What Comes After the AI Diffusion Rule for Companies, the US, and China?
The AI diffusion rule is over. Now what?
The Commerce Department recently rescinded the Biden administration’s so-called AI diffusion rule. While this may offer temporary relief for businesses worried about market and geopolitical impacts, future chip and AI security measures are likely to once again thrust commercial and national security interests into tension. Brought to you by Global Cyber Strategies, a Washington, DC-based research and advisory firm.
The One-Liner
As the US government inevitably keeps updating its chip and AI security and export rules, some businesses may once again find themselves in disagreement with the administration’s strongest positions on China and national security — and the government may find itself clashing with commercial views on technology and China.
The Column
This is an excerpt of the latest Barron’s column from our founder and CEO, Justin Sherman.
In a major trade and security pivot, President Donald Trump has scrapped his predecessor’s so-called artificial intelligence diffusion rule that was set to be implemented last week. That rule, signed by President Joe Biden in his final days in office, added export controls on integrated circuits and AI models to countries such as China and Iran—with big exemptions for friendly nations such as Germany. Some U.S. AI and chip companies are cheering on this reversal, their present view reflecting that of a Commerce Department spokesperson: Biden’s AI rule was “overly complex, overly bureaucratic, and would stymie American innovation.”
At face value, it seems the leading industry players and the U.S. government are on the same page: Companies want to build and sell chips and AI products globally, and the administration wants U.S. industry to boom. Both worry about Beijing’s AI capabilities and threats to U.S. national security. Same talk, same page.
But many chip and AI companies’ talk about national security and China is more or less just that—talk. For some firms, talking about China and national security is simply a way to frame their own priorities, such as relaxing export controls or building data centers, in terms that land well with the current top policymakers. It seems like talking about Biden’s diffusion rule as overly burdensome for companies—and therefore bad for national security—worked.
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A replacement program could relax chip and AI model technology exports to some countries favored by Trump, such as the United Arab Emirates and Saudi Arabia, and hugely ramp up limits for China. That will prompt industry concerns for chip companies wanting to sell in China and to maintain certain China-based supply chain points. Or a new program could soften restrictions below a certain compute or model performance threshold, but broadly curb exports of higher-end technologies in ways that impact a different vertical of industry sales.
As a general rule, export restrictions focused on national security are going to both limit companies’ overseas market opportunities and speak to issues that aren’t companies’ bread and butter. Just as some investment firms are skeptical of inbound and outbound investment screening, some leading chip and AI companies are unlikely to truly buy into the scope and degree of national security concerns about exports to China.
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Read the full Barron’s column here.
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