Such a plan would “show to the world that free trade with a large number of countries is possible on a rules-based foundation,” von der Leyen said after an EU summit on Thursday night. “This is a project where I think we should really engage on, because CPTPP and the European Union is mighty.”

Making the pledge

But how could forming such a coalition of the willing work?

One idea would be to make an up-front pledge to uphold the established rules of multilateral trade, veteran trade negotiators Tim Groser, Steve Verheul and John Clarke said in exclusive commentary shared with POLITICO.

Groser, a former New Zealand trade minister; Verheul, previously Canada’s chief trade negotiator; and Clarke, until recently a senior EU trade negotiator, said the 39 EU and CPTPP countries should, in a first step, commit to a “Standstill Agreement” to keep their markets open to each other.

“What it would do is send a massive signal to Washington that a very substantial part of the global economy, including nearly all the traditionally closest partners of the United States, remains committed to the rules-based system,” they said.

The U.S. had the chance to join the CPTPP, previously known as the Trans-Pacific Partnership, during the Barack Obama administration. But Trump withdrew in 2017, after taking office for the first time, before the pact could be finalized.

In times of urgency, national promotional bank institutions (NPBIs) are the optimal solution to complement the role of the European Investment Bank (EIB) and other alternatives. NPBIs are best suited to set up European or regional financial vehicles with strong control from member states and the best access to capital markets.

Europe is on the path to implementing the Polish presidency’s slogan, ‘Security, Europe!’ Recent geopolitical shifts have not disrupted the prevailing trends in European capital markets or shaken confidence in our own capabilities. The president of the European Commission announced the creation of a new defense financial instrument with an allocation of €150 billion in the form of loans for member states. The Commission is proposing amendments to the Stability and Growth Pact, allowing military expenditure to be excluded from the excessive deficit clause and enabling transfers within existing EU financial programs — e.g. cohesion policy. EIB is also exploring ways to further increase its support for so-called dual-use expenditure.

External pressure for swift economies of scale in financing European defense spending strengthens the argument for utilizing financial institutions trusted by governments that are capable of both the EU’s and national defense initiatives.

In Poland, Bank Gospodarstwa Krajowego (BGK) has been implementing EU financial instruments since the country joined the EU. With its experience in financing the ever-growing number of EU policies, BGK has reinforced its flexibility and efficiency alongside the ability to swiftly adapt to new challenges. The agility of BGK and NPBI to absorb ‘special assignments’ — even on short notice — derives from the status of a public financial institution and a long-term investment horizon.

Poland’s defense financing model

BGK has notable experience in securing funds for defense expenditure. Poland leads NATO in defense spending relative to GDP, with projections for 2025 indicating that this share will stand at 4.7 percent of GDP — higher than the United States, at 3.4 percent, and the United Kingdom’s planned increase to 2.5 percent by 2027. In nominal terms, Poland ranks fourth in Europe, following Germany, the United Kingdom and France.

Poland’s efforts are financed through the state budget and the Armed Forces Support Fund (AFSF). This fund, established under the relevant act, is managed by BGK and is de facto anchored in the state budget. In 2025, 66 percent of defense expenditure is expected to come from the state budget, with 34 percent allocated from the AFSF.

BGK is responsible for managing the fund’s financial liquidity, securing debt financing — primarily via loans and borrowings, supplemented by bond issuance — and distributing funds. To date, BGK has secured approximately €40 billion for AFSF from international markets, benefiting from guarantees from the Polish State Treasury and export credit agencies, resulting in favorable financial conditions. BGK’s track record as a borrower demonstrates that concerns about the impact of military spending on ESG ratings are not an obstacle to obtaining financing. This is particularly relevant in light of ongoing EU negotiations for the Capital Markets Union, a matter yet to be settled.

Toward a European defense financing architecture

EU institutions already have a variety of advanced financing tools at their disposal. The EIB’s role in financing dual-use projects, including support for small and medium-sized enterprises in the defense sector, will be crucial for various activities, including financing new technologies, or so-called defense tech.

BGK’s experience in managing the AFSF could be leveraged to finance strictly military expenditure, which the EIB is currently unable to support. This could serve as a foundation for creating a European Defense Fund, which could be set up and co-managed with other banks.

Creating a new fund through NPBIs offers several advantages. NPBIs possess in-depth knowledge of regional industrial ecosystems, enabling more tailored funding solutions for local companies and research institutions. They also facilitate faster and more efficient allocation of funds. Leveraging their experience with EU funding programs, such as InvestEU, NPBIs are well positioned to implement defense projects efficiently. NPBIs can combine EU, national and private funds, creating significant financial leverage, and integrating various instruments like defense bonds, preferential loans or investment guarantees. Their regional perspective also makes them adept at identifying and supporting strategic companies in the defense supply chain, including research and development initiatives.

Creation of armaments fund(s)

Given the urgency of addressing the armaments gap, we propose that the first step toward implementing the ReArm Europe Plan should involve creating regional or task-based armaments funds , such as one dedicated to the eastern flank of NATO. Such a vehicle could quickly meet the funding needs of countries looking to accelerate defense procurement spending and increase financing for their manufacturing capacity. A regional defense fund would provide new funding opportunities to member states where military modernization efforts are constrained by limited access to financing.

Projects agreed upon at the EU, NATO and member states levels could be financed by a fund, similar to the structure of Poland’s AFSF. The selected NPBI would manage the fund, securing financing with a guarantee from the European Commission and, in some cases, member states too. Such a fund could be anchored in the EU budget, mirroring the setup of the AFSF within the Polish budget, with the Commission providing grants or other resources, including the issuance of defense bonds if necessary.

In terms of financing the expansion of production capacities, the private sector could play a key role, with appropriate incentives such as financing guarantees.

In conclusion, we believe that the European discussion on financing its defense capabilities has now shifted from ‘whether’ to ‘how?’ And NPBIs are the answer, emphasizing the crucial role in managing and raising funds for European financial programs. The advantage of NPBIs, such as BGK, is their ability to quickly absorb new tasks. To us, the EU defense policy represents another assignment, and leveraging such trusted partners offers the fastest route to building an effective and open financing architecture. This approach complements the role of other financial institutions, EIB or potentially a new armament bank modeled on the European Bank for Reconstruction and Development. Modifying a public bank’s mandate is a much simpler process, and given the time-sensitive nature of the current defense investments, regional procurement funds managed by NPBIs offer the most efficient solution.

With the European Green Deal and the Clean Industrial Deal, the EU set a clear course for the economic transition, serving Europe’s strategic interests of competitiveness and growth while also tackling climate change.

For the EU to reach its industrial decarbonization and competitiveness objectives, the Draghi report identifies an annual investment gap of up to €800 billion. High-quality, reliable and comparable corporate disclosures, including on sustainability risks and impacts, are key to inform investment decisions and channel financing for the transition. EU rules on corporate sustainability reporting have been expected to fill the existing data gap.

While simplification as such is a helpful aim, it looks like the Omnibus initiative is going too far. With the current direction of travel, confirmed by the Council in its agreement on 24 June, the Omnibus is likely to severely hinder the availability of comparable environmental, social and governance (ESG) data, which investors need to scale up investment for industrial decarbonization and sustainable growth, thus impairing their capacity to support the just transition.

The Omnibus is likely to severely hinder the availability of comparable environmental, social and governance (ESG) data, which investors need to scale up investment for industrial decarbonization and sustainable growth.

The European Commission introduced the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU Taxonomy to respond to real needs, voiced over the years by investors and businesses alike. These rules were intended to close the ESG data gap, bring clarity and structure to the disclosures needed to allocate capital effectively for a just transition, and foster long-term value creation.

These frameworks were not meant as ‘tick-box compliance exercises’, but as practical tools, designed to inform capital allocation, and better manage risks and opportunities.

Now, the Omnibus proposal risks steering these rules of course. Although investors have repeatedly shown support for maintaining these rules and their fundamentals, we are now witnessing a broad-scale weakening of their core substance.

Far from delivering clarity, the Omnibus initiative introduces uncertainty, penalizes first movers, who are likely to face higher costs due to adjusting the systems they put in place, and undermines the foundations of Europe’s sustainable finance architecture at a time when certainty is most needed to scale up investment for a just transition to a low-carbon economy.

The cost of downgrading sustainability data

The EU’s reporting framework is a critical enabler of investor confidence, for them to support the clean transition, and resilience building of our economy. It aims to replace a fragmented patchwork of voluntary disclosures with reliable, comparable data, giving both companies and investors the clarity they need to navigate the future.

Let’s be clear: streamlining corporate reporting is a goal that is shared by investors and businesses alike. But simplification must be smart: by cutting duplications, not cutting corners. The Omnibus is likely to result in excluding up to 90 percent of companies from the scope of CSRD and EU Taxonomy reporting, if not more, should the council’s position, which includes a €450 million turnover threshold, be retained. This would significantly restrict the availability of reliable data that investors need to make investment decisions, manage risks, identify opportunities and comply with their own legal requirements.

Voluntary reporting is unlikely to bridge this data gap, both in terms of the number of companies that will effectively report and regarding the quality of information reported. Using basic, voluntary questionnaires that were designed for very small entities would result in piecemeal disclosures, downgrading data quality, comparability and reliability. Market feedback has already demonstrated that it is necessary to go beyond voluntary reporting to avoid these shortcomings. This is precisely why EU regulators designed the CSRD in the first place.

As a result of the Omnibus initiative, investors will likely focus on a limited number of investee companies that are in scope of CSRD and provide reliable information — limiting the financing opportunities for smaller, out-of-scope companies, including mid-caps. This will also restrict the offer and diversity of sustainable financial products — despite the clear appetite of end investors, including EU citizens, for these investments. This runs counter to the objectives of scaling-up sustainable growth laid down in the Clean Industrial Deal, and of mobilizing retail savings to help bridge the EU’s investment gap as proposed in the Savings and Investments Union.

Cutting due diligence blinds investors

The CSDDD is also facing significant risks in the current institutional discussions. Originally, the introduction of a meaningful framework to help companies identify, prevent and address serious human rights and environmental risks across their value chains marked an important step to accelerate the just transition to industrial decarbonization and sustainable value creation.

For investors, the CSDDD provides a structured approach that improves transparency and enables a more accurate assessment of material environmental and human rights risks across portfolios. This fills long standing gaps in due diligence data and supports better-informed decisions. In addition, the CSDDD provisions to adopt and implement corporate transition plans including science-based climate targets, in line with CSRD disclosures, are providing an essential forward-looking tool for investors to support industrial decarbonization, consistent with the EU’s Clean Industrial Deal’s objectives.

By limiting due diligence obligations to direct suppliers (so-called Tier 1), the Omnibus proposal risks turning the directive into a compliance formality, diminishing its value for businesses and investors alike. The original CSDDD got the fundamentals right: it allowed companies to focus on the most salient risks across their entire value chain where harm is most likely to occur. A supplier-based model would miss precisely the meaningful information and material risks that investors need visibility on. It would also diverge from widely adopted international standards such as the OECD guidelines for Multinational Companies and the UN Guiding Principles.

The requirement for companies to adopt and implement their climate transition plans is also at risk, being seen as overly stringent. However, the obligation to adopt and act on transition plans was designed as an obligation of means, not results, giving businesses flexibility while providing investors with a clearer view of corporate alignment with climate targets. Watering down or downright removing these provisions could effectively turn transition plans into paperwork with no follow-through and negatively impact the trust that investors can put in corporate decarbonization pledges.

Additionally, the council proposal to set the CSDDD threshold to companies above 5,000 employees, if adopted, will result in fewer than 1,000 companies from a few EU member states being covered.

Weakening the CSDDD would add confusion and leave companies and investors navigating a patchwork of diverging legal interpretations across member states.

A smarter path to simplification is needed

How the EU handles this moment will speak volumes. Over the past decade, the EU has become a global reference point in sustainable finance, shaping policies and practices worldwide. This is proof that competitiveness and sustainability can reinforce, not contradict, one another. But that leadership is now at risk.

How the EU handles this moment will speak volumes. Over the past decade, the EU has become a global reference point in sustainable finance, shaping policies and practices worldwide.

The position taken by the council last week does not address some of the major concerns from investors highlighted above and would lead to even more fragmentation in reporting and due diligence requirements across companies and member states.

While the window for change is narrowing, the European Parliament retains the capacity to steer policy back on track. The recipe for success and striking the right balance between stakeholders’ concerns is to streamline rules while preserving what makes Europe’s sustainability framework effective, workable and credible, across both sustainability reporting and due diligence. Simplify where it adds value, but don’t dismantle the tools that investors rely on to assess risk, allocate capital and support the transition. What the market needs now is not another reset, but consistency, continuity and stable implementation: technical adjustments, clear guidance, proportionate regimes and legal stability. The EU must stand by the rules it has put in place, not pull the rug out from under those using them to finance Europe’s future.

The question isn’t whether globalization will continue, but who will lead it and on what terms, says BMW’s Frank Niederländer.

With geopolitical tensions and uncertainty in the world market on the rise, the EU has an opportunity to shape the global trade agenda — if it gets out of its own way.

“Europe had the ambition to lead with the Green Deal, setting the pace for the global economy,” says Niederländer, BMW Group Vice President, Government Affairs Europe. “But while we focused on regulation, others moved ahead prioritizing speed, investment and outcomes.”

We need to envision growth as an imperative again. Frank Niederländer, BMW Group vice president, government affairs Europe

Europe’s auto industry has a sterling reputation globally for manufacturing high-quality vehicles, and the EU has a goal of zero emissions for all cars by 2035. But China’s drive for innovation has helped it lead the world market for electric cars. Only one of the world’s top 15 battery electric vehicles is made in the EU.

“The share of EVs sold still depends heavily on national regulatory conditions. This fragmentation in the single market remains one of the greatest challenges to the uptake of electric vehicles. Political alignment, investment scale and the ability to react with speed is essential,” says Niederländer.

POLITICO Studio sat down with Niederländer to discuss what shifts need to happen to create a climate-neutral, competitive Europe.

POLITICO Studio: What is BMW’s outlook on international trade in this era of geopolitical tension?

Frank Niederländer: The global trading system is shifting — and it has real consequences. It shapes investment flows, supply chains and the rules of competition in real time.

Other regions are acting with intent ― investing heavily to secure their industrial bases through billions in subsidies, raw material lockdowns and strategic alliances that give them an edge. Access to energy, technology and key inputs is now, very openly, used as leverage. The risk for Europe isn’t deglobalization, it’s marginalization. It’s falling behind while others move with more speed and focus.

Europe must remain open with a trade policy that reinforces our competitiveness, secures our supply chains and reflects our values, while recognizing and managing strategic dependencies.

PS: Amid the United States’ increasingly isolationist trade policies, is there a new opportunity for Europe?

FN: There could be, if the EU stops playing defense and starts thinking strategically about where it wants to lead. Europe has a chance to position itself as a stable, credible anchor for open and fair trade. For that, we need cohesion within the EU, and alignment of environmental, economic and trade policy. More free trade agreements with core partners (such as Mercosur) are essential today after a long period of insufficient EU engagement.

Europe has what it takes to lead: a strong Single Market, technological leadership and a solid rule-of-law tradition. What’s missing is the will to shape the global trading system, not just manage its consequences.

We should focus on areas where the need for collaboration is highest, such as climate-neutral industry, resilient supply chains and high-value innovation. The EU must be capable of swiftly recalibrating its priorities to keep pace with the evolving geopolitical environment, or it may find itself sidelined. We need to envisage growth as an imperative again.

PS: What emerging technologies could define Europe’s competitive edge? How is BMW helping to accelerate them?

FN: Europe’s edge will be defined by the convergence of climate ambition and industrial competitiveness. The winning technologies will be those that deliver both. At BMW, this is already shaping how we build, invest and compete globally.

We have long embedded circularity into the core of our strategy ― in the design phase, material sourcing and end-of-life recycling. We are also investing heavily in battery cell innovation and scaling European production capacity while continuing to advance a broad range of powertrain technologies ― from electric drivetrains to highly efficient combustion engines running on renewable fuels. In fact, all diesel BMW vehicles produced in Germany are now delivered with HVO100, a renewable fuel that reduces life cycle CO2 emissions by up to 90 percent.

Europe has the talent and industrial base to lead. The challenge now is to translate that potential into scale — with policy that recognizes and accelerates technological leadership. We need agile policy frameworks, public-private partnerships and an ecosystem that fosters innovation, rather than policies that dictate technologies.

Europe has the talent and industrial base to lead. The challenge now is to translate that potential into scale — with policy that recognizes and accelerates technological leadership.

PS: How can Europe turn decarbonization into a long-term competitive advantage? What role does BMW play in that transformation?

FN: Decarbonization can give Europe an economic edge if we scale up cost-effective, low-carbon technologies. While Europe led with ever tighter regulation, other regions ― notably the U.S. and China ― have advanced by mobilizing massive investments, securing critical resources and rapidly scaling technologies. Still, Europe has what it takes to lead this transition through choice and innovation, not restrictions.

Take the supply chain. The largest levers for reducing CO2 emissions lie upstream from manufacturers. We prioritize renewable electricity, secondary materials and low-carbon production processes, and we actively invest in and source from suppliers that meet those standards. That creates real momentum on the demand side to accelerate the transition.

This approach plays to Europe’s industrial strengths: advanced engineering capabilities, integrated supply chains and the ability to deliver premium solutions across multiple technologies. Let companies compete to deliver the best climate solutions — that’s how we’ll maintain global leadership.

PS: How does life cycle assessment (LCA) affect BMW’s strategies?

FN: At BMW, our strategic focus is clear ― achieving business success while reducing our climate footprint. To do that, we must look at the full life cycle of our products ― from raw material extraction to manufacturing, use and end-of-life recycling. This is essential if we want climate policy to reflect real impact.

Tailpipe emissions cannot be the only measure of a vehicle’s environmental impact. We need to assess CO2 emissions across the entire value chain. This means designing with carbon footprint in mind from the start, and we’re already applying this approach with the Neue Klasse, a new, fully electric BMW model generation, where we are embedding circularity and carbon reduction every stage of development.

The EU’s move toward LCA is welcome — but it needs consistency, transparency and practical application across sectors. Done right, LCA will reward innovation where it matters most: in cutting total emissions.

PS: How is BMW future-proofing its global supply chain?

FN: Europe’s future competitiveness will hinge on whether we treat supply chains as a strategic asset, not a logistical challenge. That’s especially true in areas such as the battery value chain, where industrial success depends on both resilience and global cooperation. This will require massive investments — just look at the figures in the Draghi report.

This isn’t about reducing complexity. It’s about managing it. Engagement with partners such as China must be realistic and rules-based, because decoupling is neither feasible nor desirable. Europe cannot operate as an island.

At BMW, our global production footprint is built upon a strong European foundation. We localize to serve markets more efficiently and to strengthen resilience, and our international presence amplifies Europe’s role as a hub for innovation, engineering excellence and high-value manufacturing.

Climate neutrality must be engineered — deliberately, collaboratively, and at scale.

PS: What can the EU do to ensure that companies like BMW remain globally competitive while leading the green transition?

FN: Europe has the chance to define climate neutrality in a way that keeps Europe competitive and keeps jobs here.

Stronger cooperation between governments and industry is key. The Strategic Dialogue launched by EU Commission President Ursula von der Leyen was an important step to this and must continue.

The future will be shaped by many choices — smart regulation, strong industrial alliances and a shared commitment to progress that is measurable, not ideological.

PS: What future does BMW imagine for a climate-neutral world?

FN: A climate-neutral Europe is not just a moral responsibility — it’s a competitive imperative. It means rethinking how we power industries, design products and create value chains. The future will be built not on a single breakthrough but by thousands of decisions across technology, regulation and investment. Climate neutrality must be engineered — deliberately, collaboratively and at scale.

At BMW Group, we are engineering that future with purpose. Our 2030 climate targets are fully aligned with the Paris Agreement, which means reducing our CO2 emissions by 40 million tons by 2030 as compared to 2019.

Europe has the potential to lead this transformation. But leadership requires the courage to move beyond outdated regulations, respond decisively to shifting geopolitical realities and streamline the path forward. This is the moment to lead with conviction.

If Europe wants to win hearts, minds and markets, it must prove how the climate transition delivers not just long-term targets, but also tangible benefits — and this all begins in cities with good green jobs, security, healthier places to live, work and play and lower bills.

Europe cannot achieve industrial competitiveness without decarbonization, and it cannot meet its climate commitments without transforming industry. Cities are hubs of economic activity, innovation and workforce development that will determine whether Europe succeeds in achieving both goals.

City leaders understand how EU policies land on the ground. Empowered cities can turn high-level climate ambition into real economic transformation.

Today, Europe’s 18 C40 cities, representing approximately 48 million residents and contributing €3.51 trillion to the global economy, already support 2.3 million green jobs — 8 percent of their total employment — including over 1.3 million in sectors like clean energy, construction and transport. That number will only grow as key sectors decarbonize. With the right support, cities can accelerate the creation of good, green jobs and better access to them: jobs that are safe, secure and future-proof.

Europe’s 18 C40 cities, representing approximately 48 million residents and contributing €3.51 trillion to the global economy, already support 2.3 million good, green jobs

The examples are everywhere: London’s Green Skills Academy is reskilling thousands for low-carbon careers. Rotterdam, where construction materials and buildings account for 25 percent of the city’s €1.3 billion annual spend, is using procurement to scale the circular economy, and through the Circular Materials Purchasing Strategy, strives for a 50 percent reduction in primary resource consumption by 2030. Considering that C40’s European cities have reduced per-capita emissions by 23 percent between 2015 and 2024, these are not just local initiatives — they are scalable models of the industrial transformation Europe needs.

Cities also control powerful economic levers. Strategic procurement can shape markets, drive clean-tech adoption and support local small and medium-sized enterprises (SMEs). For example, Oslo mandates zero-emission construction in public projects, and five years on, 77 percent of municipal building sites are emission-free, a great example of procurement driving industry-wide changes. With direct access to funding and streamlined EU instruments, cities can go further and faster, creating demand for clean innovation and building thriving local economies from the ground up.