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In-Depth: Rail freight strike could devastate US economy, supply chain

Posted at 6:07 AM, Sep 14, 2022
and last updated 2022-09-14 14:33:28-04

SAN DIEGO (KGTV) - The country's major freight rail carriers and their unions have until Friday at 12:01 a.m. to avoid a strike that could devastate the U.S. economy.

The two sides have been negotiating a new contract since 2019. But a federally-mandated "cooling off" period expires on Sept. 16, and the unions are threatening a strike.

Major freight companies, like CSX, Union Pacific, BNSF, and Norfolk Southern have already started to cancel some shipments ahead of the deadline. They say it's to ensure that cargo isn't left stranded on long-distance routes.

In response, the two largest unions, who are the lone holdouts against an agreement, say the rail companies are engaging in "Corporate Extortion" and "Corporate Terrorism."

The main sticking point in negotiations is quality of life items like sick leave and time off.

Caught in the middle of the impasse are American consumers, who could face weeks of exacerbated supply chain shortages.

"Supply chains are quite stressed right now, coming out of the COVID-19 pandemic," says UC San Diego economics Professor Dr. Kyle Handley. "To have most rail freight shut down will just further stress those supply chains. They're already at a breaking point."

"A lot of agricultural commodities, like corn and soybeans, travel by rail. Lumber travels by rail. Quite a few chemicals, anything that's heavy, it's likely they'll be traveling at least in part on a rail line," he adds.

The Association of American Railroads says a strike would cost the US economy around $2 billion every day, and impact the food, agricultural, chemical, coal, automotive, and construction industries. Dr. Handley adds manufacturing could come to a halt as companies wouldn't be able to get raw materials quickly enough to keep up with demand.

"I think there'll be a lot of anecdotal stories about businesses and factories and operations that have had to either shut down or cancel orders because they just don't have the raw materials and the inputs that they need," he says.

And it would also affect passenger rail, as 97% of that industry uses train tracks that are owned, operated, maintained, and dispatched by freight companies. If a strike happens, companies like Amtrak wouldn't be able to run on the vast majority of their lines.

Like many freight companies, Amtrak already canceled some cross-country trips. In a statement, a spokesperson said, "Amtrak has begun to make initial service adjustments in response to a possible freight railroad service interruption that could occur later this week. If your train is canceled, we will attempt to notify you at least 24 hours in advance at the contact information you provided when making a reservation—as well as offer the opportunity to receive a full refund."

ABC 10News reached out to the North County Transit District, which operates the Coaster on the same lines. They replied saying "We do not anticipate an impact to the Coaster service. It would run its normal schedule.'

San Diego's freight companies say they're preparing for the strike. The San Diego & Imperial Valley Railroad, which is owned by Genesee & Wyoming, told ABC 10News, "In the event of a rail strike, San Diego & Imperial Valley Railroad (SDIY) will continue serving customers based on the fluidity of traffic to us at interchange."

BNSF, which operates a major rail yard near the port, sent an email reading, in part, "We are committed to the collective bargaining process and have faith that should a labor strike occur, Congress will intervene to prevent or quickly resolve the service disruption."

BNSF also sent a letter to its customers urging them to call Congress and intervene. Even the US Chamber of Commerce called on Congress to act.

A Presidential Emergency Board (PEB) presented a compromise to both sides, which several of the unions have agreed to. However, if any union doesn't and decides to strike, the others will follow suit in solidarity. In the past few days, the President and Congress have pressured the railroads and unions to find a solution and avoid a work stoppage.

Meanwhile, Congress can pass legislation to enforce the PEB's recommendations, but it's unlikely that will happen. Dr. Handley says people will start to see the impact of a strike almost immediately.

"I think it would be noticeable within a few days, that certain things aren't available," he says.