(Bloomberg) -- Business groups are signaling the alarm that President Joe Biden’s call for Congress to intervene in a US rail labor dispute could come too late to stop a potential shutdown of transportation arteries vital to the broader economy.
Biden has lined up support from both Democratic and Republican leaders, but if Congress doesn’t step in soon to stave off a work stoppage then distribution may seize up well before a Dec. 9 strike deadline, trade groups say. Once rail operators start curtailing shipments as soon as later this week, the impact would be felt by a wide range of industries -- from agriculture and mining to manufacturing and retail.
“There cannot be a shutdown of the rails,” Brian Dodge, president of the Retail Industry Leaders Association, warned reporters on a conference call organized by the Association of American Railroads. “It’s entirely too catastrophic for the economy.”
Railroads are expected to begin shutting down service a week ahead of the strike date, first by declining to accept hazardous freight shipments. The move is typical to make sure rail cargo isn’t left stranded and also acts as a pressure tactic to compel Congress to intervene in the dispute with a group of a dozen rail worker unions.
A small group of unions that remain holdouts counter a strike is needed to bring management back to the bargaining table. They say railroad operators are profitable enough to provide more sick leave and other benefits.
Under the Railway Labor Act, which only applies to rails and airlines, Congress can force a settlement on the parties by passing legislation that would be signed by Biden. House Speaker Nancy Pelosi committed to passing without changes a labor agreement brokered by the White House in September. The sticking point could come in the Senate where one senator can hold up that House version from being approved without modifications.
Congress has intervened at least 18 times to prevent a strike since the Railway Labor Act was passed in 1926, according to a report by Cowen analyst Jason Seidl. The last nationwide freight rail strike was in the early 1990s and Congress quickly crafted legislation to force service to resume. Industry groups are hoping lawmakers can take action well before the deadline.
“Historically, Congress has voted on these matters with overwhelming bipartisan support and certainly that’s something we’re calling on both Democrats and Republicans to repeat here,” Ian Jefferies, chief executive officer of the Association of American Railroads, said on the call. “This is something that will impact all citizens, all workers and something that both parties should cooperate on to move forward with haste.”
The September deal hit a snag after the largest of rail unions involved in the discussions joined others to vote down the agreement. The Nov. 21 results were close, with 50.9% against among those who participated in the vote by the union that represents about 28,000 workers, mostly conductors. Unions had pushed for as many as 15 days of paid sick leave, which was not included in the September agreement.
The dispute hasn’t hinged on money. The workers are getting a 24% raise and a total $5,000 bonus over five years and kept healthcare benefits mostly intact. Rail pay is higher than many industries, with train engineers normally taking home more than $100,000 a year, not including benefits.
Out of a total of 13 labor agreements among the 12 unions, nine have been ratified and four were struck down by members. The railroads have said they won’t negotiate outside of the framework of a report created by a Presidential Emergency Board, which consisted of three arbiters, that Biden convened in July to settle the impasse.
The Brotherhood of Maintenance of Way Employes Division, which is part of the Teamsters, said it was disappointed by Biden’s push for Congress to force the deal on union workers.
“Regardless of what happens next, President Biden, Congress and the railroads need to know that this problem is not going away soon,” the BMWE, whose members voted against ratification, said in a statement. “The railroad is not a place to work while you’re sick. It’s dangerous.”
But industry leaders depict dire consequences if rail workers don’t stay on the job.
Fertilizer supply is already tight because of Russia’s war on Ukraine and high natural gas prices, said Corey Rosenbusch, CEO of the Fertilizer Institute. More than half of all the fertilizer used in the US is moved by trains and railroads would stop taking fertilizer shipments five days before the strike date. For every day rail workers are on strike, it would take five to seven days for the supply chain to catch up, he said on a call organized by the Association of American Railroads.
“With limited storage at production facilities, if this is not resolved quickly, fertilizer manufacturing would have to be curtailed,” Rosenbusch said. “This would be absolutely devastating for fertilizer distribution to farmers, who need the fertilizer to grow the food on which the world depends.”
The rail shutdown would boost inflation, cost 700,000 jobs across multiple industries and chop $160 billion from the economy, possibly tipping the economy into recession, according to a study by the American Chemistry Council. US chemical manufacturers alone ship 33,000 rail carloads per week worth $2.8 billion.
The auto industry, which has struggled with a chip shortage, moves almost 75% of new vehicles by rail. Rail carries about a quarter of all US grain, said Mike Seyfert, CEO of the National Grain and Feed Association.
“Certainly, having this proposal there and what the speaker and the president have said, gives us great hope that we’re going to get this legislation and proposal passed and not come to a strike,” Seyfert said. “But if you’re in business, the worst thing there is is uncertainty. Until Congress passes this, Dec. 9 is still hanging over your head.”
©2022 Bloomberg L.P.
BNN Bloomberg Picks
Opportunities in luxury retail: Three hot picks from John San Marco
Majority of Canadians determined to own a home despite affordability challenges: Survey
Started a side hustle? Seek expert advice to avoid tax season headaches
It's possible to have 'too much' in your RRSP: Tax expert
Food prices set to increase — again — as blackout on price hikes ends at some stores
WestJet temporarily suspends service from 3 Canadian cities to Europe