Canada Rail Strike Threatens to Imperil US Auto, Chemical, Construction, and Food Industries

Paul Boucher, president of the Teamsters Canada Rail Conference, speaks during a news conference to announce the results of strike votes at Canadian National (CN) and Canadian Pacific Kansas City (CPKC) on Parliament Hill in Ottawa, Canada, on May 1, 2024. Sean Kilpatrick/The Canadian Press

News Analysis

Canada’s railway workers’ strike, if not resolved quickly, would have a significant effect on its largest trading partner, the United States.

The United States accounted for nearly two-thirds of its northern neighbor’s $1.5 trillion in worldwide trade in 2022, according to Statistics Canada. In addition, Canada’s major shipping ports, which are a source of many imports into the United States, are served by the rail systems currently involved in the labor dispute.

While Canadian National Railway (CN) workers returned to work on Aug. 23 after a lockout went into effect at midnight on Aug. 22, the workers’ lockout at rival Canadian Pacific Kansas City (CPKC) has so far remained in effect. Canada’s Teamsters Union, which represents the rail workers, vowed to resume the strike at CN on Aug. 26.

CN and CPKC are Canada’s two largest rail operators.

The U.S. and Canadian chambers of commerce issued a joint statement on Aug. 20, saying, “The Government of Canada must take action to ensure goods continue to move reliably between our two countries.”

“A stoppage of rail service will be devastating to Canadian businesses and families and impose significant impacts on the U.S. economy,” Suzanne P. Clark, U.S. Chamber president, and Perrin Beatty, Canadian Chamber president, stated. ”Significant two-way trade and deeply integrated supply chains between Canada and the United States mean that any significant rail disruption will jeopardize the livelihoods of workers across multiple industries on both sides of the border.”

Other business groups have also been leaning on government officials to step in and force the two sides to come to arbitration.

According to the U.S. Department of Transportation, freight transported by train between the United States and Canada totaled $113.9 billion, or 15 percent of all bilateral trade. That included $41.6 billion in exports and $72.2 billion in imports, moving on 1,571,503 rail containers.

Under intense pressure, the Canadian government has referred the labor dispute to a national board in hopes of reaching a quick settlement. Canada’s labor minister, Steven MacKinnon, ordered an end to the strike on Aug. 22, demanding that the Canada Industrial Relations Board (CIRB) impose binding arbitration on labor unions and the rail companies.

Canadian trains carry more than $700 million of goods daily; they transported more than 375 million tons of freight in 2023. Given the trade ties between the two countries, U.S. companies are watching developments up north closely and with heightened concern. Industries such as car manufacturing depend heavily on Canada for components.

“A prolonged railroad strike would severely disrupt the North American automotive supply chain, which is critical to the U.S. auto sector, its domestic manufacturing supply chain, and the hundreds of thousands of people employed in the industry,” former Missouri Gov. Matt Blunt, current president of the American Automotive Policy Council (AAPC), told The Epoch Times.

“AAPC has been in contact with the Biden administration on behalf of our member companies regarding the potential impact on the U.S. auto industry and its employees.”

The AAPC represents U.S. automakers Ford, General Motors, and Stellantis on policy issues.

Cars and car parts are among the largest commodities moved by rail between Canada and the United States. According to the U.S. Transportation Department, these shipments amounted to more than $4 billion during the month of June.

If it continues, the rail strike will also have an especially harsh effect on industries such as chemicals, refineries, timber, construction, coal, grain, and fertilizer, which rely on rail transport for large, long-distance shipments. Because of the size of shipments, moving products by truck is not a viable option for many of these industries, and some may be forced to shut down until transportation resumes.

Chlorine is one product that will be affected. It is used to treat drinking water, and water treatment plants typically have less than two weeks’ supply of chlorine, making them dependent on continuous shipments to keep operations going.

Leading up to the strike, Canadian railroads stopped accepting new shipments of hazardous materials to prevent them from being stranded on the tracks. Shipments of perishable goods had also been temporarily halted. In addition, many consumer goods are transported by rail directly to the United States once they are unloaded from massive cargo ships at Canada’s ports.

Companies likely to be affected include the big three U.S. carmakers, Dow Chemical, Walmart, Target, Nike, Procter & Gamble, and home construction companies. In addition, companies that rely on shipments by truck could see rates increase with greater demand for trucking services.

Ports rely heavily on railroads, with the Port of Halifax reporting that about 60 percent of the cargo containers that move through it are loaded onto trains for distribution. The Vancouver Fraser Port Authority is asking shipping companies to delay incoming shipments, and many shipping companies are seeking alternative ports to deliver their cargo.

CPKC issued a statement on Aug. 22 saying that over the past year of negotiations with workers’ unions, the railroad operator “has bargained in good faith.”

“But despite our best efforts, it is clear that a negotiated outcome with the TCRC [Teamsters Canada Rail Conference] is not within reach,” it said.

CPKC stated that “the TCRC leadership continues to make unrealistic demands” and “reiterated its standing offer” for both sides to enter into binding arbitration to resolve the remaining issues.

“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 stated.

In an interview with CNBC, Francois Laporte, president of Teamsters Canada, said: “I want to specify the decision to stop the operation, the decision to take hostage the economy, and the exporters and the farmers and everybody, it’s not our decision.

“It’s the decision of the railway company. They are the ones who must bear the consequences of their decision.”

In a post on social media platform X, Teamsters Canada wrote: “Teamsters Canada Rail Conference has taken down picket lines at CN. Workers will begin returning to work on Friday.”

However, the union stated that the work stoppage at CPKC “remains ongoing” and that “there is no indication that the CIRB will actually order an end to the labor dispute at CPKC.”