Barring any sudden reversals, Italy will formally endorse China’s “Belt and Road Initiative” (BRI) during Chinese President Xi Jinping’s visit to Rome this week. Though US President Donald Trump’s administration recently signaled its disapproval of Italy’s engagement with China’s massive transnational infrastructure investment scheme, Prime Minister Giuseppe Conte confirmed on March 15 that the government will proceed with signing a memorandum of understanding (MoU).
The MoU will come at a high political cost for Italy, while offering only limited economic benefits. Nonetheless, it has been in the pipeline for quite some time. Italian Undersecretary of State for Economic Development Michele Geraci, the head of the Ministry of Economic Development’s “China Task Force,” has made formal endorsement of the BRI his pet project. And Italian Deputy Prime Minister Luigi Di Maio has publicly committed to signing the document.
Moreover, securing Italy’s official endorsement of the BRI is Xi’s main reason for visiting. Italy is a member of the Group of Seven (G7), a founding member of the European Union, and the eurozone’s third-largest economy, which means that its participation will give Xi a significant political boost at home.
Since coming to power last June, Italy’s governing coalition, comprising the populist Five Star Movement (M5S) and the right-wing League party, has pursued a China-friendly policy at the expense of wider EU and transatlantic interests. But the recent pushback from the US has at least forced Italian officials – not least Minister of the Interior and League leader Matteo Salvini – to recognize that endorsing the BRI will have far-reaching geopolitical implications.
As the US National Security Council recently warned on Twitter, an MoU could legitimize China’s “predatory approach to investment” while yielding “no benefits to the Italian people.” That highly public intervention seems to have driven a wedge between the coalition partners. Whereas M5S still supports the MoU as negotiated, the League is now demanding concrete guarantees that Italian companies will be included in BRI infrastructure projects.
In its current form, the MoU lacks such assurances, as a leaked draft shows. Worse, Geraci and Di Maio have failed to make a convincing case for why Italy should embrace the BRI at all. They contend that doing so will help Italy reduce its bilateral trade deficit with China, which was around $12.1 billion in 2018. But France and Germany have far more balanced trade with China, and neither has officially endorsed the BRI. Moreover, the EU member states that have already signed onto the initiative – namely, Poland and other Eastern European countries – have since complained that the promised economic opportunities never materialized.
In downplaying the geopolitical risks, Italian proponents of the MoU are ignoring China’s history of retaliating against trade partners that do not support its geopolitical interests. Moreover, the BRI itself has been widely criticized for compelling strategically placed countries’ political obeisance by luring them into debt traps. By signing the MoU, the Italian government would effectively be endorsing that practice.
Given China’s eagerness for a high-level endorsement of the BRI, Italy could have demanded far more in the MoU negotiations. But it is probably too late to go back to the drawing board. Chinese officials have informed their Italian counterparts that if Italy does not sign the MoU, all of the other commercial deals that were going to be signed during Xi’s visit will be rescinded. It is clear that China has the upper hand. The sooner Italian leaders realize that there can be no engagement on an equal footing with China, the better.
Far from demonstrating leadership in Europe, Italy has broken ranks with the other leading EU member states. The EU has been working to improve intra-European coordination so that individual member states are not lured into unfavorable arrangements with China. A Joint Communication being discussed at the European Council this week expresses a “growing appreciation in Europe that the balance of challenges and opportunities China presents has shifted.” And this conclusion accords with a 2018 report by 27 European ambassadors to China – including Italy’s – arguing that the BRI promotes Chinese interests almost exclusively.
The Italian government’s dealings with China have undermined its credibility within the EU. In February, for example, Italy abstained from a vote on an EU-wide investment-screening mechanism to ensure the security of Europe’s strategic sectors. That represents a significant departure from the previous Italian government, which had been an important partner to Germany and France in promoting such measures.
Rather than unilaterally endorse China’s global trade and investment strategy, the Italian government should be developing a more balanced China strategy in partnership with the other EU members. An EU that spoke with one voice would have far more negotiating power than Italy can ever hope to wield on its own, and thus would be in a better position to advance Italy’s interests vis-à-vis China.
Copyright: Project Syndicate
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