Context: On December 13, 2024, the U.S. government announced it would be issuing a rule (“Export Control Framework for Artificial Intelligence Diffusion”) that would empower tech companies like Google and Microsoft to act as gatekeepers worldwide for highly sought-after access to AI chips. The rule would require companies to report key information to the U.S. government and block Chinese access to AI chips. This would allow those businesses to provide AI services overseas without a license. The proposed rule could be enacted as soon as January 10.
What’s new: The Information Technology Industry Council (ITI), an industry group that represents 79 tech companies, including Amazon, Microsoft, Meta, Google, Ericsson, and IBM, has sent a letter to U.S. Commerce Secretary Gina Raimondo, urging the government to refrain from issuing the rule (January 7, 2025 ITI letter). While the group acknowledged the U.S. government’s commitment to national and economic security, it warned that the proposed approach’s potential risks to U.S. global leadership in AI are “real” and “should be taken seriously”.
Direct impact and wider ramifications: The letter joins several other complaints against the proposed last-minute rule, including from the Semiconductor Industry Association (SIA) (January 6, 2025 SIA statement) and Ken Glueck, executive vice president at Oracle (January 5, 2025 Oracle blog post).
Here is the ITI’s letter:
ITI’s CEO Jason Oxman had previously written to National Security Council and National Economic Council Directors Jake Sullivan and Lael Brainard expressing the industry’s concerns. ITI also met with staff in the Office of Information and Regulatory Affairs and Bureau of Industry and Security to demonstrate why the rule should be considered “economically significant,” as defined by Executive Order 12866. This means that rules deemed economically significant undergo a robust public review and consultation process, to which the draft rule has not yet been subject even though the proposed approach would exceed the “economically significant” threshold of $200 million or more in annual economic impact.
In his letter yesterday, Mr. Oxman said the industry remains “troubled” by the Joe Biden administration’s insistence on publishing a “complex and consequential rule of this nature” – without any prior consultation with industry or other stakeholders. He requested that the U.S. government instead issue the rule as a Notice of Proposed Rulemaking, given the “significant potential geopolitical and economic implications” of the proposed approach.
While noting that the rule shows the government is committed to national and economic security, Mr. Oxman wrote that the proposed approach’s potential risks to U.S. global leadership in AI are “real” and “should be taken seriously”.
This includes, he wrote, that it would place global restrictions on countries’ access to integrated circuits, regardless of cluster size or use case. It would “cede the global market to U.S. competitors who will be eager to fill the untapped demand created by placing arbitrary constraints on U.S. companies’ ability to sell basic computing systems overseas”, he said, adding:
“Should the U.S. lose its advantage in the global AI ecosystem, it will be difficult, if not impossible, to regain in the future.”
ITI’s letter contained similar concerns to those posed by SIA in a statement on Monday, which said that it was “deeply concerned” by the “unprecedented scope and complexity of this potential regulation”. It could “significantly undercut U.S. leadership and competitiveness in semiconductor technology and advanced AI systems”, SIA wrote.
And, on Sunday, Ken Glueck, executive vice president at Oracle, said in a blog post that rather than target activities of concern, the rule “drops the Mother of All Regulations on the commercial cloud industry, regulating… nearly all commercial cloud computing globally for the first time in history”. He said the “Export Control Framework for Artificial Intelligence Diffusion”, as the draft rule is titled, “will go down as one of the most destructive to ever hit the U.S. technology industry”.
Mr Glueck added:
“For the first time, we are applying draconian new regulations to the largely unregulated public, commercial cloud. We are stifling innovation and strangling emerging business models. Worse, without fully contemplating the rule’s effects, we are likely handing most of the global AI and GPU market to our Chinese competitors. Let that sink in.”