Chinese EVs to Face Custom Duties of up to 45%
Chinese EVs to Face Custom Duties of up to 45%
But also — Deforestation, Parliamentary hearings, Meta, Hungary, Football, EU-UK relations
Hello! Today is October 8, 2024, and here is the EU news you need to start the week. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and LinkedIn.
The Briefing
The European Union will impose customs duties of up to 45% on electric vehicles (EVs) manufactured in China. Several EU governments, including Germany and Hungary, have publicly expressed their reservations about the Commission's proposal.
MADE IN CHINA • Over the last twenty years, Chinese EV manufacturers — such as SAIC, Geely and BYD — have made inroads into European markets. From 1% of sales in 2010, Chinese manufacturers now account for 11% of the market. And there is more to it: 20% of electric vehicles sold in Europe are made in China — that includes Tesla, Dacia and BMW production plants.
The Chinese government has supported the development of electric vehicles with direct subsidies, tax credits, and loans at preferential rates. BYD received €2.1 billion in direct subsidies from the Chinese government in 2022.
In the face of sluggish domestic growth, Chinese carmakers have turned to exports as a way of selling off their production, even if it means slashing prices. Chinese electric vehicles are currently selling in Europe for around 20% less than the same models in China.
MADE IN BRUSSELS • On 4 October 2023, the European Commission launched an anti-subsidy investigation into imports of battery electric vehicles from China.
After consultations with China and targeted companies, the Commission has announced the entry into force of provisional customs duties on 4 July 2024. Definitive measures must be adopted no less than 4 months after the imposition of provisional duties, i.e. in this case by 31 October at the latest.
Trade is an exclusive competence of the Commission. Member States can only oppose the introduction of customs duties proposed by the Commission. Qualified majority voting rules apply, meaning that at least 55% of the Member States (15 in practice) representing 65% of the European population must oppose the duties for them to be dropped (more details on qualified majority voting here).
TARIFFS • In anti-subsidy investigations, tariffs are set according to the estimated level of subsidies and the level of cooperation of the companies during the investigation.
The tariffs range from 7.8% for Tesla to 17% for BYD and 35.3% for SAIC. They affect Chinese carmakers but also those who manufacture electric vehicles in China and subsequently export them to the EU — such as Tesla, BMW and Volkswagen.
The adopted tariffs will apply for 5 years on top of the standard 10% tariff on all car imports into the EU. The tariffs in force in the United States and Canada for imports of electric vehicles produced in China reach 100%.
EUROPEAN UNION • This is most high-profile tariffs-related decision since the introduction of customs duties against imports of Chinese photovoltaic panels in 2013.
The Commission wants to avoid the fiasco that occurred then: many thought the introduction of customs duties came too late, giving Chinese producers enough time to dominate this segment in Europe.
Five European governments voted against tariffs, including Germany and Hungary; twelve governments abstained, including Spain; and ten governments supported the imposition of tariffs, including France and Italy.
Those opposed to the measures fear that they will be costly for major Western automotive groups (BMW, Volkswagen, Tesla) that produce electric vehicles in China.
The prospect of a trade war is a concern for many European players. China has launched an anti-subsidy investigation into European dairy products, in addition to pork and Cognac-type spirits.
During a visit to China in September, Spanish Prime Minister Pedro Sanchez called on the EU to "review" its position. Spain is the main exporter of pork products to China.
In the case of EVs or solar panels, tariffs increase the price of products that play an important role in the EU's ambitious carbon neutrality objective. The EU must strike a delicate balance between the resilience of the European automotive sector in the face of Chinese competition, and the financing of the ecological transition — which can benefit from cheap Chinese products.
In Case You Missed It
DEFORESTATION • The European Commission has yielded to the pressure from its trading partners. On October 2, it proposed that the application of the European Deforestation Regulation (EUDR) — which prohibits the sale of products that have contributed to deforestation on the European market — be postponed by one year, to give companies more time to comply with the rules.
Initially, the EUDR was due to apply from 30 December 2024 (30 June 2024 for SMEs), for the following products: livestock, cocoa, coffee, palm oil, rubber, soya and timber.
The Commission's proposal to delay the application of the regulation must now be adopted by the Council and the European Parliament. If you missed last week's briefing on the subject, it's here.
HEARINGS • The European Parliament has set the timetable for the hearings of Commissioners-designate. From 4 to 12 November, each of the 26 candidates will appear before the relevant parliamentary committee(s).
Committees can issue an unfavourable opinion on a candidate. In the run-up to the hearings, the European Parliament's Committee on Legal Affairs (JURI) will also be scrutinising candidates' declarations of interest.
Once the hearings are over, the entire college of Commissioners will be put to a simple majority vote in the plenary session of the European Parliament. If everything goes smoothly, the Commission should take office at the beginning of the following month, i.e. on 1 December 2024.
Some of the hearings will likely be tougher than others, although there may be occasional surprises. The appointment of Italy’s Raffaele Fitto as Commission Executive Vice-President and the reappointment of Hungary’s Oliver Várhelyi have increased tensions within the centrist majority — the former because he is part of the Conservatives and Reformists group (ECR), the latter because of his close ties with Viktor Orbán and has repeatedly overtly put Hungarian interests before EU ones.
In 2019, the Romanian and Hungarian candidates did not pass the first stage of declarations of interest, while the French candidate Sylvie Goulard received an unfavourable opinion following her hearing — she withdrew in favour of Thierry Breton.
PERSONAL DATA • Following a ruling by the Court of Justice of the European Union (CJEU), Meta will have to drastically limit the personal data it uses for targeted advertising.
Max Schrems, an Austrian activist campaigning for the protection of private data, had challenged Meta's use of personal information disclosed outside the Facebook platform for targeted advertising purposes before Austrian courts. Max Schrems had publicly revealed his homosexuality at a round table and had subsequently been the target of advertising specifically aimed at homosexuals (invitations to events, etc).
The CJEU has ruled that a social network cannot use all personal data obtained for targeted advertising — particularly outside the social network, via cookies, for example — without time limitation and without distinction as to the type of data.
The fact that Max Schrems publicly revealed his sexual orientation does not mean he authorised the processing of other personal data related to him. This follows from the data minimisation principle laid down in the General Data Protection Regulation (GDPR).
Max Schrems is a marathon runner in European litigation. In the Schrems and Schrems II rulings, he was behind the CJEU's invalidation of the Safe Harbor and Privacy Shield agreements on the transfer of personal data from the EU to the United States.
HUNGARY • The Commission is suing Hungary before the CJEU. The Commission considers that the Hungarian government's responses to its finding that the country has been breaching EU law is insufficient. The Commission launched an infringement procedure — whereby it asks a Member State to comply with European Union law — against Hungary in February 2024.
The infringement proceedings relate to the Hungarian Defence of Sovereignty Law which was adopted at the end of 2023. This law creates a new Office responsible for investigating the activities, in Hungary, of organisations and individuals that receive foreign funding and could compromise Hungary's sovereignty.
In practice, the Office is used to monitor and prosecute political opponents and has access to secret service resources and data. Its reports cannot be challenged in court.
FOOTBALL • In a groundbreaking ruling for football clubs, the CJEU has ruled that certain FIFA rules on international transfers of professional footballers hinder the free movement of players and restrict competition between clubs.
FIFA is therefore going to have to modify its system for transferring players — in particular the rule whereby players who break their contract without "just cause" are obliged to pay compensation to the club they are leaving. This ruling could lead to a reduction in transfer fees and increase players' bargaining power.
Football has already given the CJEU the opportunity to don its gloves as goalkeeper on several occasions, from the Bosman ruling on freedom of establishment in 1995 to the Superleague ruling in 2023.
STARMER • At the end of their meeting on 2 October, Starmer and von der Leyen announced that the EU and the UK will hold regular bilateral summits from 2025 onwards, and each declared their desire to increase cooperation on subjects of common interest, from energy to climate change and immigration.
While Starmer has made a "reset" of EU-UK relations a campaign theme, the avenues for negotiation between Brussels and London remain unclear, given the red lines that have been drawn by each side. Brussels wants to advance its position on fishing quotas and student mobility. The Commission, like the Member States, wants to make sure that London does not try to obtain concessions in terms of access to the European market — no cherry picking.
What We’ve Been Reading
Michel Barnier has announced that he intends to reintroduce border controls on the grounds of "exceptional circumstances", as Germany has been doing since mid-September, the FT analyses.
In a joint letter, Italy, France and Germany call on the Commission to ease banking regulations in order to preserve the competitiveness of the sector in Europe, particularly in relation to the United States. To find out more, read this Bloomberg article.
Three good reads on the potential consequences of the US election for Europe: Giuseppe Spatafora and Christian Dietrich of the EUISS focus on its impact on EU foreign policy; Aslak Berg and Zach Meyers of the CER look at its aftermath for the European economy, while Ian Bond and Luigi Scazzieri, also at the CER, zoom in on the prospect of a Kamala Harris presidency.
This edition was prepared by Nathan Münch, Luna Ricci, Antoine Langrée, Maxence de La Rochère, Augustin Bourleaud, and Hana Rajabally. See you next week!