Specifically, the committee recommended that the State Department assess whether the distillation attacks violate laws such as the Economic Espionage Act and the Computer Fraud and Abuse Act. They also want “adverse distillation” to be classified as a clearly defined and officially controlled technology transfer, which would make it easier to restrict fraudulent Chinese access to models.
The committee report said that if such steps were taken, the US could prosecute bad actors and impose heavy financial penalties, which could deter Chinese companies from “considering serious violations as a tolerable cost of doing business”.
China described the allegations as “pure slander”.
Kratsios’ memo threatening tough action comes ahead of Donald Trump’s highly anticipated meeting with Chinese President Xi Jinping next month.
Trump claimed the meeting would be “special” and that “a lot will be accomplished.” However, at least one analyst told the South China Morning Post that the war in Iran means Trump has “lost almost all his bargaining chips” at a time when the US and China are trying to stabilize a trade relationship that has been strained since Trump took office.
It seems that China will not be able to tolerate Kratsios’s allegations. Liu Pengyu, a spokesman for the Chinese embassy in Washington, DC, told the FT that the White House’s allegations were “pure slander.”
“China has always been committed to promoting scientific and technological progress through cooperation and healthy competition,” Pengyu said. “China attaches great importance to the protection of intellectual property rights.”
Whether Trump will side with AI firms that want to see China stripped of its models and cleared for distillation attacks is yet to be seen. In the past, Trump has been accused of making major concessions to China on export control matters, which experts have claimed threatens US national security and the economy, as US companies claim to be subject to distillation attacks.
Fighting alleged “industrial espionage” may require reversing some of Trump’s concessions.
Chris McGuire, a technology security expert at the Council on Foreign Relations, told the FT that “Chinese AI companies are relying on distillation attacks to make up for shortfalls in AI computing power and to illegally reproduce the core capabilities of US models.” To stop them, the US may need to tighten export controls that Trump had loosened, such as allowing Nvidia chip sales to China as long as the US gets a 25 percent cut. That bizarre deal made “no sense” to experts, who warned that Trump’s strange move could open the door for China to demand access to America’s most advanced AI chips.
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