In the waning days of the Biden administration, the Department of Commerce’s Bureau of Industry and Security (BIS) released controls on what and where America’s chip makers could sell. At the time, ALFA said of the rule: “The AI chip market is among the most sought-after in the world — and fortunately, American companies are the ones setting the pace. Yet, by taking American products off the playing field, the U.S. risks ceding tech leadership to foreign competitors, especially those backed by the Chinese government.”
In the piece below, ALFA Institute Chairman, Speaker McCarthy further articulates how this misguided rule will hurt America’s technological leadership.
As promised, President Trump has begun his second term in office with a flurry of executive activity designed to turn the page on the failures of the Biden administration towards a new chapter of American exceptionalism.
In fact, on his very first day on the job, President Trump revoked 78 Biden-era executive orders on topics ranging from Diversity, Equity, and Inclusion to oil and gas leasing.
Given the breadth of the prior administration’s harmful policies, it’s reasonable that some may have been missed. Indeed, that is the case as one of the most damaging America Last memorandums issued by Joe Biden remains in place: B.I.S. Rule 00636, otherwise known as Biden’s “AI Diffusion” rule.
Drafted behind closed doors and signed in the waning days of the Biden presidency, this 41 page interim rule would impose a litany of new restrictions on American chip manufacturers seeking to export their products to our friends around the world.
Last I checked, it was considered a good thing when other countries wanted to buy what American companies were selling.
Instead, under the new Biden framework set to take effect this May, allies like Israel and Poland would find it harder to purchase cutting-edge technologies made right here in the USA, leaving them to turn to other sources for their needs; namely: China.
Proponents of the diffusion rule would lead you to believe that this policy is tough on China. They think that AI should be treated as a weapon, closely guarded by a select few nations, and run by an even smaller number of “validated end users.” And that America can maintain our slim yet meaningful lead in the all-important race for AI dominance through more bureaucratic regulations and red tape.
The only problem? The Chinese Communist Party didn’t even bat an eye at the rulemaking. No saber-rattling or public threats of retaliation.
Rather, there is every reason to believe that Beijing is secretly celebrating this last-minute gift from President Biden—one which provides CCP-backed companies like Huawei and Tencent with a critical opening to capture vast new market share from South America to Southern Europe, surpass the United States as the world’s leading provider of AI infrastructure, and gain key geopolitical influence in the process.
From standing up the landmark Select Committee on China and hosting Taiwanese President Tsai Ing-wen on American soil, to speaking out against China’s coercive economic, political, and intelligence gathering practices, I have worked for years to raise the alarm over the long-term challenges posed by a rising and unencumbered CCP.
That is exactly why I know better than to underestimate the Chinese and presume that America’s technological edge is a foregone conclusion, as Biden’s diffusion rule seems to do. Look no further than China’s stated intention to be the world leader in AI by 2030—a commitment backed by massive public investment into the sector that is responsible for such advances as the recently announced DeepSeek model.
Put differently, given the sheer cost associated with constructing an AI data center—from the computing chips themselves, to the utilities needed to power the plant, to the surrounding infrastructure to access it—any given country that chooses to enter the field is likely to remain with the initial technology provider they sign-up with. It would be prohibitively expensive to change course down the road.
Why, then, should America forfeit our first-mover advantage and leave an opening for China to once again undercut us on the world stage? That would truly be the definition of an America Last position.
One thing is for certain: the future will be built on AI and the future is unfolding now. The question we need to ask ourselves is whether those systems will don an American flag or a Chinese one.
Fortunately, President Trump can once again right the wrongs of the Biden administration with the single stroke of a pen. I encourage him to do so and swiftly rescind this self-defeating rule.
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