Dockers on the west coast of Canada formally start their strike

A union representing dockers in western Canada has officially begun the strike, in action that could reach well beyond the US’s northern neighbor.

The Canadian longshore division of the International Longshore & Warehouse Union announced the start of its labor strike on Saturday in a Facebook post signed by union chairman Rob Ashton. More than 99% of union members who support West Coast ports like Vancouver and Prince Rupert voted in favor of the strike last month. The strike was announced on Wednesday.

“The ILWU Canada Longshore Division did not take this decision lightly, but for the future of our workforce, we had to take this step,” Ashton said in the post. “We still hope that an agreement will be reached through FREE collective bargaining!”

The union has been open to negotiations with the British Columbia Maritime Employers Association, which represents port owners, since February and remains willing to continue working on a deal, Ashton added.

The employers’ association, known as BCMEA, said in a statement it had been working to “promote proposals and positions in good faith with the aim of reaching a fair agreement at the negotiating table”. Citing the role of federal mediators, it said it was open to “any” solution that could bring the parties to a balanced settlement, including mediated arbitration.

Cruise ships can still sail and bulk grain is transported, but container grain is not. Canadian Labor Secretary Seamus O’Regan Jr. tweeted what appeared to be support for the continuation of negotiations between the two groups, noting that “the best agreements for both parties are reached at the table.”

The two parties disagree over issues such as automation, the use of contract labor and the cost of living for workers. Two facilitators appointed by the Canadian government oversaw the talks, which ran until the end of May. These talks were followed by what is known as a cooling-off period between the two groups.

A strike in western ports around the holiday in both the US and Canada could impact the US economy, industry officials say. The Port of Vancouver and the Port of Prince Rupert are popular destinations for US trade as these ports are among the most important ports of call for goods from Asia. Some logistics managers told CNBC that rail travel from these ports is much faster than via the Port of Seattle or Tacoma.

The International Longshoremen’s Association said it would not pick up diverted cargo from ports with striking workers, while the chairman of the International Longshore and Warehouse Union, which represents longshoremen on the US west coast, issued a statement of solidarity with the Canadian union, but did not do anything concrete mention action.

The strike could lead to congestion at these ports as dockers are unable to offload their ships. Congestion can create backlogs and result in late pickups at terminals, which can then result in late fees that are often passed on to consumers – a similar situation to that experienced during the pandemic.

“In light of the Canadian public holiday and Fourth of July bank holiday, the volume of containers moved is lower than normal, but now the vessels are not being used due to the strike,” said Paul Brashire, Vice President of Drayage and Intermodal at ITS Logistics. “If this strike lasts until the middle of next week, it will cause congestion at the Chicago and Detroit rail terminals in the coming weeks as many containers would have accumulated there and eventually been transported to those rail terminals.”

It is estimated that Canada’s ports handle nearly $225 billion worth of goods each year, with goods from various industries such as household goods, electronics and clothing being transported by rail. According to the Port Authority, about 15% of consumer trade through the Port of Vancouver goes to or from the United States. Port data shows that around two-thirds of the container import volume going to the Port of Prince Rupert is directed to the US.

Three Class 1 railways operate at these ports: CN, Canadian Pacific and BNSF, a subsidiary of Berkshire Hathaway. In an email to CNBC, BNSF said it had no comment on the impact of the strike. CN was not immediately available for comment.

In a CPKC customer announcement issued Wednesday, the railroad said, “The work stoppage associated with this announcement could impact British Columbia port operations. At this time, we do not anticipate that this work disruption will result in significant business disruption. CPKC has not issued any embargoes related to a potential service disruption, but we are closely monitoring developments to assess any impact on shipments on CPKC’s network. We will provide updates as needed.”

American Apparel and Footwear Association CEO Steve Lamar told CNBC that the “fragile and recovering supply chains will not tolerate a strike” and called on the Canadian government to help keep the parties at the negotiating table.

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