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The financial fallout of the railroad blocking Wet'suwet'en pipeline protests

A counter protester removes pieces of the blockade as supporters of the indigenous Wet'suwet'en Nation's hereditary chiefs camp at a railway blockade as part of protests against British Columbia's Coastal GasLink pipeline, in Edmonton, Alberta, Canada February 19, 2020. REUTERS/Codie McLachlan

After about two weeks of pipeline protests — blocking railroads and the movement of people and goods— it’s still too early to put a dollar figure on the economic impact. 

But businesses and individuals are already feeling a financial toll, like CN and VIA workers who have been temporarily laid off. Things will likely get worse the longer the situation drags on.

Doug Porter, BMO’s chief economist, offers a preliminary outlook.

“The ultimate cost will depend on the duration of the shutdown, and we have plenty of recent evidence to make an early assessment,” he said in a research note.

“The November CN strike, which lasted more than a week, ended up carving less than 0.1 ppts from GDP that month. However, this shutdown threatens to be more open-ended, with the situation fluid.”

Travellers are stranded and commuters can’t get to work. Airline prices have gone up as a result. 

“The situation is inconvenient but is unlikely to have major economic repercussions outside of the transportation sector itself,” Pedro Antunes, The Conference Board of Canada’s chief economist, told Yahoo Finance Canada.

Billions of dollars at stake

On the other hand, an ongoing disruption to the movement of goods along the supply chain would have widespread repercussions.

“Today’s transportation logistics are extremely tight, allowing industry to manage production with just-in-time delivery,” said Antunes.

“Essentially, companies tend to keep a minimum in inventories. As such, even short disruptions can lead to production stoppages.” 

The Railway Association of Canada estimates more than $175 billion worth of goods are exported with the help of the country’s railways every year. 

Dennis Darby, CEO of Canadian Manufacturers and Exporters, told a Toronto press conference that $425 million worth of goods are stuck for every day the blockade continues.

“Exporters are at risk from the transportation stoppages, but so are domestic industries and consumers,” said Antunes. 

“We’re already hearing about some products not being available in store shelves, especially in eastern Canada.“

Businesses pen open letter to Trudeau

A number of small businesses and farmers are having a hard time getting their products to market. They are also struggling to get supplies they need like propane, which is used to heat some homes.

The Canadian Federation of Independent Business (CFIB) represents 110,000 small and medium-sized business members, who have shared their concerns. It wrote an open letter to Prime Minister Justin Trudeau to figure out how get things moving again.

For example, one member in Quebec that makes flags and banners buys raw materials from a company in Taiwan, which sends the goods to Vancouver and then sends them by train to Montreal. 

“Currently, this company is waiting for a delivery that will allow them to complete their contracts, which expire at the end of March 2020,” read the letter.

The company says it’s worried about production and delivery delays of the finished products, which would result in an approximately $100,000 loss if its contractual requirement isn’t fulfilled.

There’s also a CFIB member business in Alberta that uses 100,000 lbs of steel per day, which is shipped by rail. The owner says he can go 30 days before being forced to lay off 400 people. It, along with the CFIB, are concerned about another hit to Canada’s reputation as a dependable place to do business.

The CFIB hopes government and law enforcement can work together to resume rail service. It’s also calling on the Canada Revenue Agency to be flexible with severely affected small businesses.

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

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