The recently announced “Interim Final Rule” by the outgoing Biden administration has sparked a fierce debate over the future of the American artificial intelligence (AI) industry. On one side, proponents assert that these regulations will safeguard U.S. technological superiority against Chinese competitors. Conversely, critics warn that these very measures could inadvertently suffocate the industry, allowing China to seize the global lead in AI technology.

As of Monday, this much-anticipated rule divides nations into three distinct zones based on their trustworthiness and alignment with U.S. interests, shaping the framework for future high-tech exports. The core objective is twofold: simplify the export process for high-powered chips while simultaneously fortifying barriers that could allow adversaries to pilfer advanced AI technology. National Security Advisor Jake Sullivan encapsulated this dual mandate succinctly, stressing the importance of maintaining American leadership in AI while ensuring its benefits extend globally.

However, detractors argue that this regulatory landscape could entangle U.S. exports in convoluted compliance requirements, rendering them less competitive on the global stage, particularly against China. As has been observed in the past, the over-regulation of certain technologies — as seen with unmanned aircraft — often leaves the market wide open for competitors, in this case, Chinese firms poised to dominate the international AI landscape.

Industry leaders have not held back their criticism. Oracle’s VP Ken Glueck blasted the draft as potentially catastrophic for the U.S. tech sector, predicting it could shrink the global chip market for American companies by a staggering 80%. NVIDIA, a leading player in the AI chip market, also voiced its concerns, highlighting the possible detrimental effects on American competitiveness stemming from a regulatory framework perceived as cumbersome and overly restrictive.

Yet, the label “interim” in the rule suggests that the final determinations concerning AI tech exports will rest with the incoming Trump administration. The distinct factions within the administration present a conundrum. Will Trump align with the protective instincts of his supporters, or will he champion a more open approach that encourages innovation and exportation? This dilemma underscores the complexity of governance in an era where technology, security, and international relations are intertwined.

An extended 120-day public comment period indicates that the current administration is cognizant of industry concerns and is potentially leaving room for future adjustments. This comparatively lengthy timeframe is an opportunity for stakeholders to voice their opinions and shape the ultimate outcome of these significant regulations.

Under the proposed rule, nations are categorized based on trust levels. The “inner circle” comprises 18 allies, including Japan and France, who are afforded relatively few restrictions on chip sales. In contrast, the middle tier includes the majority of countries with specific limitations on cutting-edge exports, while the outer ring comprises nations under U.S. arms embargoes, facing strict controls.

The Biden administration argues that this new framework will ultimately facilitate the export of AI technologies to a broader range of nations while bolstering privacy and security measures where necessary. The expectation is that it will ease the licensing delays previously faced by smaller entities, thereby maintaining the United States’ competitive edge.