The administration of Canadian Prime Minister Justin Trudeau is heeding left-wing demands to stay out of a dispute between railroad companies and unions.
If labor and management cannot reach an agreement, Canada will experience its first complete shutdown of rail freight on Thursday, with devastating consequences for both Canadian and American businesses.
Canada is heavily reliant upon rail freight, especially for agricultural products and manufactured goods. The vast and sparsely-populated country is crossed by over 26,000 miles of railroad, which handles about 70 percent of freight between cities and half of Canada’s international exports, according to statistics compiled by the Railway Association of Canada (RAC).
The RAC noted that Canada’s railways move 330 metric tons of freight per year, including $200 billion worth of exports, at very competitive rates. Rail freight is integral to many Canadian business models.
Canadian rail freight is dominated by two companies, Canadian National Railway (CNR) and Canadian Pacific Kansas City (CPKC). CPKC dispatchers also coordinate passenger rail travel in the big cities of Montreal, Toronto, and Vancouver, since the passenger trains use rails that also handle large quantities of freight.
The Teamsters Canada Rail Conference (TCRC), which counts about 9,000 railroad employees as members, has been negotiating a new labor agreement with CNR and CPKC since early this year.
Labor contracts are normally staggered by a year between the two big rail companies, precisely to avoid the kind of nationwide railroad shutdown that currently looms over Canada, but CN asked for a one-year extension on its labor contract in 2023 in order to process new government regulations on labor fatigue, so both companies came to the negotiating table at the same time in 2024.
The negotiations are not going well. The union and the companies have accused each other of intransigence on their demands and bad-faith bargaining tactics.
The Teamsters claim the two railroad companies are demanding too much “flexibility” in worker scheduling, and they want their employees to be more willing to relocate when required. The union argues these demands would lead to worker fatigue and increase the risk of accidents.
The railroad companies say their employees are very well-compensated – their conductors make about $120,000 a year and engineers about $150,000, and both companies have offered generous salary increases during the current round of labor negotiations. The companies feel their hefty pay and benefits should buy them some flexibility from the workforce as they attempt to provide a vital service to Canadian industry with reasonable costs and profit margins.
In early August, the Canadian Industrial Relations Board ruled that the Teamsters could stage a walkout if they wanted to, on the grounds that shutting down the railroads would not threaten Canadian national security. Some found this ruling questionable, since the economy relies so heavily upon rail freight, and indeed some Canadians need those trains to keep running just to get the chemicals required to purify their drinking water.
Soon after the walkout ruling, Canadian Labor Minister Stephen MacKinnon refused a request from CN and CPKC to force the Teamsters into binding arbitration.
The Canadian Left is determined to avoid any government action that might help the railroad companies, even at the risk of bringing the entire national economy down in ruins. On Monday, the leftist New Democratic Party – feeling its oats as a key member of the prime minister’s increasingly shaky political coalition – bluntly ordered Trudeau not to intervene in the labor dispute, no matter the risk to Canada’s economy.
CN and CPKC both announced they are prepared to lock workers out of their positions if they do not sign a new contract this week. The Teamsters countered by saying they were ready to walk off the job anyway.
On Monday, the two railroad companies began refusing to accept certain hazardous cargoes to prepare for the impending shutdown, and they warned commuters in Montreal, Toronto, and Vancouver that passenger services could become unavailable. Over 32,000 commuters could be affected by the work stoppage.
Nervous agribusiness analysts warned that Canada’s harvest season began in August, so shutting down railroads could cause prices to explode and leave grocery store shelves empty. A prolonged strike could cause billions of dollars in damage from spoiled food, and perhaps damage Canadian food exports by making the country look unreliable to buyers. The grocery industry said on Wednesday that shipments of some frozen foods have already been halted.
Canada’s small businesses are likely to suffer disproportionately from a railroad shutdown because big companies can work out alternative shipping plans with American railroads. For their part, American managers are worried because Canadian railroads handle about 15 percent of cross-border trade.
“The government of Canada must take action to ensure goods continue to move reliably between our two countries,” the Chambers of Commerce in the U.S. and Canada said in a joint statement on Monday.
“Every facet of daily life would be impacted as our national economy grinds to a halt,” the Greater Vancouver Board of Trade warned on Monday.
A growing chorus of Canadian business leaders is telling Trudeau to stop listening to the Left and take action before the economy suffers irreparable damage. Associated Equipment Distributors (AED) president Brian P. McGuire wrote to Trudeau and his labor and transportation ministers on Sunday, warning that a railway disruption “would have immediate effects on thousands of businesses across Canada.”
“I urge you to protect both the well-being of Canadians and Americans by ensuring that our national railway system remains uninterrupted. Canada’s international reputation and trade relations are at risk,” McGuire told Trudeau.
A U.S. trade group called the National Corn Growers Association (NCGA) sounded a similar alarm on Tuesday, warning that a Canadian railroad strike would hurt farmers on both sides of the border.
“We plan to keep calling for a resolution on this issue. The stakes are high, and this is the last thing our farmers need as they deal with a drop in corn prices and higher input costs,” NCGA president Harold Wolle said.
A group of 35 American agriculture trade groups sent a letter to Trudeau on Tuesday, warning him to be “prepared to move quickly if negotiations fail.”
