And what’s wrong with distillation? In its own right, and especially considering how those models were trained in the first place - in what world is it right that US firms are free to use copyrighted / otherwise non-public works however they like, while others are ostensibly in some moral wrong for just using the product (completely normally) and then using the outputs in a way that threatens US firms.

They can simply host the models somewhere like Singapore and then sell the service from there. I mean, my Xiaomi account gets routed through Singapore.