RBC believes a proposal from a Senate committee to create a supply-chain tribunal to reduce work stoppages and keep the supply chain stable is a positive for Canadian National Railway (CNR.TO) and Canadian Pacific Kansas City (CP.TO).
The "Keep Canada Moving" report, which was tabled on June 11, also asks the federal government to create a Supply Chain Reliability Act or amend the Canada Labour Code to establish an alternative dispute resolution process for the marine and rail sectors that includes mediation and arbitration.
Analysts Walter Spracklin and James McGarrage note the committee's proposal would formalize a dispute resolution mechanism that has so far only been applied on an ad hoc basis by the federal government, and view this as a "positive readthrough" for CN and CP.
Greater labor continuity supports shipper confidence and removes a recurring overhang on both names heading into future contract cycles, they point out.
"While the proposal has drawn pushback from organized labour and the path forward will require further consultation, we see the broader policy conversation around supply chain resilience moving in a constructive direction that reduces disruption risk for Canadian railways."
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