(Reuters) -Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) announced the lockout of their Canadian workers on Thursday after failed labor talks, resulting in a shutdown of their rail networks in the country.

The decision, confirmed by the Teamsters union representing the workers, sets the stage for an unprecedented rail stoppage that could badly damage the Canadian economy and have a significant effect on cross-border trade with the United States.

Canada is the world's second-largest country by area and relies heavily on rail transport. A stoppage would cripple shipments of grain, potash and coal while also slowing the transport of petroleum products, chemicals and autos.

CN said it had offered improved wages and a deal that would have seen employees work fewer days per month, but the "union did not respond".

CPKC said a negotiated outcome with the Teamsters Canada Rail Conference (TCRC) union was not within reach.

"Teamsters have put forward multiple offers, none of which were seriously considered by either company," the union said in a separate statement.

(Reporting by Abhinav Parmar and Jahnavi Nidumolu in Bengaluru; Edited by David Ljunggren, Rod Nickel and Jamie Freed)