Italy drives trade innovations with BRI MOU
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CHINA and Italy signed a memorandum of understanding to advance the Belt and Road Initiative during President Xi Jinping’s state visit to Italy in March.
But Italy’s signing of the MOU met with criticism from some people, who blamed Italy for its “centrifugal tendency” and deviation from common EU trade policy.
In response to such criticism, Michele Geraci, Undersecretary of State to the Ministry of Economic Development of Italy, said his government has consistently operated within the framework of EU trade policies, but trade promotion remains the right of each sovereign state.
Having taught and worked extensively in China from 2008 to 2018, Geraci delivered a speech on Tuesday at the Shanghai Academy of Social Sciences, with the theme of “From Beijing to Rome: The Silk Road of Prosperity and Reciprocity.”
EU member states’ trade policies have long been under the control of Brussels. By signing the MOU with China, Italy is “not changing anything related to trade policy or unilaterally lowering tariffs,” Geraci said. He added that the perception of Italy as being isolated from the rest of Europe is wrong; quite the opposite, Italy is unexpectedly leading for the first time. He used the metaphor of sprinter Usain Bolt to illustrate his point. “I don’t think Bolt running 100 meters with a guy 50 meters behind is isolated.”
“This is what I believe will happen to the rest of EU members. They will see the benefit of it (MOU) and other countries will join,” said Geraci.
When it comes to issues like trade promotion and investment, he believes they should be put totally in the hands of individual governments.
More activer player
The signing of an MOU on the BRI — the first by a G7 country — could turn Italy into a more active player in deciding its own trade policies.
Also, it is an important step toward acquiring room for maneuver in contemplating free trade agreements with trading partners, the ultimate goal of which is to “benefit the citizens.”
It has been the hope of EU decision-makers to unite 28 member countries to compete with bigger economies like China through economies of scale.
This may well be futile, as evidenced by steelmaking. China’s annual output stands at 150 million tons.
In comparison, EU countries produce a total of 125 million tons of steel a year, “not anywhere close to what China makes,” Geraci explained.
The Italian economist conceded that many Italians are not yet psychologically prepared for changes and challenges brought by globalization.
Part of the reason is that Italy has many small, medium and even micro businesses that find it difficult to compete in a globalized world.
Geraci said Italy is most exposed of all the 28 EU countries to competition from China, because Italy’s economy bears a striking similarity to China’s.
About 60 percent of their goods are the same. This means that head-to-head competition is not an option.
But since 60 percent of their economies overlap, “the other 40 percent is complementary,” and “we can use the 40 percent to turn conflicts into possible cooperation,” said Geraci.
The MOU has set the stage for exploring these “40 percent” areas where expansion of common interests is possible.
According to Geraci, areas of Sino-Italian collaboration include infrastructure, digitalization, agriculture, logistics, food and machinery. “The potential for growth is huge,” he observed.
However, he lamented the fact that Italy now trades far less with China than major European economies like Germany. This is reflected by the volume of exports. Italy exported only 13 billion euros (US$14.6 billion) worth of goods to China last year — the least among all EU nations.
The figures for French, Swiss and German exports to China in the same year are 20 billion euros, 22 billion euros and 87 billion euros, respectively. As such, facilitating trade with China will be high on the agenda of Geraci and his colleagues.
Toward the end of his speech, he dismissed claims that the BRI is a debt trap and that Italy has been tricked into it.
Italy has never borrowed money from China in the form of bonds, and its economy is resilient enough to withstand risks from public debt, said Geraci.
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