Week Ahead (15 July)

Monday, 15 July – Deadline for member states to submit their views on the Commission’s import duties on Chinese EVs 

On 4 July, the Commission’s provisional tariffs of up to 38.1% on imported Chinese electric vehicles (EVs) entered into force, following the launch of an EU anti-subsidy investigation aiming to address potential unfair subsidies received by Chinese EV manufacturers. Negotiations between EU and Chinese officials are underway with the aim of finding an agreement which can see the recently-introduced tariffs  reversed. By the end of the day, EU member states will have to provide their input to the Commission’s newly imposed import duties on Chinese EVs. This marks the first vote in this highly politicised investigation. Voting will take place under a written procedure requiring a simple majority to pass. However, its outcome will not be binding and will have no direct impact on how the Commission decides to proceed although it will send a strong political signal. 

The bloc of countries opposing tariffs is led by Germany, along with Sweden and Hungary, but they need the support of 55% of the member states (currently 15 out of 27) representing at least 65% of the total EU population. On the other hand, France, Spain, and Italy are poised to vote in favour of the tariffs. However, many member states are still undecided, wary of potential retaliation from Beijing, which has already targeted or considered targeting various European exports (pork, brandy, dairy products, and potentially luxury cars). Despite its non-binding nature, the outcome of this vote may offer an early indication of the remaining member states’ positions ahead of the more crucial vote in late October, which will determine whether to extend the duties for up to five years. 

Tuesday 16 July – Friday 19 July – First plenary session of the new European Parliament to be held, including vote on von der Leyen’s bid for a second term 

This week, the first plenary session of the new European Parliament will take place in Strasbourg. Commencing tomorrow, it will set the foundation of the new Parliament. MEPs will elect the President of the European Parliament, with Roberta Metsola poised to remain in her post, vice-presidents and quaestors. Furthermore, they will decide on the composition and number of MEPs in each parliamentary committee. The vote for the chairs and vice-chairs of the committees is scheduled for 22 July. 

A notable recent development in the new Parliament is the formation of the far-right group, Patriots for Europe. This group has successfully surpassed the required threshold, featuring former members of the Identity and Democracy (ID) group and the Hungarian Fidesz party led by Viktor Orbán. They have become the third-largest group in the European Parliament, with 84 MEPs, following the addition of 30 MEPs from the French National Rally (RN). This has allowed them to surpass the European Conservatives and Reformists (ECR) led by Giorgia Meloni and the Renew Europe group led by Emmanuel Macron. Nevertheless, the pro-EU centrist majority, comprising the European People's Party (EPP), the Progressive Alliance of Socialists and Democrats (S&D), and Renew Europe, will still be able to dictate the policy agenda albeit with lower numbers than the previous mandate. 

On Thursday, MEPs will vote on Ursula von der Leyen's future as President of the European Commission. Theoretically, von der Leyen is backed by the three pro-EU centrist political groups which hold 401 out of 720 seats, a comfortable majority. However, early informal talks held in Brussels between the three groups indicated that 350 out of the 401 MEPs from these three groups were willing to support her. 51 MEPs, mainly from the Socialist camp and French Conservatives, did not commit their support, which means that according to this projection, she still falls 11 votes short of a majority of 361. According to German media reports, the European Commission’s President was originally planning to attend NATO’s 75th anniversary Summit in Washington D.C. but had to change her plans to focus on securing her re-election. Her priority is to convince the dissenters within the three major political groups in order to avoid having to turn to a fourth group, either the Greens or Meloni’s ECR. 

Last week, Italy’s Europe Minister Raffaele Fitto, who is tipped to be nominated as the next Italian Commissioner, suggested Meloni's Fratelli d’Italia party could support von der Leyen if she accommodates their policy priorities, especially on migration, agriculture, and the Green Deal. Meloni is expected to reveal her stance tomorrow, after meeting with von der Leyen who will present her programme for the next mandate. On the other hand, a draft document outlining Renew’s priorities for the next mandate was circulated last week, warning von der Leyen against any backtracking from Green Deal. In other words, backing from the ECR might cause the Social Democrats or Renew Europe to withdraw their support, rendering Meloni’s offer counterproductive. 

Therefore, the safest route for von der Leyen would be to secure support from the Greens, who, despite heavy losses in the EU elections, hold 53 seats, enough to offset any losses from EPP, S&D and Renew Europe. Last Wednesday, von der Leyen met with the Green group, where Greens co-leader Bas Eickhout and others saw a willingness to negotiate and compromise. Since then, it has emerged that its MEPs are prepared to support her for a second term, in a pragmatic move aiming to prevent conservative Meloni-led ECR from becoming the kingmaker. Still, the Greens would expect assurances that there will be no backtracking on the Commission's climate targets, aiming to make the European economy climate-neutral by 2050. However, certain key Green Deal files are facing increased opposition from parts of her own EPP group that could attempt to reverse the recently-voted ban on conventional engines in favour of electric vehicles from 2035. 

It is noteworthy that the secret ballot adds an extra layer of unpredictability to the final outcome of this week’s vote. However, the likeliest scenario remains that von der Leyen stays in charge of the Commission. Even though the ECR group will not succeed in its quest to become the kingmaker, it will still hold more influence in the upcoming mandate by forming alliances with the EPP and potentially certain parts of Renew Europe on an ad-hoc basis. 

Wednesday 17 July – EU General Court to rule on ByteDance’s DMA legal challenge 

On Wednesday, the General Court, the EU’s lower court, is scheduled to rule on  ByteDance’s legal challenge (Case T-1077/23) against TikTok’s ‘’gatekeeper’’ designation under the Digital Markets Act (DMA). 

Last September, the European Commission confirmed its initial list of six tech companies qualifying as ‘’gatekeepers’’ under the DMA namely Apple, Alphabet (Google), Amazon, Meta, ByteDance (TikTok), and Microsoft. Companies with an annual turnover exceeding €7.5 billion, a market capitalisation of over €75 billion, and active monthly users in the EU totalling 45 million fall under these rules. The Commission has the power to investigate the actions of gatekeepers and fine them up to 10% of their global turnover from the preceding year if they are found to be in breach of the DMA.  

After its inclusion in the Commission’s initial list, the Chinese online video platform challenged its designation at the General Court claiming that TikTok’s inclusion on the list could undermine the ‘’DMA's own stated goal by protecting actual gatekeepers from newer competitors like TikTok’’ and applied for interim measures. However, in February the Court ruled against the suspension of TikTok’s designation, arguing that it could not prove that it needed it urgently to prevent “serious and irreparable damage”. This meant that TikTok would have to at least temporarily comply with the DMA rules after the new rules went into effect on 7 March.  Nevertheless, ByteDance pledged to continue its legal challenge against TikTok’s gatekeeper designation. In the hearing before the Court on 29 April, the company argued that the Commission failed to properly assess its objections to TikTok’s gatekeeper status and should have conducted market investigations to appraise them.  

Thursday, 18 July – ECB Governing Council to meet; rates to remain unchanged 

On Thursday, the ECB Governing Council (GC) will meet to discuss monetary policy. At the June, the GC decided on its first rate cut in five years, from an all-time high of 4% to 3.75%. Even though rates are widely expected to remain unchanged this week, investors are likely to pore over ECB’s press release for further indications of monetary policy easing in subsequent meetings. Flash inflation data released earlier in July will likely reinvigorate the doves as it eased to 2.5% in June, meeting market expectations and following a temporary uptick in May where it rose to 2.6% from 2.4% the previous month. Excluding food and energy, core inflation decreased from 2.9% year-on-year in May to 2.8% in June, also in line with expectations. 

Nevertheless, according to Dutch central bank chief Klaas Knot, there is no case for a rate cut this month, but the September meeting will be "open" to discussions on further easing. Speaking to the German media last Monday, Knot also expressed confidence in the ECB's progress towards reducing inflation, with the 2% target anticipated to be reached by late 2025. The following day, Fabio Panetta, a dove, supported the idea of continued interest rate cuts, arguing that concerns about wage growth driving inflation were "not warranted." Panetta emphasised that a temporary wage increase following an inflation shock is natural and that the overall inflation data justifies further reductions in borrowing costs this year, even though service inflation remained higher at 4.1% in June.  

Earlier this month, ECB President Christine Lagarde, speaking at the ECB’s annual symposium in Sintra, indicated that the bank does not need to wait for service inflation to fall to 2%. However, she also repeated that the ECB needs more time to ensure inflation is firmly on track to reach the 2% target, suggesting that immediate rate cuts are not urgent. According to the latest Reuters survey (4-11 July), all 85 economists predicted that the ECB will keep interest rates unchanged in the July 18 meeting. Of those, 69 out of 85 expected the ECB to cut the deposit rate twice more this year, in September and December, despite record-low unemployment and elevated wage growth. 

Thursday 18 July – Leading European cognac producers to attend hearing on China’s anti-dumping probe in Beijing 

On 5 January, China announced that it would investigate whether European producers of liquors are dumping their products on its market.  This is targeted primarily at France’s brandy sector – per the Chinese Ministry of Commerce, this will target “spirits made from distilled wine originating in the EU”. Via its well-known companies including Remy Martin and Hennessy, France accounts for 99% of all brandy imports into China and the market is estimated to be worth around €1.4 billion to these groups. Thus, the move was largely seen as Beijing’s first retaliatory response to the EU’s anti-dumping probe focusing on imports of Battery Electric Vehicles (BEVs) from China, which was understood to have been largely by French President Macron.   The Chinese investigation is expected to conclude no later than January 2025 – only two months after the EU’s final decision on the EV tariffs.  

Since announcing the probe into Chinese EVs, the EU has further stepped up its crackdown against perceived unfair competition from China. It has launched probes into wind turbines and solar panels under the recently passed Foreign Subsidies Regulation and a probe into Chinese medical device procurement under its International Procurement Instrument (IPI). As things currently stand, a retaliation with tariffs on European liquors at that stage should be expected. 

A hearing will take place in Beijing on Thursday to discuss the aforementioned Chinese investigation into French brandy producers. The Chinese commerce ministry had previously stated that the hearing was requested by Remy Martin, Martell, Societe Jas Hennessy & Co, and other stakeholders.  Beijing is also understood to be preparing further countermeasures targeting European pork and dairy products. 

Friday 19 July – EU and US to launch review of their transatlantic data flow framework 

On Friday, European Justice Commissioner Didier Reynders travels to Washington D.C. to launch a review of the EU-US data flows agreement with his American counterparts. Last July, the European Commission approved the new transatlantic data framework, by adopting its adequacy decision under the GDPR. By approving the new data transfers pact, the Commission formally recognised the US as a country with adequate protection for Europeans’ personal data, bringing an end to three years of legal uncertainty for tech firms such as Google and Meta. The approval of the new data transfer pact has been a significant development, clearing the way for unrestricted transatlantic data exchanges that had been disrupted after the Court of Justice of the EU (CJEU) invalidated the previous data transfer mechanism known as ‘’Privacy Shield’’ in 2020. The tech industry warmly welcomed the Commission’s approval of the newly announced EU-US data transfer pact, which has brought relief to many industry giants caught in a legal quagmire, providing them with a much-needed resolution to the legal uncertainty surrounding data transfers. 

Despite the approval of the new pact, there are still concerns about its potential effectiveness and legality. Privacy activist Max Schrems, who played a pivotal role in the downfall of the previous data transfer agreements, has previously announced plans to challenge the deal in court this year. Overall, persisting concerns from various stakeholders will keep the deal subject to potential legal challenges and a high level of scrutiny. 

Part of the agreement is that the Commission will review the EU-US Data Privacy Framework within a year and conduct subsequent reviews every four years to evaluate the effectiveness of US privacy safeguards for Europeans. Following this week’s review, the Commission, along with EU member states and data protection authorities, will determine whether ongoing evaluations should be conducted regularly or if the next review can be postponed for another four years.