G7 finance ministers look to rein in tech giants at French meeting

There are concerns the growing powers of big tech companies, such as Facebook, are increasingly encroaching on areas belonging to governments, like issuing currency. (AP)
Updated 17 July 2019

G7 finance ministers look to rein in tech giants at French meeting

  • Concerns that the growing powers of big tech companies are increasingly encroaching on areas belonging to governments
  • ‘These digital giants are turning into private states — states over which citizens have no control and where democracy has no place’

CHANTILLY, France: G7 finance ministers will have the growing powers of big digital firms in their sights when they meet on Wednesday outside Paris despite divisions about how best to tax them.
France wants to use its presidency of the two-day meeting in the picturesque chateau town of Chantilly north of Paris to get broad support for ensuring minimum corporate taxation.
G7 governments are concerned that decades-old international tax rules have been pushed to the limit by the emergence of Facebook and Apple, which book profits in low-tax countries regardless of the source of the underlying income.
The issue has become more vexed than ever in recent days as Paris defied US President Donald Trump last week by passing a tax on big digital firms’ revenues in France despite a threat from him to launch a probe that could lead to trade tariffs.
“France is a sovereign nation and will continue of course to decide as a sovereign nation on all taxation issues,” French Finance Minister Bruno Le Maire said at a conference at the French central bank on the eve of the G7 meeting.
“So, let’s work during the G7 ... on that key question of digital taxation because this is for us the best way to fix this issue,” Le Maire added.
Their bilateral dispute aside, France and the United States are in favor of rules ensuring minimum taxation as part of an effort among 139 countries to overhaul international tax rules.
Although a G7 agreement would set the tone for the broader push, an agreement among all of the G7 ministers on a minimum rate or range of rates is likely to prove elusive as Britain and Canada have reservations, a French Finance Ministry source said on Friday.
Common ground should be found more easily among ministers and central bankers present at the meeting on the issue of digital currencies and coins.
Facebook’s recent announcement of plans to launch a digital coin has met with a chorus from regulators, central bankers and governments insisting it must respect anti-money-laundering rules and ensure the security of transactions and user data.
But there are also deeper concerns that the growing powers of big tech companies increasingly encroach on areas belonging to governments, like issuing currency.
“These digital giants are turning into private states – states over which citizens have no control and where democracy has no place,” Le Maire said.
“We cannot let companies, which are serving private interests, gather all the attributes of sovereign states. We must act,” he added.
Off the official agenda, ministers are also due to consult on possible successors to replace Christine Lagarde at the head of the International Monetary Fund.
US Secretary of the Treasury Steven Mnuchin and some European ministers are due to meet with Bank of England Governor Mark Carney, who has been mooted as a possible candidate for the IMF job.


Japan lower house passes US trade deal but auto tariffs still in limbo

Updated 19 November 2019

Japan lower house passes US trade deal but auto tariffs still in limbo

  • There is uncertainty over how much progress Japan can make in negotiating the elimination of US tariffs on its cars and car parts
  • Japan has estimated the initial deal will boost its economy by about 0.8 percent over the next 10-20 years

TOKYO: Japan’s lower house of parliament approved on Tuesday a limited trade deal Prime Minister Shinzo Abe agreed with the United States, clearing the way for tariff cuts next year on items including US farm goods and Japanese machine tools.
But there is uncertainty over how much progress Japan can make in negotiating the elimination of US tariffs on its cars and car parts, casting doubt on Abe’s assurances the deal he signed with US President Donald Trump was “win-win.”
Japan and the United States last month formally signed the limited trade deal to cut tariffs on US farm goods, Japanese machine tools and other products while staving off the threat of higher US car duties.
The government’s proposal to ratify the trade deal will next be brought to the upper house for a vote but its passage in the powerful lower house increases the chances it will come into force in January.
The deal will give Trump a success he can trumpet to voters but Abe has said it will bring as much benefit to Japan as to the United States.
Japan has estimated the initial deal will boost its economy by about 0.8 percent over the next 10-20 years, when the benefits fully kick in. It also estimated ¥212.8 billion of overall tariffs on Japan’s exports to the United States will be reduced.
But the figures were based on the assumption the United States would eliminate its tariffs on Japanese autos and auto parts — a major sticking point.
Without those tariff cuts, the reduction in overall US tariffs on Japanese goods would be a little over 10 percent of the government’s projection, according to an estimate by Japan’s Asahi newspaper and Mitsubishi UFJ Research and Consulting.
After the deal is ratified, Japan and the United States have four months to consult on further talks, and Trump has said he wants more trade talks with Japan after the initial deal.
But Japanese government sources familiar with the talks say the momentum to negotiate a deeper deal appears to have waned for now with Washington preoccupied with talks with Beijing.
“It’s unclear whether Washington seriously wants to continue trade talks,” one of the sources said.
“The question is how much time the United States can allocate for talks with Japan, even if we start negotiations. There’s limited time to conclude talks before the presidential elections.”
Japan and the United States already appear to have different interpretations of what was agreed on car tariffs.
Japan has said it has received US assurance that it would scrap tariffs on Japanese cars and car parts, and that the only remaining issue was the timing.
But Washington has not confirmed that.
US Trade Representative Robert Lighthizer has said cars were not included in the agreement, and that it was only Japan’s ambition to discuss car tariffs in the future.
A US document only said customs duties on autos and auto parts “will be subject to further negotiations with respect to the elimination of customs duties.”
“The deal was left vague on the issue of tariff cuts on Japanese auto and auto parts. Otherwise, we couldn’t have reached the agreement,” another source said.
There is also uncertainty on whether Trump will drop threats to impose steep tariffs on Japanese car imports under “Section 232” that gives him authority to do so on national security grounds.
Abe said he had got an assurance from Trump that he would not do that, though analysts say the president could always change his mind, or at least keep Japan guessing.
Opposition parties have attacked Abe for a deal they say is unfair. Critics say Trump could drag his feet on further negotiations unless he is sure he can win more concessions.
“There’s a chance Trump will put pressure on Japan on trade to appeal to his voters,” said Junichi Sugawara, senior research officer at Mizuho Research Institute. “There’s a possibility he could renew his threat over auto tariffs.”