Business Groups Press Canada Officials to Bring End to Railroad Stoppage — 2nd Update

By Paul Vieira

OTTAWA--Pressure mounted quickly on Canada's Liberal government to intervene and bring an end to the simultaneous labor stoppage at the country's two main railroads, Canadian National Railway and Canadian Pacific Kansas City.

Canadian Prime Minister Justin Trudeau told reporters in Sherbrooke, Quebec, that officials would "have more to say shortly" on how the government intends to address the labor conflict. He didn't elaborate or take questions from journalists.

The companies locked out over 9,000 employees represented by the Teamsters Canada Rail Conference early Thursday, after the railroads and the union couldn't reach agreements on new labor deals ahead of a midnight deadline. The move brings a halt to freight-rail traffic--used to transport grains, energy products, chemicals, fertilizer and other durable goods--across Canada and into the U.S., and threatens to snarl cross border trade and upend North America's supply-chain networks.

A prolonged shutdown could have repercussions in Canada and beyond, analysts warn. Anderson Economic Group, a consultancy that specializes in loss assessments from strikes and global conflicts, estimates a seven-day work stoppage at Canadian National and CPKC could cost the Canadian and U.S. economies over $1 billion, with most of the pain in Canada. Anderson added that beyond seven days, "the impact in both the U.S. and Canada would be much worse," with agriculture, manufacturing and energy sustaining acute strains.

U.S. apparel makers fret that children's apparel, backpacks, winter coats and work shoes won't make it to retail shelves. Car dealerships say they might have to wait longer for in-demand models. Canadian policymakers are working to limit the damage, although the Liberal government faces domestic considerations that could stymie their efforts.

Canadians "need to see decisive leadership from a government that puts their families and livelihoods first," Perrin Beatty, head of the Canadian Chamber of Commerce, said Thursday. The labor minister, he said, "must use the tools at his disposal to immediately resolve this conflict through binding arbitration."

The two Canadian railroads transported the equivalent of about $280 billion of goods last year, with both companies bringing cargo arriving at coastal ports in Canada across the country and into the U.S. The U.S. Bureau of Transportation Statistics estimates that, in 2023, rail accounted for about 16%, or $114 billion, of the freight that moved between the U.S. and Canada.

The Canadian Federation of Independent Business, the country's advocacy group for small and mid-sized businesses, said its members might have to halt operations as they can't access goods to deliver on work for clients.

The federation's president, Dan Kelly, said the government should refer the labor conflict to binding arbitration--which it has the power to do under Canadian law--or recall parliament to pass back-to-work legislation.

A spokesman for Canadian Labor Minister Steven MacKinnon said the minister was attending meetings Thursday related to the rail stoppage, adding that he was receptive to ideas and options that could bring an end to the lockout.

The Liberals, led by Trudeau, run a minority government, which means they rely on support from other parties in the legislature to keep them in power and help pass legislation. The prime minister has relied heavily on the left-wing New Democratic Party, which is opposed to government intervention in labor negotiations.

The Liberal government has to balance this need to keep its political partner content while also protecting the Canadian economy, said Stewart Prest, a political-science analyst at the University of British Columbia in Vancouver. "The government will wait as long as they can to act," he said, "both to avoid having to take sides, but to give time for public sentiment to create a strong [rationale] for action."

In June, the government tried to avert a strike during a busy travel weekend by unionized mechanics at WestJet Airlines, Canada's No. 2 air carrier, by sending the dispute to binding arbitration, via a rarely used section of the Canada Labor Code. However, the move backfired when the Canadian Industrial Relations Board ruled that a strike could proceed while the matter was before arbitration.

The Canadian railroads gradually wound down their operations in the past 10 days or so in preparation for a possible labor disruption. U.S. railroads that move loads on Canadian networks said they were adjusting their operations. German carrier Hapag-Lloyd told customers on Wednesday that American customers who use the Canadian ports and then Canadian rail would have to divert their shipments to either U.S. west or east coast ports.

The American Apparel & Footwear Association said the labor stoppage comes at a critical time for back-to-school sales season and the start of the holiday inventory rush, adding about 30% of clothes, shoes and other accessories move by rail. Steve Lamar, the association's president, said he was urging railroads and the union leaders to return to keep negotiating.

Blair Qualey, president of the New Car Dealers Association of British Columbia, said customers who ordered vehicles or dealers who are in the process of ordering vehicles "won't be seeing them anytime soon."

Teamsters Canada said talks with the Canadian railroads broke down over demands by both companies for concessions on scheduling and fatigue management that would compromise worker safety. A union official said wages weren't a hurdle in talks. The companies have denied their offers imperiled worker safety.

--Esther Fung contributed to this article.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

August 22, 2024 13:25 ET (17:25 GMT)

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