“We can’t shut down a rail network by simply flipping a switch,” Canadian National spokesman Jonathan Abecassis told CNN on Wednesday before the lockout. “We had to initiate a safe and secure shutdown.”
Canada does not have the same railroad labor laws as the United States, which would allow Prime Minister Justin Trudeau to prevent a strike or lockout while a panel weighs both sides’ demands and makes recommendations. That happened in 2022, when President Joe Biden and Congress each took action to prevent a strike by 13 railroad unions at the four largest U.S. railroad companies.
Canadian Labour Minister Steve MacKinnon has been meeting with union and management negotiators in recent days in an unsuccessful attempt to reach an agreement. It has the power to refer the matter to binding arbitration, a solution sought by the railroads and opposed by the unions. But so far the Trudeau government has rejected that option.
“We hope he will reconsider his position,” said CN’s Abecassis.
This story has been updated with additional context and reporting.
