Italy Looks to China
April 1, 2019
The U.S. and EU may worry about Rome joining the New Silk Road, but it's
their fault, writes Andrew Spannaus.
By Andrew Spannaus
in Milan
Special to Consortium News
Italy caused a political firestorm in mid-March when it announced that it
would be joining China's Belt and Road Initiative by signing a memorandum of
understanding during Chinese President Xi Jinping's visit to Rome from March
21 to 23.
As the first G-7 country to accept a formal agreement to participate in the
initiative, also known as the New Silk Road, Italy found itself under
instant pressure from both the United States and its allies in Europe, all
of which worried that it represented an expansion of China's economic
foothold in the West.
The populist government led by the Five-Star Movement and the League was
caught off guard by the rapid backlash, which began with a pointed tweet
from the U.S. National Security Council on March 9.
Garrett Marquis, confidant of U.S. National Security Adviser John Bolton and
former Security Council spokesman, followed up with a threat to stop
intelligence-sharing between the two countries.
Prior to the Chinese leader's arrival, Giancarlo Giorgetti, the secretary of
the Council of Ministers, a post equivalent to chief of staff in the U.S.,
confirmed the signing of the memorandum to exploit new economic
opportunities, but said important restrictions would be placed on
cooperation with China, and that it was "ridiculous to speak of detachment
from the United States."
Garrett Marquis. (Twitter)
Garrett Marquis. (Twitter)
The government also took practical measures immediately, expanding the scope
of the "golden power," the government's ability to veto economic operations
that it deems a threat to national security. This is aimed in particular at
protecting the telecommunications sector and the development of the 5G
mobile network, an area where the Trump Administration is putting pressure
on other European countries as well.
On March 25, by the time Xi Jinping had come and gone, Deputy Prime Minister
Matteo Salvini said "I think the proper balance has been reached. . Nobody
should see this as a change in course, or a change in strategy
internationally. Italy remains where it is."
Nonetheless, the China Daily is calling it a "milestone in cooperation" and
plenty of news outlets are underscoring the significance of the deal, which
starts at $2.8 billion and could expand to $22.6 billion.
Michele Geraci, undersecretary of state at the Italian Ministry of Economic
Development, who led negotiations on the deal, has insisted that despite
taking into account U.S. and EU worries, Italy must make its own decisions,
following an "Italy first" strategy.
But Salvini, to whom Geraci owes his position, and who is poised to have
even more clout after the European elections at the end of May, has been
clear that it is not the type of change in alignment the Chinese had
trumpeted.
Salvini even stayed away from the state dinner with Xi; and he has vowed to
use his position as interior minister to monitor national security as
regards port infrastructure. The other deputy prime minister, Luigi Di Maio,
who met with Bolton last Thursday in Washington, says that while Italy is
simply pursuing its economic interests, it remains a key NATO ally and trade
partner. This is Italy's standard posture, which will likely be accommodated
as long as the government responds to specific requests from the U.S., as it
already has, for example on 5G, the new telecommunications infrastructure.
Salvini with microphone in 2013. (Wikimedia Commons)
Salvini, with microphone, in 2013. (Wikimedia Commons)
Larger Partnerships
Italy is certainly not the first country in Europe to look to China for
economic growth opportunities. Its larger neighbors in the European Union
(EU) actually do more business with China, and have established themselves
as key partners in the BRI.
Germany exports 94 billion euros worth of goods to China, for example, while
the United Kingdom and France come in at 23 billion and 21 billion,
respectively. Italy's share is currently only 13 billion.
After his visit to Rome, Xi Jinping was welcomed to Paris, where he signed
agreements for the purchase of tens of billions of euros of French products,
from airplanes to wind power systems, despite not formally joining the BRI.
And the German city of Duisburg has become a key terminal for the Chinese
initiative, with the arrival of dozens of trains every week that carry goods
to be distributed throughout Europe thanks to the city's central position
and infrastructure connections.
Critics of these agreements point to two negative effects of Chinese
expansion: cheaper products that undercut European producers, costing
manufacturing jobs, and growing Chinese ownership of assets in Europe,
giving the Asian giant increasing power over Western economies.
Other European countries, such as Portugal and Greece, have signed formal
agreements with China regarding the New Silk Road. Italy is different
because it has a much larger economy, and is a member of the G-7. Yet it
shares the need to rebound from the economic collapse suffered in recent
years during the Euro crisis. These have been aggravated by the neoliberal
policies imposed by the European Commission and the European Central Bank,
with the assistance of the International Monetary Fund.
Between 2011 until 2014, during EU-dictated austerities, Italy's GDP
declined by 7 percent, with the loss of 20 percent of the country's
industrial production.
It's been a disaster from which the economy has only partially recovered.
The current government is attempting to reverse the situation, with greater
social spending and public investment. But lacking many allies in Europe,
it's being forced to compromise with EU institutions and scale back on its
plans.
So, it's no surprise that Italy would look to China to help jump-start the
economy. And given that other European countries have more trade with China,
it's reasonable to expect Italy to make up the gap with countries such as
France and Germany, both through investment in private enterprises and the
construction of public infrastructure. And the Italians are seeking more
opportunities for their companies to sell products in China.
Six proposed corridorsof Belt and Road Initiative, showing Italy inside
circle, on maritime blue route. (Lommes, CC BY-SA 4.0, Wikimedia Commons)
Six proposed corridors of Belt and Road Initiative, showing China in red;
Italy inside circle, on blue maritime "silk road." (Lommes, CC BY-SA 4.0,
Wikimedia Commons)
Larger Problem for West
Italy's situation reflects a larger problem for the West. The neoliberal
economic policies of the past 30 years have brought the outsourcing of
well-paying jobs, and a reduction of the role of the state in both
stimulating growth and guaranteeing the welfare state. This has weakened the
middle class and widened inequalities. As this has happened, the West has
lost economic and political weight, opening the door for new powers to
expand. China has been the main beneficiary, considerably increasing its
economic presence in areas such as Africa and Latin America, and now aiming
to play a leading role in Europe as well.
This shift worries U.S. government institutions seeking to bar China from
such strategic sectors as telecommunications and to maintain close
military-industrial cooperation with European allies.
The strong negative reaction from the U.S., followed by the European
Commission, may have been driven by China's public relations about the deal
and in part by the make-up of the Italian government.
China portrayed it as a major step, not just another agreement with one
country among many in Europe. The Chinese press hailed the accord as a step
forward in a "comprehensive strategic partnership," and published remarks
calling it an "antidote to the rising wave of unilateralism and trade
protectionism," a clear dig at the U.S.
Xi Jinping then wrote a long article published on the front page of Italy's
leading daily, Corriere della Sera. Meanwhile, on the day of Xi's arrival,
copies of the official China Daily were distributed free to numerous hotels
around Rome.
All that contributed to the unease, and key players in the Italian
institutions quickly decided they could not afford to anger the United
States. The memorandum has been signed, and Italy will try to obtain as much
economic benefit as possible, attempting to make up ground compared to its
European competitors. However, the document, and the government's rhetoric,
have been adjusted to dampen the notion of a change in Italy's strategic
positioning.
Italy has the only fully populist government in Europe: the Five-Star
Movement and the League came to power after elections one year ago,
determined to challenge the status quo, meaning going against EU economic
orthodoxy, and also hoping to lower the tensions that have dominated
relations with Russia in recent years.
The Trump administration has generally been supportive of the Italians,
while other European governments have not. Thus, the desire to accelerate
cooperation with China is now being tempered by the need to maintain the
full support of the country's most important ally.
Andrew Spannaus is a journalist and strategic analyst based in Milan. He was
elected chairman of the Milan Foreign Press Association in March 2018. His
latest book "Original Sins. Globalization, Populism, and the Six
Contradictions of the European Union" is due out at the end of April.
