Union dispute shuts down Canadian freight rail amid fears for US trade

Both of Canada’s major rail freight companies have shut down their rail networks in the country and locked out nearly 10,000 workers after unsuccessful negotiations with a major union.

The decision, confirmed by the Teamsters union, sets the stage for an unprecedented rail stoppage that could badly damage the Canadian economy and have a significant effect on cross-border trade with the US.

Canada is the world’s second-largest country by area and relies heavily on rail transport. The stoppage is expected to cripple shipments of grain, potash and coal while also slowing the transport of petroleum products, chemicals and vehicles.

Industry groups had urged Justin Trudeau’s Liberal government to prevent a stoppage, noting Canada’s railways transport about C$380bn (£214bn) worth of goods annually.

Canadian National Rail (CN) and Canadian Pacific Kansas City (CPKC) began lockouts on Thursday morning after tense negotiations following complaints from workers over worsening job conditions failed to produce a deal.

CN confirmed it had moved ahead with the lockout, saying the union “did not respond to another offer by CN in a final attempt to avoid a labour disruption”. 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 union said: “Despite months of good faith negotiations on the part of the Teamsters Canada Rail Conference, parties remain far apart, and both CN and CPKC have began their lockout of 00:01 today … Despite the lockout, the Teamsters remain at the bargaining table with both companies.”

In its announcement, CPKC said: “The TCRC [union] leadership continues to make unrealistic demands that would fundamentally impair the railway’s ability to serve our customers with a reliable and cost-competitive transportation service.”

A pause to freight traffic will have cascading effects on Canada and the US. According to the Railway Association of Canada, affected rail carries more than C$1bn worth of goods each day. Nearly half the aviation fuel used at Toronto’s Pearson airport, Canada’s busiest air terminal, arrives by rail. More than 32,000 commuters in Montreal, Vancouver and Toronto rely on the rail network. A strike would also hit the mining, agriculture and retail industries.

The federal labour minister, Steven MacKinnon, said on Wednesday night that he had completed meetings with the companies and the Teamsters union. He called for urgency at the negotiating table and for a deal to be done.

In recent days, the Calgary-based CPKC and Montreal-based CN had started winding down operations. In Canada, both companies, valued at roughly C$100bn each, own virtually all of the rail track in the country and control most of the freight shipment. The country has never experienced a labour stoppage involving both companies simultaneously.

As the possibility of a strike loomed, industry groups issued a joint statement calling on the government to intervene, saying it “has a responsibility to protect the Canadian public and maintain national security, and it is time to act decisively to fulfil that obligation”.

MacKinnon last week declined a request from CN and CPKC to move negotiations to binding arbitration. “These collective bargaining negotiations belong to CN Rail, CPKC and [Teamsters] workers alone – but their effects will be borne by all Canadians,” he said.

On Wednesday, Trudeau said the country’s two main rail companies and the Teamsters union had to settle their differences at the negotiating table, but stopped short of suggesting his government might get involved.

“My message is very straightforward. It is in the best interest of both sides to continue doing the hard work at the table to find a negotiated resolution,” the prime minister said. “Millions of Canadians, of workers, of farmers, of businesses right across the country are counting on both sides to do the work and get to a resolution.”

The deputy prime minister, Chrystia Freeland, said: “We know that the best deals are reached at the bargaining table, and I am calling with extreme seriousness on the employers and on the union to roll up their sleeves to get a deal done.”

The union representing workers at CPKC said the company wanted to “gut the collective agreement of all safety-critical fatigue provisions” while those with CN said the rail operator wanted work days to be extended in western provinces, potentially creating “a fatigue-related safety risk”. The unions have cited fatigue management, rest periods and scheduling as key sticking points.

Both companies said offers on the table were competitive and did not compromise safety.

Reuters contributed to this report