ITAA's Year 2000 Outlook
May 7, 1999

Published by the Information Technology Association of America,
Arlington, VA

Bob Cohen, Editor
bcohen@itaa.org

Commerce Study Makes Global Y2K Connections

Without pointing fingers, the Commerce Department's International Trade Administration issued a report last month on Y2K and the global economy which contains much food for thought. And some of it may become the stuff of economic indigestion.

That's because one-fifth of global output involves international trade and could be put at risk by two-digit dates that won't translate from country to country. The stakes in this game are enormous. The U.S., for instance, exports over 20 percent of everything it makes, and counts on commerce with its trading partners to support 12 million American jobs.

So significant date fumbling by important players could throw a large rock into the world's economic pond. But the new report, entitled The Year 2000 Problem and the Global Trading System, avoids discussions of individual country readiness, preferring instead simply to depict the substantial set of trade relationships which bind one nation to the next:

"The international trading system, with its complex web of suppliers, distributors, customers, and transportation links, is supported by a critical infrastructure of products and services," the report notes. "The most important components of the infrastructure are energy production and distribution facilities, transportation modes, communications channels, and financial networks. These sectors are highly computerized and interdependent and are particularly sensitive to dates for the smooth exchange of goods and services. These characteristics render them especially susceptible to Y2K-related problems. Breakdowns in any part of the trade support structure could slow or halt shipments of key imports needed to keep factories working, hospitals functioning, food in continuous supply, and people employed."

The report sets out what may be not so obvious facts about global trade and leaves readers to take heed--if not necessarily heart--from its deadpan, "just the facts" approach. For instance, Russia, Iran, Venezuela and Nigeria are among the world's top ten exporters of crude oil; leading exporters of natural gas are Russia, Algeria, Indonesia, Turkmenistan, Malaysia and Uzbekistan. Top ten petroleum product exporters to the U.S. include Venezuela, Nigeria, Angola, Columbia, and Algeria.

According to ITA: "By the end of 1999, it is estimated that the United States will consume 19.3 million barrels of oil a day, about half of which is imported. Of this amount, 51 percent is imported from countries in the Western Hemisphere, 21 percent from the Middle East, 18 percent from Africa, and 11 percent from other countries. The petroleum industry is highly dependent upon information technologies in every aspect of its business operations, including production, maintenance, finance, communications, security, safety, and delivery. Embedded microchips are widely used in the industry's distributed control systems."

Y2K could drill down to other U.S. trade vulnerabilities too. Like minerals. The report notes that the U.S. is "totally dependent" on imports for such commodities as bauxite and alumina, columbium, natural graphite, manganese, and mica. More than 50 percent of minerals like platinum, tin, zinc, tungsten, and cobalt come from overseas. "Temporary disruptions in the supply of some of these materials could affect automobile manufacturing (catalytic converters and pollution control systems), the petroleum and construction industries (drill bits), and the electronics sector (cathode ray tubes and electronic capacitors)," the report says.

Banking also yields interesting data. The U.S., with its aggressive regulatory oversight of the financial services industry, accounts for just two of the world's 25 largest banks. An equal number of large banks are Chinese. Japan dominates the world's largest list with eight, while France lays claim to three.

Beyond banking, the report underscores how important Japan's Y2K readiness will be for U.S. firms. Japan is this nation's top overseas supplier of machine tools, information technology devices and scientific equipment.

Check out the report at http://y2k.ita.doc.gov/y2k/y2k.nsf

Also see the "Central Intelligence Agency Y2K Worldview" thread on this web site

ITAA's Year 2000 Outlook is published every Friday to help all organizations deal more effectively with the Year 2000 software conversion. To create a subscription to this free publication, please visit ITAA on the web at https://www.itaa.org/transact/2koutlooksub.htm.

-- Bill (billdale@lakesnet.net), May 07, 1999