Sen. Banks Calls for U.S. Open-Source AI Leadership to Counter China

Recommends action to strengthen American open-source AI leadership

WASHINGTON, D.C. - Senator Jim Banks (R-Ind.) sent a letter to Council of Economic Advisers (CEA) Chairman Christopher Phelan encouraging the Trump administration to examine policies that ensure the United States wins both the race to develop the world's most advanced artificial intelligence and the race to make American AI models the global standard. Banks warned that China is attempting to repeat its Huawei playbook by flooding the global market with cheap open-source models designed to create foreign dependence, introduce security vulnerabilities, and spread Chinese Communist Party influence.

Banks encouraged CEA to examine new incentives that could strengthen America's open-source AI ecosystem, expand opportunities for startups and small businesses, and prevent Chinese companies from exploiting stolen technology, acquiring chips illegally, and conducting large-scale model distillation. He also requested a staff-level briefing within 60 days on the economic and national security benefits of American open models and semiconductor export controls.

Read the Reuters exclusive here.

Read the full letter here or below:

Dear Chairman Phelan:

I am writing about the importance of American leadership in both frontier artificial intelligence (AI) development and the global diffusion of AI models, including open-source models.

America faces two related but distinct AI competitions. The first is a vertical race to the frontier to ensure that America, not China, develops the world's most capable AI systems. The second is a horizontal diffusion race to ensure American, not Chinese, models and technical ecosystems become the default for businesses, researchers, and governments around the world.

The Chinese pursuit of open-weight dominance should come as no surprise. The Chinese government has long pursued exactly this kind of global market capture using cheap, oftentimes illicitly acquired, technology. We can expect that "good enough" Chinese open-weight models will be offered at steep discounts and be used to nurture dependencies, introduce vulnerabilities, and proliferate Xi Jinping thought across the world economy. This is the very playbook the first Trump administration correctly called out and took action to counter globally from Huawei. China is now trying to apply the Huawei playbook to artificial intelligence. For this reason, the administration's AI Action Plan is correct to recognize that American open models would have both economic and geostrategic value.

Open models can generate broad economic benefits by lowering barriers to entry, reducing development costs, strengthening competition, and enabling downstream innovation. Frontier developers invest large sums to develop models and frequently rely on controlled access to recover those investments. For a given frontier model developer, releasing weights openly could reduce revenue, transfer capabilities to domestic competitors, or attract scrutiny if open models create harm. As a result, frontier developers may underproduce open models due to their structural incentives. The United States must think creatively about the types of incentives that may change this calculation and promote a strong American open-source ecosystem.

To prevent Chinese models from becoming the foundation of the global economy of the future, the U.S. must also take aggressive action against illicit chip acquisition, export control evasion, and industrial-scale distillation by Chinese AI companies. As Director Kratsios made clear, Moonshot AI's Kimi K3 model achieved its significant breakthrough in large part through malign behavior. China not only benefited from industrial-scale distillation but also illegally acquired export-controlled chips and exploited loopholes in chip controls to remotely access prohibited chips in Southeast Asia. As we help U.S. companies run faster in open-source, we must also make it harder for the Chinese to cheat.

America cannot afford to see Chinese open models proliferate and burrow into the global economy only to be weaponized, like rare earths, at a time and place of China's choosing. We need an American AI ecosystem that wins both the vertical and horizontal races.

As the Administration considers how to promote American AI leadership and limit dependence on PRC models, I recommend examining the following questions:

1. Economic incentives and open-source. Do private incentives systematically undervalue the economic and national-security benefits of American open models? What benefits accrue broadly to the United States but cannot be captured by individual companies? How does the availability of strong American open models affect innovation and competition among startups, small businesses, and independent developers?
2. Tools for promoting U.S. open-source leadership. What policy tools or economic incentives could address potential market failures and strengthen the U.S. open-source ecosystem? Which interventions would most effectively support the development, distribution, and adoption of competitive American open models? How can such policies support startups, small businesses, and independent AI developers?
3. Preventing China from cheating. What are the quantifiable economic benefits of semiconductor export controls for both the frontier race and the diffusion race? What is our best estimate of how much existing export controls have strengthened U.S. AI leadership in each race, and how much have these advantages contributed to gains in U.S. productivity, growth, investment, or global market share? What economic costs would result from failing to prevent large-scale distillation or enforce existing controls?

I look forward to following your work in these areas as you continue to promote U.S. AI leadership, both for open-source models and for frontier models. To support your work, I request a staff-level briefing within 60 days to discuss these topics.

Sincerely,

Jim Banks

U.S. Senator for Indiana

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