TORONTO– Canada’s two largest railways have come to a standstill after an ongoing labor dispute could not be resolved before Thursday evening’s deadline.
Canadian National and CPKC have halted all of their trains in Canada and stopped shipments to the US after the failure to reach new agreements with the Teamsters Canada Rail Conference union. The standoff could cause significant economic damage to businesses and consumers in both countries, who depend on billions of dollars of goods transported by trains each month.
The big questions are how long the shutdown will last and whether the government will step in. Here’s what you need to know.
It comes down to an employment contract dispute.
CPKC and CN laid off nearly 10,000 engineers, conductors and dispatchers after the deadline passed. As a result, no trains are running in Canada, but both railroads continue to operate in the United States and Mexico.
Negotiations resumed on Thursday, with picketing already underway. Both railroads have said they would end the lockout if the union agrees to binding arbitration. But on Thursday post to XPaul Boucher, president of the Teamsters Canada Rail Conference, accused CPKC and CN of “holding the Canadian economy hostage” to pressure the government to impose binding arbitration.
Both railroads are offering pay increases for what are already well-paid jobs that they say are in line with other recent deals in the sector. Negotiations have stalled largely over issues related to work schedules and concerns about rules designed to prevent fatigue among train crews.
CN had been negotiating with the Teamsters for nine months, while CPKC had been trying to reach a deal for a year, the unions said. Although the case was settled on Thursday, both railroads have started closing shipping networks last week.
Billions of dollars worth of goods travel by rail between Canada and the U.S. every month, according to the U.S. Department of Transportation. The current standoff is halting all CPKC and CN rail traffic in Canada, as well as shipments from those two railroads into the U.S., although trains in the U.S. and Mexico will continue to operate.
The consequences will be felt by both businesses and consumers.
Chemical companies and food distributors will be the first to be hit. The railways had already stopped accepting new shipments of hazardous materials when they began to gradually close last week, to prevent dangerous goods from becoming stranded along the tracks. Perishable goods were also put on hold early.
But Greg Moffatt, executive vice president of the Chemistry Industry Association of Canada, said most chemical manufacturers have said they can last about a week. It just depends on how much inventory they have on hand, how much space they have to store their products and whether they can scale back production.
The automotive industry could also quickly run into problems, as it relies on just-in-time deliveries to dealers and there are many cross-border deliveries of engines, parts and finished vehicles.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, posted on X that about four out of every five cars made in Canada are exported to the U.S., almost exclusively by rail. He said a prolonged lockout could cause temporary work stoppages across the industry.
And it’s not just freight. More than 30,000 commuters in Vancouver, Toronto and Montreal were the first to feel the pinch of the lockdowns. They were left scrambling Thursday morning to find ways to get to work because their commuter trains aren’t running while CPKC is closed.
Prime Minister Justin Trudeau refused to immediately force the parties into binding arbitration, fearing it would offend the Teamsters Canada Rail Conference and other unions.
But that could change.
“We don’t take this lightly because Canadians across the country are concerned about it,” Trudeau told reporters in Sherbrooke, Quebec, on Thursday, adding that “we’ll have more to say soon” about finding a solution.
Still, entrepreneurs were angry about the lack of early government intervention.
“When you completely shut down the coast-to-coast supply chain, nothing good can come of it,” said John Corey, president of the Freight Management Association of Canada. “It’s infuriating. People are going to lose their jobs.”
It is difficult to predict. Most previous Canadian rail shutdowns lasted only a day or two and usually involved only one of the major railways, but some lasted as long as eight or nine days.
Edward Jones analyst Jeff Windau said the biggest problems will come if the lockdown continues. But many companies will likely be able to weather a brief disruption, in part because of the changes they made to their supply chains after the pandemic, he said.
However, the pressure for government intervention will increase as the exclusion continues, and the impact will be greater as both rail lines are at a standstill.
“We need the rails to keep moving,” Windau said. “And so at some point, the government is going to get more involved.”
All eyes are currently on the ongoing contract negotiations and whether there will be any significant government intervention.
“It won’t be long before it becomes untenable,” said Daniel Béland, a political science professor at McGill University in Montreal, noting the potential economic impact for both Canada and the U.S. “The pressure to end it as quickly as possible is coming from both sides of the border and can only increase rapidly if and when the situation on the ground deteriorates,” he said.
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Funk reported from Omaha, Nebraska. Associated Press Business Writer Wyatte Grantham-Philips in New York contributed.