EU joins industry backlash against Biden’s AI Chip export restrictions

Upsetting most of the AI industry with its new chip export restrictions was bad enough. Now the Biden Administration’s new AI rules have riled the entire EU bloc.

This shouldn’t be a surprise; the list of countries that will face no restrictions only covers 10 of its 27 members, specifically Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Spain and Sweden.

In addition, Australia, Canada, Japan, Taiwan, South Korea, New Zealand, Norway and the UK are also cleared for export.

However, larger EU members not on the list include Austria, the Czech Republic, Hungary, Greece, and Poland. Why those countries and others were excluded is not clear but is likely to include the pro-Russian leanings of some of their leaders or the worry that their physical proximity to non-allied countries might allow them to act as export intermediaries.

Gray area

The US plans, trailed in December and due for publication in full on Wednesday as the Export Control Framework for Artificial Intelligence Diffusion, place a range of export controls on selling the top-end chips and the most powerful AI models they are used to create.

The intended targets are China, which already faces heavy export controls, plus a selection of other antagonistic countries while sparing the US’s friends. But many other countries fall into a gray area between these poles.

Because the framework was issued by the Biden administration as an Interim Final Rule (IFR), in theory it is applicable immediately. However, IFRs can also be revised after feedback, which might explain the EU’s carefully worded response.

“We believe it is also in the US economic and security interest that the EU buys advanced AI chips from the US without limitations,” read a joint statement by executive vice-president for tech sovereignty, security, and democracy, Henna Virkkunen, and trade and economic security commissioner, Maroš Šefčovič.

“We have already shared our concerns with the current US administration, and we are looking forward to engaging constructively with the next US administration,” they said.

What the framework says

The new Framework creates a three-tier licensing hierarchy. Favored countries such as the 10 EU nations will be able to purchase AI chips, including the most powerful, without restriction. Most countries fall into the middle tier, subject to export licensing restrictions on how much computing power they can get hold of. And then there are coutnries that already can’t buy AI chips from the US, including obvious candidates such as China and Russia.

For countries in the middle tier, if an individual order doesn’t exceed a “collective computation power up to roughly 1,700 advanced GPUs,” — the sort of GPU power used by a university or medical institute — no export license will be required. These sales won’t count against national chip quotas.

As for LLMs, sales of the most powerful proprietary models will also be restricted outside of the favored countries. The US Department of Commerce’s Bureau of Industry and Security (BIS), which drafted the framework, defines the restricted models as those built using closed (as opposed to open-source) weights using more than 10^26 computational operations.

Nevertheless, countries in the second restricted tier will still be able to bypass the rules if they meet tough requirements through the existing universal validated end user (VEU) authorization program. That won’t be easy – a compliant data center will have to meet FedRAMP High standards, for example. The pay-off will be the ability to build larger clusters than would otherwise be possible.

“With this status, they can then place up to 7% of their global AI computational capacity in countries around the world – likely amounting to hundreds of thousands of chips,” the White House said.

The backlash

Normally, the last days of an outgoing US administration are a time of quiet reflection. With the inauguration of a new president only days away, the Biden administration has broken with convention, releasing one of the most contentious technology regulations of its four years in office.

The Export Control Framework for Artificial Intelligence Diffusion has also been heavily criticized across the tech industry in the US. Indeed, it is hard to think of a technology regulation that’s left more criticism in its wake. Some of this is the awareness that railing against an outgoing administration is low-risk. And yet there is also genuine panic at how the innards of the new framework might affect some US tech companies.

The main gripe is that it could stop US companies from selling or even operating powerful AI systems, the most profitable sector of the industry, to customers in many countries. That includes platforms selling advanced cloud services. Perversely, it is argued, this could end up creating a captive market for China while limiting US market share.

There are some surprise omissions from the framework’s list of favored nations, including Israel and Singapore: not only important markets for US AI tech but military and economic allies of the US.

A post on X (formerly Twitter) by Republican Senator Ted Cruz was typical of the bipartisan political opposition the framework has generated:

“This heavy-handed restriction on chip exports, drafted in secrecy without input from Congress or American companies, mirrors their misguided approach to AI policies and threatens to cripple innovation,” Cruz wrote.

Nvidia, the company most directly affected by the new framework, didn’t hold back either:

“In its last days in office, the Biden Administration seeks to undermine America’s leadership with a 200+ page regulatory morass, drafted in secret and without proper legislative review,” wrote Ned Finkle, the company’s vice president of government affairs in a scathing assessment.

Will it stick?

The assumption in some quarters is that the incoming Trump administration will ditch most of the framework. But even if changes are certain, the new administration will still have to field the complex problem of who gets access to US AI tech and who doesn’t, and on what basis. President Trump’s administration is unlikely to want AI chips to end up in Chinese, Iranian or North Korean hands any more than Biden’s does.

The flaw in the framework is its mixture of complexity and the number of exceptions that could end up creating loopholes. But every future administration will find itself grappling with the same issue — how to slow AI development in hostile nations without burdening US companies with form-filling bureaucracy that is watertight on paper only.