Rail freight traffic in Canada came to a halt early Thursday after the country's two largest railroads locked out about 10,000 employees in a labor dispute that could disrupt supply chains in the United States and cause severe economic consequences in Canada.
The move comes after months of contract negotiations that failed to produce an agreement. Both Canadian National and Canadian Pacific Kansas City had said before the lockout that they would continue to operate extensive routes within the United States, but that many companies in the country could be affected.
About 6,500 containers travel by rail from Canada to the U.S. every day, according to the Canadian Railway Association, an industry lobbying group. That includes cargo from Asia and Europe that arrives at Canadian ports. Rail shipments from the U.S. to Canada will also be suspended.
A prolonged closure could have severe economic consequences for Canada's export-dependent economy: The Railway Association estimates that half of Canada's exports are shipped by rail, with C$380 billion ($279 billion) worth of goods moving by rail in 2022.
The impact may be less pronounced on intercity passenger and commuter rail services, which primarily use CN's tracks, and while the railroad moves grain and other products for global export, it carries a relatively small amount of food sold in Canadian grocery stores.
Canadian Pacific Kansas City said its operations in Mexico, which primarily handles traffic to and from the United States, would continue as normal.
“Given the impact on the general economy, I don't think it will last long,” Barry Prentiss, director of the Transportation Institute at the University of Manitoba in Winnipeg, said before the labour dispute began. “Every time something like this has happened before, the government has had to call parliament into session and pass legislation to get the rail service up and running again.”
In 2015, a two-day strike by 3,000 locomotive engineers at Canadian Pacific Railway (the company's name before it acquired US rival Kansas City Southern last year) ended when the two sides agreed to arbitration hours before the then-Conservative government introduced back-to-work legislation. In 2019, Canadian National Railway workers negotiated a settlement after eight days of strike action.
The two companies' labor contracts had previously expired on a yearly basis, preventing a near-total rail shutdown, but Canadian National extended its previous contract by another year to accommodate changes in federal regulations. The contracts with both companies expired at the end of last year. Negotiations began in September of last year.
The main issues for railroad workers seem to be schedules, work hours, and fatigue management. Hunter Harrison, a longtime American railroad executive who ran both railroads separately, introduced a system called precision scheduled railroading. To increase efficiency, he put trains on strict, consistent schedules and reduced equipment and employees by running very long trains and other measures.
His approach boosted profits, and both railroads have largely retained the legacy of Harrison, who has not been with either system since late 2009.
In June, the Teamsters Canadian Railway Congress, which represents currently out-of-work workers, said the rail companies were “trying to squeeze more hours out of workers,” which it said means “train crews will be forced to stay awake for longer periods of time, increasing the risk of derailments and other accidents.”
Canadian National said in a recent statement that it had proposed “a modernized agreement that improves safety, wages and work-life balance,” without providing details. Canadian Pacific added that its proposal “maintains the status quo on all labor regulations” and is “fully compliant with new regulatory requirements on rest periods and in no way compromises safety.”
Federal Labour Minister Steve McKinnon, who earlier rejected a request from the railroads to send contract talks into binding arbitration to avert a closure, visited Canadian National Railway's headquarters in Montreal on Tuesday and met with company executives at Canadian Pacific's Kansas City headquarters in Calgary, Alberta, the next day.
Prime Minister Justin Trudeau's Liberal government maintains control of the House of Commons with the support of the New Democratic Party, a party founded in part by labor unions. Its leader, Jagmeet Singh, on Monday warned Trudeau not to pass a bill that would force rail workers to return to work.
“For a long time we have seen the Liberal and Conservative parties stepping in to these kinds of labour disputes, favouring employers and to the detriment of workers,” Singh told reporters. “This is wrong and we will be opposed to this.”
The closure is expected to affect several sectors of the Canadian economy, including agriculture, mining, forestry, oil and manufacturing.
Many shippers who use rail freight in Canada can't easily shift their cargo to trucks — ships aren't an alternative outside the Great Lakes and St. Lawrence River systems — and the vast majority of cars and trucks made in Canada are shipped to the U.S. primarily by rail.
“Parts and components are brought into our plants primarily by truck, and finished vehicles are shipped primarily by rail,” said David Adams, president and CEO of Global Automakers of Canada, a group that includes Honda and Toyota, both of which have large operations in Canada. “The ability to transfer finished vehicle shipments from rail to truck would be very limited, if at all.”
Wade Sobkowich, executive director of the Western Grain Elevator Association, said the closures come just as his association's members have begun buying this year's grain harvest from farmers. Farmers will now have to stockpile grain and wait for payments, Sobkowich said.
“We tend not to import grain unless we know we can get it on the train,” he said from Winnipeg. “It's bad timing because it's the start of the harvest. We're going to have a hard time catching up the rest of the year.”
Via Rail Canada, the government-owned passenger rail system, said in an email that the majority of its trains, which primarily run on CNR tracks, will not be affected. CNR's train dispatchers will continue to work, unlike CPR-Kansas City train dispatchers.
Exo, a Montreal-area commuter rail service owned by Canadian Pacific Kansas City, said it would cease operations on three lines that carry about 24,000 passengers a day.
“The proposed bus shuttle would not be able to replace regular rail service, especially during back-to-school season,” spokesman Eric Edstrom said.
Metrolinx, which operates commuter rail in the Toronto area, said most of its trains run on Canadian National lines and will not be affected, but it will suspend service on one line that carries about 6,000 passengers a day.
In British Columbia, commuter rail service to and from the old Canadian Pacific station on Vancouver's waterfront will be suspended, with TransLink, which operates the line, estimating that 3,000 riders use it on weekdays.
