Canada's economy slows down with CN and CP rails shutdown

Canada's economy slows down with CN and CP railways now shutdown

Canadian Pacific Kansas City. (sockagphoto/Shutterstock)

For the first time since both of Canada’s major railway companies were founded over a century ago, the Canadian Pacific Kansas City (CPKC) and Canadian National Rail (CNR) railways are not operating.

Nearly 10,000 railway workers are represented by the Teamsters Canada Rail Conference (TCRC), which has been engaged in separate labour contract negotiations with each company for months. This includes locomotive engineers, conductors, train and railway yard workers, and railway traffic controllers.

Both railways shut down at 12:01 am ET on Thursday, August 22, 2024 (9:01 pm PT on Wednesday, August 21). The union representing thousands of freight railway workers served a 72-hour strike notice to CPKC last weekend, and both CPKC and CNR subsequently issued notices to TCRC indicating that it will lock out its members at the same time unless an agreement or binding arbitration is achieved ahead of time.

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“At this time, the responsible path forward for the union, the company, our customers, the Canadian economy and North American supply chains and the public interest is for TCRC and CPKC to engage in binding arbitration to resolve all outstanding disputes. Binding arbitration is an effective, reasonable and fair process that ultimately has been used many times in the past to resolve disputes with this union,” reads a statement by CPKC issued today.

“CPKC reiterates its standing offer to resolve this matter through binding arbitration. Acceptance of that offer by the TCRC would immediately end this work stoppage and mitigate further harm and disruption to supply chains and our economy.”

CPKC states that prior to the stoppage, they offered enhanced wages that exceed inflation, guaranteed extra board for engineers, increased shift differentials, and resetting rest only at the home terminal.

In a separate statement today, CNR asserts the union did not respond to the company’s latest offer in a final attempt to avoid a lockout.

According to CNR, conductors and locomotive engineers currently work about 160 days per year, when duty and rest period rules, paid sick days, personal leave days, and existing rest and vacation provisions are combined.

In 2023, the average CNR conductor earned about $121,000, and the average locomotive engineer earned about $150,000, plus pension and medical benefits.

“This offer improved wages and would have seen employees work less days in a month by aligning hours of service in the collective agreement with federally mandated rest provisions,” reads CNR’s statement today.

“The offer also proposed a pilot project for hourly rates and scheduled shifts on a portion of the network as CN continues to believe this is a better and more predictable framework for our employees. Without an agreement or binding arbitration, CN had no choice but to finalize a safe and orderly shutdown and proceed with a lockout.”

TCRC’s brief statement issued yesterday before the start of the lockout focuses on the need for the companies to make it more predictable for when workers might be called for work to reduce fatigue-related safety risks.

The union is also opposed to the proposed major pay reductions in held-away-from-home terminal time and for leave.

“Throughout this process, CN and CPKC have shown themselves willing to compromise rail safety and tear families apart to earn an extra buck. The railroads don’t care about farmers, small businesses, supply chains, or their own employees. Their sole focus is boosting their bottom line, even if it means jeopardizing the entire economy,” said Paul Boucher, president of TCRC, in a statement today.

‼️Division 793 picket line in Saskatoon ✊

📸 Are you on the picket line? Send us your pictures! 📸 Vous êtes sur une ligne de piquetage ? Envoyez-nous vos photos!
📩 [email protected]#canlab #Syndcan pic.twitter.com/Lfrfy9FoUh

— Teamsters Canada (@TeamstersCanada) August 22, 2024

According to the Railway Association of Canada, as of 2022, Canadian freight railways transport about half of the country’s exports and a total of over $380 billion worth of goods on an annual basis or more than $1 billion per day. The average railway industry wage is over $104,000.

Earlier this week, Moody’s Corp. estimated the stoppage of CN and CPKC railways could cost the Canadian economy up to about $340 million per day from its productivity impacts on international trade, logistics, supply chains, and manufacturing, as well as the added transportation costs for businesses to find an alternative way of transporting goods.

Freight transportation by railway is generally far more economical than by trucking and air, and such increased costs, coupled with delays, could be passed on to consumers.

Canada’s major ports also depend on freight railways for a very significant proportion of how cargo and goods are loaded and unloaded on ships. The railway stoppages could quickly congest the major ports of Vancouver, Prince Rupert, and Montreal. The current railway disruptions follow the Summer 2023 port workers strike that significantly disrupted the operations of the Port of Vancouver, which is already ranked among the world’s worst ports for productivity.

The railway shutdowns could have a ripple effect on a wide range of businesses, services, and organizations — even the chlorine chemicals necessary for the municipal treatment process for the drinking water supply that comes from the tap.

Both railway companies began preparing for a potential strike/lockout over a week ago, such as beginning with the diversion of dangerous goods exports and imports.

In a joint statement, Alberta Premier Danielle Smith and her three provincial Ministers responsible for transportation, agriculture, and the economy state the railway disruptions at this time of year will impact Alberta’s agricultural industry.

“We are extremely concerned about the labour disruption at our country’s two largest railways, CN and CPKC. This stoppage will have devastating impacts on Canada’s economy, Canadian families and communities across this country,” reads Alberta’s provincial government’s joint statement.

“As harvest season begins and farmers look to get their product to market, the stoppage will affect not only those shipping agricultural products, it will hurt Canada’s standing as important partner in global food security. It will also further damage our international reputation as a reliable trading partner and place to do business… While we respect the collective bargaining process, the collateral damage to Canadians, our businesses and our country’s international reputation is too high to allow the simultaneous disruption of both of these railways to continue.”

After the railway shut down come to an end, depending on how long the disruptions last for, it could take days or even weeks for the railways, ports, warehouses, and long-haul trucking operations to catch up with the backlog.

“We are extremely disappointed that the parties have not been able to negotiate a new contract and that we are now facing unprecedented disruption on both of Canada’s national railway systems simultaneously,” said Fiona Famulak, the president and CEO of the BC Chamber of Commerce, in a statement today.

“Based on the significant economic impact of last year’s labour disruption at our Western Ports, a prolonged labour dispute on our Class 1 rail lines is untenable for our BC-based businesses. It will also cause further damage to our reputation as a reliable trading partner and consistent component of international supply chains.”

Famulak and Alberta’s provincial officials are calling on the federal government to take immediate action to end the labour dispute as soon as possible, given that both sides have been unable to reach a deal after many months of negotiation.

“Today, I spoke to business leaders from across Canada in some of the sectors that would feel the devastating impact of a strike or lockout. Parties need to understand: The solution is at the table,” wrote federal Minister of Transport Pablo Rodriguez in a series of tweets yesterday.

“CNR, CPKC, and Teamsters have a responsibility to Canadians in these negotiations. We need them to put in the work and get deals done at the bargaining table.”

The historic shutdown of Canada’s freight railways has also led to curtailing of the public transit commuter rail services of the West Coast Express in Vancouver, Go Train in Greater Toronto, and Exo in Greater Montreal, as these services lease track time from the companies.

In a bulletin, VIA Rail notes that the lockout impacts its route between Sudbury and White River, as this service operates on CPKC tracks. VIA Rail states that no other services are impacted by the labour disruptions.

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