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The economic impact of a rail freight strike could be as high as $2 billion a day

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Rail stakeholders are concerned that a possible strike by some union members over stalled contract negotiations could lead to multibillion-dollar economic consequences.

The Association of American Railroads estimates that a nationwide rail shutdown could cost $2 billion in daily economic losses. report released on Thursday. AAR reached its conclusions by updating data from a 1992 Federal Railroad Administration econometric study.

AAR, which represents freight and passenger rail, also said a short-term switch to trucks or barges “would be costly and disruptive”, with an extra 467,000 long-distance trucks needed per day to handle freight that would otherwise go the railways. .

“Railway works in conditions of intense competition on the transport market. Firms rarely rely solely on rail transportation,” the report says. “In the long run, most firms that use rail could change their distribution patterns or production processes so that they don’t have to use rail as often as they do today.

“However, for most of these firms, switching to trucks or barges at short notice, or changing their production processes to reduce or eliminate the need for rail, would be very expensive and disruptive at best. In many cases, this would be completely impractical,” the AAR report said.

A new labor agreement for union members has been in place since January 2020, but negotiations between the unions and the railway failed to progress. The Federal Mediation Board took up negotiations, but released the parties from that effort earlier this summer.

The President’s Emergency Management Board (PEB) is a three-member board appointed by President Joe Biden. convened in July and August to come up with ways the unions and the railroads could break the bargaining impasse – issued guidelines last month that sought to break the bargaining impasse. The recommendations were to serve as a starting point for a new contract.

As of Thursday, more than half a dozen unions had yet to reach an agreement with American Freight Railroad on a new contract. Five unions so far reached an agreement and sent the agreement to its members for ratification, some of the larger unions, such as the Brotherhood of Locomotive Engineers and Railroad Workers and the Sheet Metal, Aviation, Railroad and Transportation Division International Association, also known as SMART-TD, pending an agreement with the railroad.

Under the Railroad Labor Act, the two sides must reach a consensus by midnight on September 16; after that, the “cooling off” period ends and union members can decide to strike.

“Like those unions that have already pre-agreed to the PEB deal, each of the remaining unions can still enter into agreements based on these recommendations,” AAR president Ian Jeffries said in a release accompanying the report. “However, if negotiations fail and result in a work stoppage, Congress must act to implement the PEB’s recommendations — reward employees and end unnecessary economic harm and uncertainty for railroad customers.”

While the AAR studied the potential economic costs, shippers began pressing Congress to intervene if a strike was imminent.

Thursday’s letter from the Agricultural Transportation Working Group, which was also signed by 31 shipper groups representing agricultural interests, “urges[s] Congress needs to act to avoid significant economic damage to US supply chains and further uncertainty for rail customers.”

“A complete shutdown of the rail system would shut down or slow rail-dependent facilities, which would have devastating consequences for our national and global food security,” said the letter, sent to leaders and members of the U.S. Senate on Commerce, Science and Transportation. . Committee and the US House Committee on Transportation and Infrastructure. The letter also notes that the suspension of rail services could exacerbate existing service problems.

“World leaders are already concerned about food shortages and hunger due to drought and geopolitical issues such as the invasion of Ukraine, which accounts for 10% of the world’s wheat exports. The shutdown of rail freight will come as U.S. farmers harvest crops, worsening global food security and likely contributing to further geopolitical instability in regions experiencing hunger. Congress must be prepared to act to ensure that our farmers and ranchers can continue to help feed the world,” the letter said.

The National Retail Federation also sent a letter Thursday to the House and Senate Majority and Minority Leaders expressing concern about the potential disruption in the rail message.

“If the parties do not conclude their negotiations, we recommend that Congress implement the PEB’s recommendations to avoid any disruptions that would create further supply chain tensions,” said the letter, signed by David French, senior deputy director of the NRF. president of government relations.

The letter continued: “Our national retailers continue to meet strong customer demand despite supply chain challenges. Goods and services related to retailers are a key part of the necessary economic growth – despite various economic obstacles – and they require constant improvement and fluidity in the supply chain. … If the rest of the unions do not agree to a deal by September 16, there is a real concern of a strike that could shut down the system.”

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