EU To Set Up Global Trade Alternative, Challenging US Dominance (Worthy News In-Depth)

By Stefan J. Bos, Worthy News Europe Bureau Chief

GENEVA/BUDAPEST (Worthy News) – Preparations are underway to establish a European Union-led alternative to the World Trade Organization (WTO) as part of a new global marketplace that would challenge America’s economic clout.

The EU’s executive, European Commission President Ursula von der Leyen and German Chancellor Friedrich Merz, say the WTO, founded in 1995, is broken.

“You all know that the WTO doesn’t work anymore,” Merz told the media, adding that a “new kind of trade organization” could gradually replace “what we no longer have with the WTO.”

The German chancellor referred to the WTO’s dispute resolution mechanism’s “near-total breakdown.”

Yet questions remain about how to replace the world’s largest international economic organization, which has 166 members representing over 98% of world trade and global Gross Domestic Product (GDP).

During his later years in office, observers noted that former U.S. President Barack Obama was the first to block appointments to the WTO’s Appellate Body — its top court for trade disputes.

That blockade continued under every U.S. administration since, regardless of party affiliation, as successive presidents opposed WTO rulings that they argued undermined U.S. national interests.

TRADE DISPUTES

As a result, trade disputes can no longer be conclusively resolved once a party appeals.

Currently, unresolved cases include disputes between the EU and Indonesia over nickel ore exports, rulings on subsidies for aircraft manufacturers Boeing and Airbus, and anti-dumping cases against China.

Commission President Von der Leyen said the EU could opt for closer cooperation with members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a regional trade pact of 11 Pacific Rim countries and Britain.

She introduced the initiative as a potential first step toward reshaping the global trade order.

“I said that we can think about this as the beginning of redesigning the WTO—of course, understanding what should be reformed positively within it,” Von der Leyen told reporters after the summit.

She stressed the importance of learning from the WTO’s shortcomings and showing the world that “free trade based on rules” remains achievable with a broad group of willing partners.

“This is a project we should truly engage in. CPTPP and the European Union—that’s my team,” she said, adding that the EU must take the lead in managing this initiative.

AMERICANS LEFT

Asked whether the United States should be involved, von der Leyen replied: “As far as I understand, the Americans left the CPTPP at a certain point.”

CPTPP includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Britain also joined, becoming the first European country in the bloc.

Yet, questions remain about whether Europe can create a new WTO without U.S. involvement. Jürgen Matthes, an international trade policy expert at the Cologne, Germany-based German Economic Institute (IW), said a formal EU application to join the CPTPP would be a strategically important move. “It would send a clear signal to the U.S. that its protectionism is isolating it, while the rest of the world continues to liberalize trade,” he told Deutsche Welle (DW), Germany’s international broadcaster

Matthes also said this would create a “remarkably large trans-regional trade agreement,” involving major economies, with the EU as the largest bloc.” He added that, “It would cover nearly all continents. And maybe some African countries could be brought on board as well.”

Such a club, however, would initially exclude Communist-run China, which Matthes argued is not known for playing by fair competition rules.

“The goal is to form a strategic trade alliance that addresses today’s pressing issues in global trade — not only US protectionism, but also the massive market distortions caused by China’s subsidies, which current WTO rules don’t effectively address,” Matthes added.

However, the new planned grouping was expected to challenge U.S. President Trump’s “America First” policy.

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