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CNN
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Canada’s two biggest freight rail companies have suspended operations, executives at both companies say, locking out 9,000 members of the Teamsters union that runs the trains and potentially dealing a blow to both the Canadian and U.S. economies.
About a third of the freight handled by the two railroads, Canadian National Railway (CN) and Canadian Pacific Kansas City Southern Railway (CPKC), crosses the U.S.-Canada border, and depending on how long the shutdown lasts, it could disrupt operations in many U.S. industries, including agriculture, autos, homebuilding and energy.
“CPKC is acting to protect Canada’s supply chain and all stakeholders from further uncertainty and broader disruptions that could result if this dispute drags on further and leads to potential work stoppages during peak fall shipping periods,” the company said in a statement Thursday, shortly after the lockout began at 12:01 a.m. ET. “Delaying the resolution of this labor dispute will only make things worse.”
The closure will be a reminder of how closely intertwined the two economies are, with many industries relying on the free movement of goods across the border to operate efficiently.
For example, some U.S. auto plants could be temporarily shut down if Canadian factories can’t make engines, transmissions and stampings, U.S. farmers could face fertilizer shortages, 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 biggest railroads have simultaneously been shut down due to labour disputes. The most recent strike in the industry was a 60-hour strike at Canadian Pacific Railway in 2022. Prior to that, there was a nine-day strike at Canadian National Railway in 2019.
Thursday’s action is different from a strike, in which union members refuse to show up to work, in which management is telling the roughly 9,000 Teamsters members they can’t work.
CPKC spokesman Patrick Waldron said it would be better for the union to stop work and reach a conclusion now rather than go on strike later this fall.
“We are just around the corner from the peak fall shipping season. New Canadian grain crops are coming in and for the first time in two years we are not experiencing the effects of drought,” Waldron told CNN before the lockout. “Containers are arriving at our ports loaded with Christmas gifts. If this extends into the fall shipping season, the results will be even worse.”
The Teamsters union is seeking a contract that works for both sides, but says the railroad’s demands would reduce rest periods and increase safety risks.
“Throughout this process, CN and CPKC have demonstrated their willingness to sacrifice rail safety and rip families apart to make extra money. The rail companies don’t care about farmers, small businesses, their supply chains or their own employees. Their only concern is increasing profits, even if it means putting the entire economy at risk,” Paul Boucher, president of the Canadian Railway Congress Teamsters, said in a statement early Thursday.
But the railroads deny that the reforms they are seeking would increase safety risks, arguing that all of their proposals provide stronger safety protections than those required under recently strengthened Canadian regulations.
Both companies blamed the union for failing to reach an agreement in time. They have asked the government to step in and submit the dispute to binding arbitration, but the government has so far refused.
The U.S. and Canadian chambers of commerce issued a joint statement Tuesday calling on the Canadian government to take steps to keep rail services running.
“The interruption of rail service would be devastating to Canadian businesses and families and would have a significant impact on the U.S. economy,” they said. “With strong two-way trade and deeply integrated supply chains between Canada and the United States, any interruption to rail service would put the livelihoods of workers in multiple industries on both sides of the border at risk.”
Economists say there is barely enough truck capacity to handle the freight that Canada’s railroads typically carry.
A three-day strike could result in economic losses of $300 million (C$407 million), while a seven-day strike could cost more than $1 billion (C$1.4 billion), according to a report released Tuesday by Anderson Economic Group, a Michigan research firm with expertise in estimating the economic impact of strikes.
Christine Dziczek, policy adviser in the research, policy and public engagement division of the Federal Reserve Bank of Chicago, said a shutdown of just a few days would limit the impact on the economy but would still cause problems.
“Even a shutdown for a few days will leave things different than they should be, and it will take weeks to sort out those issues,” she said.
And because of the risk of work stoppages, both railroads last week stopped accepting shipments of many hazardous materials to prevent them from getting loaded onto trains and making them undeliverable.That’s already causing chaos, said John Drake, vice president for transportation, infrastructure and supply chain policy at the U.S. Chamber of Commerce.
“We’re already hearing from businesses that their goods are not moving,” he said.
A railroad spokesman said management needed to go ahead with its lockdown plan and couldn’t wait for unions to stage a strike with only the 72-hour notice period required by Canadian law.
“We can’t just flip a switch and shut down our rail network,” Canadian National spokesman Jonathan Abecassis told CNN on Wednesday before the lockout. “We had to initiate safe and secure shutdowns.”
Canada does not have rail labor laws like the U.S. that would allow Prime Minister Justin Trudeau to block strikes or lockouts while a commission considers the demands of both sides and makes recommendations. That’s exactly what happened in 2022 when President Joe Biden and Congress each enacted measures to block a strike by 13 rail unions across the four largest U.S. railroads.
Canada’s Labour Minister Steve McKinnon recently met with union and management negotiators but efforts to reach an agreement failed. He has the power to refer the matter to binding arbitration, a solution sought by the rail companies and opposed by the unions. But so far the Trudeau government has rejected that option.
“We expect him to reconsider his position,” CN’s Abecassis said.
This story has been updated with additional background information and reporting.
