Canada forces railway dispute to arbitration

TORONTO: Freight trains in Canada should soon be rolling again after the government took a tariff dispute to arbitration on Thursday, averting potentially dire economic consequences for businesses and consumers across the country and in the United States.

Labor Minister Steven MacKinnon announced the decision to order arbitration shortly after The Associated Press broke the news, citing an official familiar with the situation who was not authorized to speak publicly before the official statement.

The dispute involves the country's two largest freight railways – Canadian National and CPKC – as well as the Teamsters Canada Rail Conference, the union that represents nearly 10,000 train drivers, conductors and dispatchers.

Both CN and CPKC have said trains can resume running once the dispute goes to arbitration. However, it was not immediately clear how quickly that would happen. MacKinnon expects it to happen within a matter of days.

The railroad company locked out its employees after the deadline to resolve the dispute with the union passed without an agreement on Thursday morning.

Talks resumed later in the day, while workers were on strike outside and business associations were urging the government to force mediation.

MacKinnon said the government wanted to give the negotiations every chance of success, but ultimately the economic risk was too great to allow the lockouts to continue. He had refused to order arbitration a week ago.

“Canada's economy cannot wait for an agreement that has been delayed for so long and on which there is a fundamental disagreement between the parties,” he said.

All Canadian freight traffic, worth more than $730 million a day and over 375 million tonnes of freight last year, was halted Thursday, as was rail traffic across the US border. About 30,000 commuters in Canada were also affected because their trains use CPKC routes. CPKC and CN trains continued to run during the US and Mexican lockouts.

Many companies in both countries and across all industries rely on rail for the delivery of their raw materials and finished products, and feared that without regular rail service, a crisis could ensue. According to the U.S. Department of Transportation, billions of dollars worth of goods are transported by rail between Canada and the United States every month.

Paul Boucher, chairman of the Teamsters Canada Rail Conference, said Thursday morning that he believes the railroads are “holding the Canadian economy hostage to pressure the Liberal government to impose final, binding arbitration and take away your right to free collective bargaining.”

Trudeau decided not to force the parties into binding arbitration before the deadline, fearing he would anger unions and the left-wing NDP, whose support his government relies on to stay in power.

In anticipation of the work stoppage, the White House has convened an interagency task force on supply chain disruptions to assess the potential impact on U.S. 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 storage space for finished products to survive a short disruption, but ports and other rail lines would quickly become clogged with stranded shipments that Canadian National and CPKC do not pick up.

Edward Jones analyst Jeff Windau said many companies have made changes to their supply chain following the Covid-19 pandemic that could help them survive a short disruption, but the real problem begins when the disruption drags on.

Most Canadian rail outages have lasted only a day or two and usually only affected one of the major railroads. However, some have lasted up to eight or nine days. This time, the impact was even greater because both railroads were shut down.

“They are so integrated and involved in the economy,” Windau said. “Just the range of products they transport. … Ultimately, I believe we still need the rails.”

Chemical companies and food retailers would have been the first to be affected. Railways stopped accepting new deliveries of hazardous materials and perishable goods when they began to gradually close down operations last week. However, most chemical plants have said they would continue to operate without problems for about another week.

The auto industry could also quickly run into trouble, as it relies on just-in-time deliveries and ships large quantities of engines, parts and finished vehicles across borders. Flavio Volpe, president of the Association of Auto Parts Manufacturers, wrote on X that about four out of five cars made in Canada are exported to the U.S. almost entirely 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. railroads that regularly transports shipments to and from Canada, said the closure means “thousands of rail cars per day cannot cross the border.”

“Everything from grain and fertilizer during the critical summer season to lumber for home building could be affected,” Union Pacific said in a statement on Thursday.

More than 30,000 commuters in Vancouver, Toronto and Montreal were the first to feel the impact of the lockouts, scrambling to find a new way to get to work Thursday morning as their commuter trains cannot run during the CPKC closure.

CN has been negotiating with the Teamsters for nine months, while CPKC has been trying to reach an agreement for a year, the union said.

Negotiations in Canada have reached an impasse over the scheduling of rail workers and regulations to prevent fatigue and ensure sufficient rest for train crews. Both rail companies had proposed switching from the existing system, in which employees are paid by the number of kilometres they travel, to an hourly system, which they believe would make it easier to grant scheduled time off. The union said it did not want to give up the hard-fought fatigue protection.

The railroads said their collective bargaining agreements included pay increases consistent with recent industry deals. Train drivers at Canadian National already earn about $150,000 a year, while conductors earn $120,000. CPKC says the wages are comparable.

Rail workers strike outside Canadian National headquarters on the first day of a nationwide rail shutdown after CN and CPKC workers were locked out because new collective agreements could not be reached by a midnight deadline, in Montreal, Thursday, Aug. 22, 2024. (Ryan Remiorz /The Canadian Press via AP)

Railroad workers strike outside CN headquarters on the first day of a nationwide rail shutdown after CN and CPKC workers were locked out because new collective bargaining agreements could not be reached by a midnight deadline, in Montreal, Thursday, Aug. 22, 2024. (Ryan Remiorz/The Canadian Press via AP)

Teamsters Rail posters lie in a pile at a Canadian Pacific Kansas City (CPKC) rail yard in Smiths Falls, Ontario, Thursday, Aug. 22, 2024. (Sean Kilpatrick /The Canadian Press via AP)

Trains stand idle at a Canadian Pacific Kansas City (CPKC) freight yard in Smiths Falls, Ontario, on Thursday, Aug. 22, 2024. (Sean Kilpatrick /The Canadian Press via AP)

An old piece of railroad equipment is displayed as trains sit idle at a Canadian Pacific Kansas City (CPKC) freight yard in Smiths Falls, Ontario, Thursday, Aug. 22, 2024. (Sean Kilpatrick /The Canadian Press via AP)

Commuters arrive on a GO train at Union Station as a nationwide rail closure causes delays in Toronto, Thursday, Aug. 22, 2024. (Paige Taylor White /The Canadian Press via AP)