Industry fears 'catastrophe,' economic fallout ahead of potential rail stoppage

North American industry groups and shippers are bracing for an unprecedented simultaneous stoppage at both of Canada's main railway companies that could inflict billions of dollars of economic damage.

As the world's second-largest country by area, Canada relies heavily on trains to transport goods, including grain, beans, potash, coal and automobiles.

"It's a catastrophe. Literally nothing would move," said Greg Northey, vice-president of public affairs at Pulse Canada, a lobby group representing the pulse crop industry.

Talks between Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) on one hand and the Teamsters union on the other have deadlocked, with each side accusing the other of bad faith.

The rail companies say they will start locking out workers on Aug. 22 if they cannot reach a labour deal, while the union says it is ready to call a strike for that date.

Paul Boucher, president ofthe Teamsters Canada Rail Conference, wrotein an Aug. 8 statementthat rail workers "have only ever sought a fair and equitable agreement."

"Unfortunately, both rail companies are demanding concessions that could tear families apart or jeopardize rail safety," Bouchersaid."Rail workers have fought for a safer and more humane industry for decades, and we will not accept moving backwards."

Industry groups want the federal governmentto prevent a stoppage, noting Canada's railways transport about$380 billion worth of goods annually.

"Factoring in the millions of Canadian jobs that would be impacted, the magnitude of the disruption is daunting," the Business Council of Canada, a lobby organization, said in an open letter to Prime Minister Justin Trudeau and Labour Minister Steven MacKinnon.

Embargoes in place

A stoppage would also hit the United States, given the degree of integration between the two economies. Canada sends about75 per cent of all goods exports south of the border. The networks of the two Canadian rail operators, CN and CPKC, connect with several key U.S. rail and shipping hubs, such as Chicago, New Orleans, Minneapolis and Memphis.

CN said on Tuesday it was placing an embargo on any new reservations for movement of hazardous materials, security-sensitive cargoes or refrigerated containers originating in Canada, starting on Thursday.

In anticipation of a potential lockout, it also announced it was embargoing all intermodal traffic originating from over half a dozen U.S. hubs with which its network connects, starting on Friday.

Separately, U.S. rail operator Norfolk Southern on Tuesday advised all customers that it was embargoing all hazardous and security-sensitive cargoes to or from CNand CPKC's networks, effective immediately. It also said additional embargoes may be issued in case of any work stoppages at the Canadian rail operators.