Von der Leyen proposes setting up EU-led alternative to WTO

Good morning. Last night as EU leaders mulled how to react to Donald Trump’s trade war, Ursula von der Leyen floated the idea of founding a rival to the World Trade Organization: my colleagues explain her thinking. And our Budapest correspondent reports on the plans by EU politicians to defy a ban on the Hungarian capital’s Pride march tomorrow.

Have a great weekend.

Summit wrap

As Donald Trump takes a wrecking ball to the international trade system, the EU is proposing to set up its own dispute settlement body in order to salvage free commerce, write Laura Dubois and Andy Bounds.

Context: EU leaders met in Brussels yesterday to discuss how to respond to US President Donald Trump’s tariffs, with a looming deadline on July 9. But they also touched upon other measures to preserve the international trade system.

European Commission president von der Leyen proposed that Brussels team up with the 11 other global economies of the CPTPP to form an institution to replace the WTO, which is struggling to contain global tensions.

“Asian countries want to have a structured co-operation with the EU, and the EU want the same,” von der Leyen said. “We can think about this as a beginning of a redesigning the WTO . . . to show to the world that free trade with a large number of countries is possible on a rules-based foundation.”

Von der Leyen declined to answer when asked if the US would be invited to join.

German Chancellor Friedrich Merz welcomed the proposal, and said he had broached a similar idea with French President Emmanuel Macron and UK Prime Minister Sir Keir Starmer.

“The WTO does not work anymore”, said Merz. “Can’t we gradually establish something with our trading partners around the world that institutionally replaces what we actually already envisioned with the WTO, namely a dispute settlement mechanism through an institution like the one the WTO was supposed to be?”

The US has been blocking the WTO’s binding dispute resolution system, although 29 members, including the EU and China, have created a voluntary alternative.

During the meeting, the commission also presented an outline of a potential trade agreement sent by the US. Most EU countries are in favour of Brussels negotiating a quick deal, but there are divisions over what to do if the US insists on 10 per cent blanket tariffs.

“We are preparing for the possibility that no satisfactory agreement is within reach,” von der Leyen said. “All options remain on the table.”

EU leaders also agreed to roll over the bloc’s sanctions on Russia in July, but its newest sanctions package still hangs in the balance. Slovakia will block the package unless it receives concessions from Brussels in its salvo against the last vestiges of Russian gas, Prime Minister Robert Fico said.

Chart du jour: Erdoğanomics

Turkey’s economic doldrums have drained President Recep Tayyip Erdoğan’s popular support, jeopardising his plans to remain in power and his geopolitical aspirations for the country.

On the march

The mayor of Budapest and dozens of EU politicians will defy Hungary’s ban of its capital’s yearly LGBT+ Pride march tomorrow, writes Marton Dunai.

Context: Hungary passed a law earlier this year enabling police to ban public gatherings deemed threatening to children’s development. The authorities used these powers to ban the Pride march in Budapest, despite criticism that the law was being used to suppress the freedoms of speech and assembly.

Von der Leyen on Wednesday called on Prime Minister Viktor Orbán “to allow the Budapest Pride to go ahead without fear of any criminal or administrative sanctions”.

But Orbán, arriving in Brussels yesterday, said that “children’s rights supersede all other liberties” and called on the commission “to refrain from interfering in the law enforcement affairs of member states”.

Budapest mayor Gergely Karácsony has vowed to allow the march, and critics and allies alike are now watching whether Orbán will actually stop it.

Hungarian justice minister Bence Tuzson sent a letter to embassies and the commission on Wednesday, telling them that “those who take part in an event prohibited by the authorities commit an infraction”.

Dozens of EU lawmakers will attend the march, including the chiefs of the Liberal, Green and Socialist groups in the European parliament.

“Our presence at Budapest Pride is an act of resistance, a duty of solidarity,” said Valérie Hayer, the chief of the liberal Renew group.

EU equality commissioner Hadja Lahbib will also be in Budapest and meet Karácsony and civil society groups, though it’s unclear if she will attend the march. “In view of the fluidity of the situation, she will assess her presence at the Pride on the ground,” a spokesperson said.

What to watch today

1. German Chancellor Friedrich Merz hosts his Austrian counterpart Christian Stocker in Berlin.

2. European parliament president Roberta Metsola meets Italian President Sergio Mattarella in Rome.

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