Freight trains in Canada are expected to be able to run again soon after the government imposed a contractual dispute in arbitration on Thursday, thus avoiding potentially disastrous situations economic consequences for businesses and consumers across the country and in the United States
Labour Minister Steven MacKinnon announced the decision to order arbitration between the country’s two major freight railways — Canadian National and CPKC — and the Teamsters Canada Rail Conference, the union that represents nearly 10,000 engineers, conductors and dispatchers.
MacKinnon’s announcement came moments after The Associated Press broke the story, citing an official familiar with the situation who was not authorized to speak publicly before the announcement.
Both CN and CPKC have said that once the dispute is submitted to arbitration, trains could be running again, but it’s not yet clear how soon that will happen. MacKinnon said he expects that to be the case within days.
The railroads locked out its employees after a 12:01 a.m. EDT deadline to resolve the dispute with the union passed without an agreement.
Negotiations resumed later in the day, as workers demonstrated outside and business groups urged the government to impose arbitration.
MacKinnon said the government wanted to give negotiations every chance to succeed, but ultimately the economic risk was too great to allow the lockouts to continue. He declined to order arbitration a week ago.
“The Canadian economy cannot wait for an agreement that has been delayed for a very long time and when there is fundamental disagreement between the parties,” he said.
All rail freight traffic in Canada, worth more than C$1 billion (US$730 million) a day and totalling more than 375 million tonnes of goods last year, was halted Thursday, as were rail shipments across the U.S. border. About 30,000 passengers in Canada were also affected because their trains use CPKC lines. CPKC and CN trains continued to operate in the U.S. and Mexico during the lockout.
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Many businesses in both countries and across all sectors rely on rail transportation to deliver their raw materials and finished products. They feared a crisis without regular rail service. Billions of dollars worth of goods move between Canada and the United States by train each month, according to the U.S. Department of Transportation.
Paul Boucher, president of the Teamsters Canada Rail Conference, said Thursday morning that he believes the railways are “holding the Canadian economy hostage in an attempt to pressure the Liberal government to impose final binding arbitration and deprive workers of their right to free collective bargaining.”
Trudeau decided not to force the parties to resort to binding arbitration before the deadline, for fear of offending unions and the left-wing NDP party on which his Liberal government is counting to stay in power.
In anticipation of the work stoppage, the White House convened a multiagency task force on supply chain disruptions to assess the potential impact on American consumers, businesses and workers, according to a Biden administration official. The official was not authorized to comment publicly and spoke on condition of anonymity.
Most companies probably have enough supplies and space to store finished goods to withstand a brief interruption. But ports and other rail lines would quickly become clogged with stranded shipments that Canadian National and CPKC would be unable to retrieve.
Many companies have made changes to their supply chains after the COVID-19 pandemic, which can help them weather a short-term disruption, according to Edward Jones analyst Jeff Windau. The real problems begin if it becomes prolonged.
Most previous Canadian rail disruptions lasted only a day or two and involved only one of the major railways, but some lasted as long as eight or nine days. The impact was magnified this time because both railways were shut down.
“They’re so integrated and tied to the economy,” Windau said. “Just the diversity of products they carry … At the end of the day, I think we need the rails to keep running.”
Chemical companies and food distributors would have been the first to be hit. Railroads stopped accepting new shipments of hazardous materials and perishable goods after they began phasing out operations last week, but most chemical plants had said they could continue operating for about a week.
The auto industry could also hit trouble quickly because it relies on just-in-time shipping, with significant cross-border shipments of engines, parts and finished vehicles. Flavio Volpe, president of the Automotive Parts Manufacturers Association, told X that about four out of five cars made in Canada are exported to the U.S. almost exclusively by rail. He said a prolonged lockout could lead to temporary work stoppages similar to the impact of the five-day Ambassador Bridge blockade in 2022.
Union Pacific, one of the U.S. rail companies that regularly makes deliveries to and from Canadians, said the shutdown meant “thousands of cars a day will not be crossing the border.”
“Everything from grain and fertilizer during the critical summer season to lumber for home construction could be affected,” Union Pacific said in a statement Thursday.
More than 30,000 transit riders in Vancouver, Toronto and Montreal were the first to feel the effects of the lockout, scrambling Thursday morning to find a new way to get to work because their commuter trains are unable to run during the CPKC shutdown.
CN had been negotiating with the Teamsters for nine months, while the CPKC had been trying to reach an agreement for a year, the union said.
Canadian negotiations have stalled over issues related to how rail workers are scheduled and concerns about rules designed to prevent fatigue and ensure adequate rest for train crews. Both railways have proposed moving from the current system, which pays workers based on the number of kilometres travelled per trip, to an hourly system that they say would make it easier to provide predictable time off. The union has said it does not want to lose hard-won fatigue protections.
The railways said their contract offers included increases in line with recent industry agreements. Engineers already earn about $150,000 a year at Canadian National, while conductors make $120,000, and CPKC says its salaries are comparable.
