Ordering the rail workers back was the right thing to do

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Daniel Schwanen is a senior vice-president at the C.D. Howe Institute.

Millions of Canadians and hundreds of thousands of businesses were relieved to hear that on Saturday, the Canada Industrial Relations Board (CIRB) had ordered the country’s two major national railways, Canadian National and Canadian Pacific Kansas City, to resume services, and for their workers to return to their jobs. At the same time, it sent their contract disputes to binding arbitration.

This decision, taken at the behest of Labour Minister Steven MacKinnon, came after lockouts by the two companies last week, and strikes called by members of the Teamsters union.

The CIRB had ruled earlier this month that the rail transport of commodities is not an essential service – not resulting in a threat to public health and safety – due to the existence of alternatives, most notably trucking. That decision might have made sense under the narrow definition of that concept under the Canada Labour Code, but it sidestepped the crucial fact that labour contracts at both companies had come to a simultaneous end for the first time in their history.

A simultaneous stoppage at the two railways, together owning 75 per cent of the rail tracks and 95 per cent of Canada’s annual rail-tonne kilometres, would have robbed consumers and producers of sufficient alternatives, no matter how much Canada’s trucking industry – which has faced its own supply chain problems in the form of shortages of qualified drivers and interprovincial regulatory barriers – stepped up to the plate.

This exact overlap of labour contracts between the two major railways should not be allowed to happen again.

Canadians – already reeling from the interrelated effects in recent years of low productivity, high inflation and slow growth in their purchasing power – were facing the prospects of emptying shelves of certain perishable goods. The consequences for farmers would have been particularly devastating. There was no other alternative but for the Minister to intervene.

Half of Canada’s imports and exports are moved by rail at some point on their Canadian journey. Not surprisingly, the stoppage made the news across the globe, hurting Canada’s reputation just as our country had begun to address its potential maritime bottlenecks – for example, major investments in the Port of Vancouver, which has been severely disrupted by major floods, fires and work stoppages in the region in recent years. We had also finally climbed to 7th spot in the 2023 World Bank logistics index, after being mired for years between 9th and 20th place.

Such stoppages do not position Canada well ahead of the 2026 trilateral review of the Canada-United States-Mexico Agreement, in which our key arguments for not raising more trade barriers include that Canada is a reliable, fair and high-quality supplier to U.S. industry and a top export market for more than 30 U.S. states.

For Canadians, this episode is another reminder that the strength of Canada’s supply chains directly affects the availability and affordability of supplies, including essential goods such as food. They are vital also for getting the product of our labour, land and investments in Canadian businesses to global markets. Supply chains are the blood vessels of our economy and are foundational to our ability to grow our businesses and generate high incomes.

It is also a reminder that supply chains are not abstractions. They are made up of infrastructure, transport and other logistics undertakings; technology and equipment, and people, underpinned by an all-important regulatory environment. That regulatory environment aims at providing for safe movement of goods and ensuring their availability at competitive costs.

Canadians are all too aware of the need for rail safety – which is a major concern of both workers and railways, yet is the major point of contention in the current disputes. One of the key issues in these negotiations is the necessary harmonization of recent rules on duty and rest periods and statutory paid leave with existing agreements, and whether this can be accomplished without harm to the railway work force or to safety.

The federal regulator has a crucial role to play in avoiding future work stoppages. Minimum rules and standards should be consistent with the safety and health of rail workers and of Canadians living along the railways, while also flexible in regards to scheduling and compensation models.

Given the widespread benefits of having our railways remaining cost competitive, the federal government should consider alternatives to the current negotiation framework affecting railways, ports and seaways, ones that would give more weight to the public good. An arbitrator may rule on this dispute, but the longer-term health of workers, the industry, and the Canadian economy requires deeper thinking.