The latest headlines from our reporters in the USA are sent directly to your inbox every weekday
Your briefing on the latest headlines from the USA
Companies from numerous industries are preparing for the two major Canadian freight railways to shut down freight trains on Thursday if they fail to resolve a wage dispute with the union of train drivers, conductors and dispatchers.
The impact will be far-reaching because so many companies rely on Canadian National and CPKC Railroads to deliver their raw materials and finished products. The railways transport over $1 billion Canadian ($730 million) worth of goods every day and delivered more than 375 million tonnes of freight last year.
More than 32,000 commuters in Toronto, Montreal and Vancouver who rely on CPKC dispatchers to direct their trains along the tracks of this freight railway will also be affected.
Government officials are taking a more active role in resolving the dispute. The labour minister met with the parties at the CN negotiations in Montreal on Tuesday and with CPKC bargaining leaders in Calgary on Wednesday. But so far Prime Minister Justin Trudeau has been reluctant to force the Teamsters Canada Rail Conference union to reach an agreement. Many business associations have urged the government to intervene and force arbitration.
Both railroads are offering raises for already well-paying jobs that they say are consistent with other recent agreements in the industry. Negotiations have stalled primarily over issues related to the scheduling of railroad workers and concerns about fatigue-preventing rules. At CN, there are some additional concerns about provisions that would help the railroad temporarily relocate workers when other regions are short-staffed.
Almost 10,000 employees are affected by these contracts. According to CN, the company’s engineers earn about $150,000 a year, while conductors earn about $120,000. According to CPKC, the pay is comparable.
Two years ago, quality of life concerns due to demanding work hours and a lack of paid sick leave pushed U.S. railroads to the brink of a strike before Congress and President Joe Biden intervened and forced unions to agree to a deal.
Businesses in Canada are particularly concerned because CN and CPKC are scheduled to close simultaneously at 12:01 a.m. EDT on Thursday. In the past, labor disputes have sometimes resulted in trains being halted for short periods on only one of the railroads – most recently on CPKC in March 2022 – but not on both at the same time.
“Nobody can survive for long without a constant source of supplies, and many goods are transported by rail,” says Dan Kelly, president of the Canadian Federation of Independent Business.
The loss of rail transport would be particularly painful for companies that rely on long-distance bulk transport, as this difference cannot be made up by trucks. Chemical manufacturers, refineries, and grain and fertilizer exporters are particularly reliant on rail. And many consumer goods are transported by rail after being unloaded from huge ships.
In the event of a lockout or strike, all rail traffic in Canada and all rail freight traffic to or from the United States would come to a halt. However, the railroad’s numerous trains within the United States and Mexico would continue to operate.
Some examples of the possible impacts:
Chemical companies could be the first to be affected
The railway stopped accepting any new shipments of dangerous goods to ensure that none of these dangerous goods remain on the tracks in the event of a railway closure. The delivery of perishable goods was also stopped early on. All other deliveries will be gradually stopped by Thursday.
Depending on how much inventory they have available and how much storage space they have for finished products, some chemical plants may have to quickly reduce production or even consider closure.
One important example is chlorine, which is used to treat drinking water across Canada and is transported entirely by rail, according to Greg Moffatt, vice-chair of the Chemistry Industry Association of Canada. Most water treatment plants keep a 10- to 14-day supply of chlorine on hand.
“The clock is ticking,” Moffatt said. “And there is no way to transport chlorine by truck.”
Even for chemicals that can be transported by truck, this is not practical. It would take at least three trucks to transport the same amount that one tank car carries.
Possible mourning for grain
Grain, fertilizer and most other bulk commodities such as lumber, building materials and coal are all transported by rail. Wade Sobkowich, executive director of the Western Grain Elevators Association, said the contract dispute comes at a time when demand for Canadian grain is at its highest: about $50 million worth of grain is transported every day.
“This is not just about grains. It’s about forest products, it’s about the automotive industry, it’s about coal and mining products. … It’s going to have a huge impact on consumers in Canada and our customers around the world who need food ingredients,” he said.
Problems at shipping ports
Ports rely on rail to transport containers of all kinds of goods across the country after they have been unloaded from huge ships.
According to Lori MacLean, spokeswoman for the Port of Halifax, about 60% of the cargo containers arriving at the port are transported by rail.
“There has already been a decline in volume at Canadian gateways due to the uncertainty in rail traffic,” she said.
The Vancouver Fraser Port Authority has advised ships currently in transit to slow down and delay their arrival times to avoid further congestion in the port.
International shipping giant Maersk is making contingency plans but is continuing to ship goods to Canadian ports for the time being.
There is actually no alternative to rail for transporting large goods across North America, says Dennis Darby, president of Canadian Manufacturers and Exporters, the country’s largest trade and industry association.
If the railways were closed, the problems would be felt across Canada and the United States, Darby said.
“We are all part of the same supply chain,” he said.
Politics is problematic
Trudeau is likely to wait to intervene until it looks like there is no other alternative because his Liberal Party does not want to “alienate” the labour movement, says Daniel Béland, professor of political science at McGill University in Montreal.
“The politics are indeed tough… But they recognize that the ongoing strike is having a detrimental impact on the entire country,” he said.
The negotiations are difficult
Both Canadian National and CPKC had proposed moving away from the long-standing system of paying train crews based on miles traveled to one based on hours worked. The railroads said this would make it easier to provide workers with more predictable schedules.
But the union fought back, believing the change will undermine the working time rules designed to reduce fatigue that it has fought so hard for over the years.
“We do not want to go backwards and make concessions to very, very profitable companies that should actually improve conditions,” said union spokesman Christopher Monette.
In the hope of reaching an agreement, the CPKC dropped its proposal to introduce an hourly wage system like the one in the United States, said railroad spokesman Patrick Waldron.
One point of contention, however, remains the question of how much train staff should be paid when they rest in a hotel between journeys.
The railway companies say they are ensuring that these new contracts comply with the latest Canadian regulations that require additional rest periods between trips.
___
Funk reported from Omaha, Nebraska.
