A lockout early today, Thursday, August 22, stopped all rail freight across Canada, idling more than 10,000 workers and threatening to disrupt supply chains in the United States, which receives more than 6,500 containers daily from Canada.
After months of talks, Canadian National Railway and Canadian Pacific Kansas City have failed to reach an agreement with the Teamsters Canada union on work hours, scheduling, labor availability, some wage issues, and rest periods.
Potentially devastating economic consequences threaten the Canadian and U.S. economies if the dispute lasts more than a few days. Estimated cost to the Canadian economy of a three-day strike is $300 million; $1 billion after one week, according to a report from the a Michigan-based research firm Anderson Economic Group. U.S. rail operator Union Pacific warns of “devastating consequences” to the U.S. economy from this strike.
In addition to direct financial impacts, consequences of the work stoppage include disruption of imports into the U.S. from Canada including cars, critical chemicals such as chlorine for water treatment, frozen foods, propane, and fertilizer products.
The parties can be forced to arbitration, or legislatively ordered back to work. Neither move is likely at this early stage, given the pro-labor position of the Canadian Trudeau government.
Businesses are scrambling to deal with the fallout. Some have cut back or stocked up ahead of the anticipated stoppage. A lockout lasting longer than a week may force some businesses to close. Others are seeking alternative sources of supply. However, moving rail cargo to trucks is a very limited option, given that roughly 300 trucks are needed to move the contents of a single freight train, as stated by Union Pacific. For now, the most likely source of relief is some quick action by the Canadian government.
What can businesses do now? It may be prudent for businesses to reach out to their Canadian and foreign vendors to see if they are impacted by this dispute. Businesses should also check for alternative sources of supply if possible. At the same time, businesses who are or may be affected by this labor dispute should be in touch with their commercial insurance carrier about business or contingent business interruption coverage in place.
This is a fast-moving situation, which we will continue to monitor and provide updates as developments occur. Meanwhile, if you have any questions about what this Canadian work stoppage means for your business, please feel free to reach out to David Confer, chair of the Barley Snyder Transportation, Logistics, and Trade Industry Group.
