Supply chain troubles are back in the news, thanks to the shutdown this week of two major Canadian freight railroads amid conflict between labor and management.
It’s unclear how long the stoppage will last and what the economic impact will be, though the Canadian government moved yesterday afternoon to get trains back on track.
Nonetheless, ripples are sure to reach Pennsylvania, according to David N. Taylor, president and CEO of the Harrisburg-based Pennsylvania Manufacturers’ Association.
“Our economy and Canada’s are very highly integrated,” Taylor said in an interview with biznewsPA.
“Any kind of logjam like this is going to have consequences for Pennsylvania,” Taylor said, noting that components may cross the border multiple times in various stages of assembly.
Even a brief shutdown will lead to delays and backups, he added.
What’s the flow: The Keystone state imports more than $13.6 billion worth of Canadian goods each year, including pharmaceuticals, plastics, aluminum and industrial machinery, according to the Pennsylvania Department of Community and Economic Development.
The state’s annual exports to Canada total $14.3 billion and include things like industrial and electrical machinery, vehicles and plastics, according to DCED.
Why is this happening: The two railroads — Canadian National and Canadian Pacific Kansas City — shut down their operations early yesterday amid stalled talks with a union representing about 9,000 workers, according to news reports.
The union and the railroads, which have been negotiating for months, blame each other for the impasse.
As for the stoppage, the companies said it would be difficult to suspend operations quickly if there were a strike, so they acted preemptively.
“Without an agreement or binding arbitration, CN had no choice but to finalize a safe and orderly shutdown and proceed with a lockout,” Canadian National said in a statement.
In a separate statement, Canadian Pacific acknowledged the potential impact of the stoppage, but said it is acting to “protect Canada’s supply chains, and all stakeholders, from further uncertainty and the more widespread disruption that would be created should this dispute drag out.”
The union argued the railroads were trying to force the government to order arbitration to resolve the dispute. “The railroads don’t care about farmers, small businesses, supply chains or their own employees,” Teamsters Canada Rail Conference president Paul Boucher said in a statement. “Their sole focus is boosting their bottom line, even if it means jeopardizing the entire economy.”
What’s next: Arbitration.
Yesterday afternoon, Canadian leaders ordered an end to the work stoppage and imposed binding arbitration on the contract dispute, according to the Wall Street Journal, which quoted an official who said things could begin moving “within days.”
The backstory: After the Covid-19 pandemic waned, global supply chains strained to keep up with the demand for goods.
The situation has gotten better — and companies worked to shock-proof their supply chains — but there have been several shocks and near-shocks over the last year.
The U.S. avoided a rail strike at the end of 2022 thanks to government action.
Mid-Atlantic supply chains were complicated this spring following the temporary shutdown of Baltimore’s port after a freighter knocked down a nearby bridge.
