The quiet machinery of the global AI supply chain just got a lot less flexible. A leaked draft letter from the US State Department tells the 35 economies that signed this year’s Joint Statement on AI Opportunity that they cannot stay in both the American and Chinese AI orbits at the same time. The message, according to one US official, is blunt: “you can’t have it both ways.”
This is not a chip tariff or a new export license. It is the first serious attempt to turn the global AI ecosystem into formal membership—with entry requirements and, implicitly, a cost for straddling both blocs.
The leaked letter: “you can’t have it both ways”
Reuters reported on August 15 that the State Department has drafted a letter addressed to the 35 signatories of the June Joint Statement on AI Opportunity. The draft argues that joining the Pax Silica framework “is not merely obtaining membership, but a commitment,” and warns against holding “duplicate memberships” whose expectations conflict with Washington’s. It does not name China directly.
A US official told Reuters the letter exists to remove ambiguity: countries that want to be seen as trusted partners inside the American technology ecosystem should not also join Chinese-led initiatives built around a competing vision. In the official’s framing, the letter is a clarification, not a threat—but the practical effect is a choice where there used to be none.
From chip controls to ecosystem membership
The letter is the logical next step in a year-long escalation. First the question was whether China could buy advanced chips. Then it became where global compute should flow. Pax Silica, launched in December 2025 with Australia, Japan, South Korea, Singapore and Israel, folded critical minerals, semiconductors, energy, advanced manufacturing and AI models into a single supply-chain framework. Today 24 countries are signatories; the Philippines joined in April with a 4,000-acre economic security zone in Luzon, and the June statement widened the circle to 35.
The draft letter moves the debate one level up: not “what can you buy,” but “which system are you in.” Washington is no longer negotiating over individual purchases. It is negotiating over which standard, which supply line and which decade-long technology path a country commits to.
Kazakhstan: the first test case
The catalyst is concrete. Kazakhstan joined Pax Silica in June 2026—the first Central Asian member, prized for critical minerals that feed advanced semiconductors and AI data centers. One month later, on July 16, it became a founding member of China’s new World AI Cooperation Organization, announced by Xi Jinping at the Shanghai WAIC with 29 founding countries including Laos, Pakistan, Russia and Indonesia.
Kazakhstan is currently the only country holding membership in both systems. Washington reportedly sees it as the proof point for why the ambiguity cannot stand—the first concrete collision between two competing membership regimes.
Why the AI stack is the real battlefield
Underneath the diplomacy is a structural insight. Building national AI capability is no longer about one model or one purchase; it is a full stack: minerals, power, chips, servers, data centers, cloud platforms, developer tools, financing and talent. Whoever can assemble that stack affordably and export it wins influence that is very hard to dislodge—and this is where compute is becoming a financialized, supply-chain-grade asset rather than a commodity purchase.
Models can be swapped and hardware re-sourced, but a built data center, a cloud ecosystem, a developer community, a regulatory standard and a talent pipeline are path-dependent. That is why the competition now runs through the organization layer of AI: who controls the connective tissue between models, infrastructure and markets controls the outcome. China is building its own network in parallel—promising 5,000 AI training slots for developing countries over five years and cooperation centers with ASEAN, the Arab League, the African Union, CELAC, the SCO and BRICS.
What it means for companies and countries
For most of the Global South, straddling was rational: US chips, cloud and frontier models on one side; Chinese infrastructure, engineering and low-cost open-weight models on the other. The letter is designed to compress exactly that space, and similar pressure is likely to spread to Southeast Asia, the Middle East, Central Asia, Latin America and Africa.
For companies operating across these markets, the practical consequence is that compliance, standards and supply decisions are increasingly being made at a geopolitical level before a business ever sees a contract. Procurement is becoming a policy statement.
There is a countervailing force, though: Washington and Beijing still talk. Treasury Secretary Bessent said in May that the two sides are discussing AI guardrails to keep frontier models out of non-state hands, and President Trump plans to continue that thread during Xi Jinping’s visit in September. Competition and guardrail diplomacy are running on parallel tracks.
What to watch next
The letter is still a draft, and the State Department has neither confirmed nor denied it. Three signals matter from here: whether the letter is actually sent and to whom; how Kazakhstan and other dual-track countries respond; and whether China escalates the World AI Cooperation Organization into a rival standard-setting body.
If both sides keep pulling, the AI economy does not simply split into two technology stacks—it splits into two rulebooks. “Pick a side” may soon be a business decision, not just a diplomatic one.
