Global supply chains under threat as Canadian rail strikes hit North American exports

A rail lockout in Canada has hit North American exports, as a wave of international transport strikes threaten to add pressure to global supply chains.

At 12:01am local time yesterday (22 August), Canadian National Rail (CN) and Canadian Pacific Kansas City (CPKC) said they had locked out employees represented by the Teamsters Canada Rail Conference (TCRC), following a failure to reach a new collective bargaining agreement. The two railways account for almost 80% of the national network.

Supply chain leaders and politicians expressed concern over the move, noting that it could damage Canada’s imports and exports and spill over to the international supply chain.

Argument and counter argument

CN said they had sent an offer to the Teamsters union that included “improved wages” and better working conditions, but did not receive a response. It said:

“Without an agreement or binding arbitration, CN had no choice but to finalise a safe and orderly shutdown and proceed with a lockout.”

The Teamsters said that both sides remain “far apart”, claiming that safety and a relocation scheme remained sticking points. TCRC president, Paul Boucher, said “the railroads don’t care about farmers, small businesses, supply chains, or their own employees.”

A joint statement from four Canadian trade associations called on the federal government to refer the dispute for binding arbitration to prevent any strikes, pending a resolution.

Negotiations continue

“It is in the best interests of both sides to continue doing the hard work at the table to find a negotiated resolution,” Canadian prime minister, Justin Trudeau, told CBC.

Trudeau said that federal labour minister, Steven MacKinnon, had met both sides and continued to be in Calgary working on the issue. Trudeau’s Liberal government is supported by the pro-union New Democratic Party, which has said it will oppose any attempt to intervene on employers’ behalf.

CNBC journalist, Lori Ann LaRocco, quoted a Teamsters source as saying that negotiations would continue “in good faith even past 12:01am deadline.”

Trade impact

Earlier in the week, Bjorn Jensen, CEO of Nanooq Management Consultancies, said that the strikes meant “a lot more than most people think”, as Canada is a gateway for a lot of shipping.

Goods including wheat, energy, timber, wine and cars are expected to be affected. Although some groups have said they are planning contingencies, many associations have warned that these may be inadequate.

The Canadian Meat Industry said that the strike would cause “untenable damage” to the domestic meat industry:

“Last summer’s Port of Vancouver strike disrupted CA$10.7bn dollars’ worth of trade during the 35 days of strike action. The impacts of two Class 1 railways striking at once will have even worse, unprecedented ramifications.”

Hapag-Lloyd and Maersk have modified their schedule. While Maersk said they would continue to service Canadian ports, Hapag-Lloyd said they would not accept any new rail bookings “originating in the US and loading via a Canadian Gateway.”

Backed up goods

According to the Rail Association of Canada, $380bn is moved on Canadian rail every year.

With almost a billion dollars’ worth of goods moving on Canadian railways daily, any disruption could take weeks to resolve, as the goods would continue to back up and hit trade in North America and beyond.

The Surface Transportation Board, a US government agency, said that it was monitoring the strike as the US’ supply chain and rail networks could be affected.

The Vancouver Fraser Port Authority has asked vessels to delay arrivals to the port in order to avoid congestion, while road haulage groups have warned that they cannot handle the extra load.

International picture

The announcement comes as other port and transport strikes threaten international supply chains.

Indian port worker unions have announced indefinite strikes from 28 August if their demands aren’t met, affecting some of India’s largest ports.

Elsewhere in North America, the International Longshoreman’s Association is preparing to lead members on strike from 1 October, potentially crippling the US East Coast supply lines.