CHANTILLY, France -- President Donald Trump's administration is objecting to France's plan to tax Facebook, Google and other U.S. tech giants, a rift that's overshadowing talks by seven longtime allies this week on issues such as digital currencies and trade.
As finance ministers from the Group of Seven gathered Wednesday for a two-day meeting at a chateau in Chantilly, near Paris, U.S. Treasury Secretary Steve Mnuchin planned to take a tough line against France.
Mnuchin planned to raise the administration's objections to France's proposed 3% tax on revenue of large technology companies with French Finance Minister Bruno Le Maire, according to a senior U.S. Treasury Department official.
The tax, which the French Parliament approved days ago and could be signed into law within weeks, has already provoked a rebuke from the White House, which said it could lead to U.S. tariffs on French imports.
The rift risks feeding into broader disagreements, including on trade, after the U.S. imposed tariffs on some European Union goods last year, drawing retaliation from Europe.
"We are very disappointed that France has passed a unilateral service tax," said the Treasury Department official. The official spoke on condition of anonymity as the meeting had not taken place at the time.
French officials have indicated that their national digital tax -- which is the first of its kind and was created without any EU-wide agreement on the issue -- is intended to spur an international agreement during the G-7 meeting. They said the tax will be withdrawn if a global deal is forged, a gamble that could provide negotiating leverage with the U.S.
"We [are] ... attempting to negotiate a new global taxation on digital activities," Le Maire told reporters outside the royal stables at Chantilly, a town famed for horse racing.
This isn't the first instance of discord at G-7 meetings. In June 2018, Trump roiled the G-7 summit in Canada by first agreeing to a group statement on trade only to withdraw from it while complaining that he had been blindsided by Canadian Prime Minister Justin Trudeau's criticism of Trump's tariff threats. In a set of tweets, Trump threw those G-7 talks into disarray.
Officials seem to be prepared for the potential for tough divergences at this week's G-7 meeting, with Mnuchin saying it could end with just a report of the discussion -- rather than the traditional final statement signed by all.
The regulation of technology companies is emerging as a major issue around the world. The U.S. is following the EU's lead in taking a closer look at whether some of them are too big for the good of the wider economy. The topic was underscored Wednesday when EU regulators opened a formal antitrust investigation into Amazon, similar to inquiries against the likes of Google and Microsoft.
Beyond the U.S. and France, which holds this year's rotating leadership role, the G-7 includes Germany, Britain, Italy, Canada, Japan and representatives of the EU. The Chantilly meeting serves to create the framework for a summit of the G-7 heads of state and government in August in the French Atlantic resort of Biarritz.
The talks come against a backdrop of slowing global growth and Trump's America-first trade policies, which have led to a trade war with China on top of the tensions with Europe.
Where the U.S. may find more common ground with its G-7 partners will be in its mistrust of cryptocurrencies like Facebook's recently announced Libra, a position shared by the French.
France asked European Central Bank official Benoit Coeure to prepare a report for this fall looking into the risks of cryptocurrencies. Coeure is to present a preliminary version of the report to ministers and central bankers in Chantilly.
Le Maire wants to lead on this issue, singling out Libra for scrutiny.
"The red line for us is that Libra cannot and should not transform itself into sovereign currency," Le Maire warned reporters ahead of the meeting.
"We won't accept that multinationals emerge to be private states -- that's to say multinationals that would have the power of a state but not the obligations linked to the sovereign states, notably the control by citizens," he added.
Le Maire said that, unchecked, Libra could exploit Facebook's vast trove of data and lead to an increased risk of embezzlement, the financing of terrorism and the destabilizing of sovereign money.
"Libra will be pegged to a basket of currencies including the dollar and euros. At a given moment, what if Libra decides to rebalance itself in favor of the euro, in favor of the dollar?" he asked.
"It will have direct repercussions on the currency's stability."
The U.S. Congress has held hearings on Libra this week, and lawmakers demanded to know why Facebook, which has market power and a track record of scandals, should be trusted with such a far-reaching project.
Information for this article was contributed by David McHugh and Martin Crutsinger of The Associated Press.
Business on 07/18/2019