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Indo-U.S. Protocol on Knowledge-Based
Products & Services

"The Knowledge Trade Initiative"

Signed Mr. G.P. Goenka, President of Federation of Indian Chambers of Commerce and Industry and Mr. Frank Wisner, Chairman Elect of the U.S. India Business Council
March 24, 2000

We, the businesses of the two nations-India and the United States of America-recognise the following extraordinary developments that have arisen in the relations between our two great nations.

• The phenomenal growth of trade in knowledge-based products and services over the recent past.
• The vital contributions of information and communications technologies to the economic dynamism of both countries.
• The extraordinary opportunities presented by the communications revolution of our time for strengthening democracy and expanding prosperity.
• The competitive advantages that both countries have as exporters of information- or knowledge-based products and services to each other and to third countries in partnership.
• The unprecedented new challenges of stimulating, monitoring and regulating the flow of information, ideas, and value across international borders; and
• The shared interest of India and the United States in assuring a liberal international trading regime for information-based products and services.

We, the Federation of Indian Chambers of Commerce and Industry (FICCI) and the U.S.-India Business Council (USIBC) resolve to work together to promote and stimulate bilateral trade and investment in the knowledge driven industries. We agree to organise a bilateral industry-to-industry dialogue to foster creative and constructive analysis of the current rules and institutions, both national and international, which regulate international trade in information- or knowledge-based products and services.

I. Rationale

The emerging economy of the Information Age has a number of characteristics that distinguish it from the agrarian and industrial economies of the past. Once they are created, information-age products - materially embedded in electronic data bits and intangible services - are easily transferred, duplicated or pirated. Trade in information products is difficult to monitor, and the market value of much of what is produced is vulnerable to rapid obsolescence because of its rapid dissemination and potential for replication. These features greatly complicate traditional institutions and practices governing trade. Knowledge-based products and services are primary inputs to all aspects of modern economic activity, including agriculture and manufacturing, and have primary strategic significance in the emerging economy. They have contributed disproportionately to productivity growth, and the concept of a "knowledge industry" is synonymous with innovation. Establishing a strong global regime to permit the ever-freer trade of knowledge and information is indispensable to the development of a dynamic, inclusive world economy in the 21st Century. The two countries have an additional special interest in the issues to be explored. The United States and India are potentially the two most important global providers of knowledge-based products and services - including software development, Internet services, basic research, R&D, space science, film, music, video animation, and other forms of entertainment, biotechnology, health related services and a host of emerging information-based industries. Both countries need to export these products and services to realize their full value. In the absence of a strong international consensus in support of a liberal international regime, the fundamental economic interests of both countries would remain unfulfilled.

II. Objectives

The proposal is designed to achieve several objectives important to business in both countries:

1. To project India and the United States as cooperative, major and progressive actors in the emerging global information economy;
2. To evolve a second track of constructive bilateral cooperation outside the security realm;
3. To generate sound, feasible, forward-looking recommendations for policy reform that advance the interests of both nations;
4. To provide concepts and principles that may guide future world discussion of issues related to "knowledge trade" (i.e., trade in information-based products and services);
5. To foster technological and regulatory leapfrogging in the development of India's information technology and communications infrastructure;
6. To document and make recommendations for realizing the benefits to both countries and to the world of expanded trade in the whole range of knowledge-based industries, including, but not limited to basic science, biotechnology, film and entertainment, financial services, medicine, remote sensing, research-based pharmaceuticals, and video animation.

III. Participation

FICCI and the USIBC agree that the dialogue, engaging many of India's and America's most respected business leaders, scientists and citizens, can be a powerful force for progressive change. The dialogue will be industry-led, with participation by government and other public interest organizations. Leaders of the dialogue will be enjoined to keep in mind that recommendations made must be capable of winning broad public support and to this end, the organizers will endeavor to assure that participation is broadly representative. To this end, FICCI and USIBC agree that participation will be at three levels:

A bilateral working group of 12-18 prominent individuals, half from each country, will be recruited to guide the overall process, evaluate the evidence, draw conclusions, and make recommendations. Fields represented would cover the entire gamut of knowledge-based industries.

Policy Subgroups will be organized to study specific topics. Expert opinion will be solicited from a variety of sources, including trade associations, government and industry experts, and consultancies; scientists, engineers, economists and other highly trained specialists; leaders of foundations, think tanks, and other nonprofit, public-interest institutions. Participation would be through seminars and panel discussions in India and the U.S., submitted testimony and studies, and commentary on draft papers and reports.

In addition, a wider national and international audience will have access to, and an opportunity to comment on, the proceedings of the working group. Meetings of the working group will generally be open; documents, reports and studies will be made available for review and comment on the Internet; and comments received from at-large participants will be reviewed in the final report. The U.S.-India Business Council (USIBC) and the Federation of Indian Chambers of Commerce and Industry (FICCI), as the responsible parties, agree to provide the coordinating structure for the dialogue, mobilize expertise, organize bilateral meetings, and assure the timely production, revision, and publication of reports. The two organizations will also undertake to fund the initiative from private sources.

IV. Subject Matter and Operation

The initiative will center on four substantive areas:

E-commerce regulation and taxation, or e-commerce narrowly defined: This concerns all of the regulatory and taxation issues related to expanded international trade through economic media. Key issues include access, privacy, encryption, copyright protection, liability, bandwidth, and technical standards.

Trade in services: This embraces all issues connected to cross-border market access for companies producing, buying, and selling knowledge. The concept of services is broad and includes a diverse array of activities, such as broadcasting, construction, consulting, design, energy, engineering, entertainment, financial services, insurance, law, management, medicine, research and development, space science, software development, tourism and travel.

Intellectual property: The protection of intellectual property is the sine qua non of knowledge-industry development. The Indo-U.S. E-commerce Initiative will build upon incipient bilateral cooperation designed to strengthen India's ability to protect intellectual capital developed in the home market and to improve the attractiveness of India as a host for multinational corporations' research and development facilities.

Movement of natural persons: While much of what is traded in the knowledge economy is easily and rapidly transmitted, global trade in knowledge industries requires increased movement of people. Business mobility is critical for the creation of a truly global market in knowledge production and application. The Bilateral Working Group would be amplified by four Policy Subgroups, i.e., one for each of the prime areas of investigation identified above. These Policy Subgroups will be supported by the USIBC and FICCI, who will invite and coordinate the participation of the relevant national industry and professional associations, industry and private experts. The Knowledge Trade Initiative will build upon the ongoing work conducted under the auspices of the USIBC, based in Washington and San Francisco, and FICCI, based in New Delhi.

V. Final Report

The principal tangible outcome of the Knowledge Trade Initiative will be the publication of a substantial report, in both paper and electronic formats. Seminars will be organized in both countries to disseminate the principal findings. The final report will have at least the following contents:

1. Introduction: A summary of principal findings and conclusions
2. What We Know: The economic and technical basis of the report
3. What We Need to Decide: The principal issues of public policy
4. Living with E-Commerce: Taxation and regulation in the public interest
5. Expanding Knowledge Trade: Building a world market for information-based services
6. Intellectual Property: The creation and protection of value in knowledge
7. Mobility Rights: Movement of persons in the information age
8. Recommendations: Proposals for institutional, legal, and policy reform

VI. Schedule

The dialogue will be organized and completed within a 12-15 month timetable from the date of

April -- Recruitment of Bilateral Working Groups; Call for papers; Solicitation of Expert Testimony

May -- Preliminary Meetings of Bilateral Working Group and subgroups via conference call; Definition of issues, working agenda, external participants

June 12-13 -- First meeting of Bilateral Working Group in San Francisco Expert-level consultations with U.S. officials in Washington, D.C.

July-August -- Organization of expert panels, conference calls, subgroup seminars in India and the United States

September -- Preparation of Second face-to-face meeting in India

October-November -- Second face-to-face Meeting of Bilateral Working Group in India

December -- Preparation of Final Report by FICCI/USIBC secretariat based on January 2001 minutes of hearings and proceedings, expert testimony, commentary February Draft Report posted on Internet and disseminated in paper format for comment

March -- Final Revisions

April 2001 -- Publication of Final Report; Seminars and press events organized in U.S. and India to disseminate findings and recommendations