There is a flurry of reports in Western media suggesting that Italian Prime Minister Giorgia Meloni is “mulling exit from the Belt and Road Initiative”. But the reality is that PM Meloni has not made up her mind, and there is a major debate in Italy concerning the matter. The memorandum of understanding between China and Italy to jointly build the Belt and Road (BRI), which was signed in March 23, 2019 during a state visit by President Xi Jinping to Italy, is to be renewed every five years. This means that a decision should be made to abandon it or stay committed to it sometime later this year or early next year. (See a copy of the MoU here!)
Professor Michele Geraci, former Undersecretary of State at the Italian Ministry of Economic Development, who played a key role in formulating China-Italy cooperation and the BRI MoU, argues in this article that Italy should remain committed to the BRI and even expand it to cooperation with China in other regions such as Africa’s development.
This article was originally published in China Daily!
By: Dr. Michele Geraci
Italian and international media have reported that the Italian government is mulling exiting the China-proposed Belt and Road Initiative which Italy joined during President Xi Jinping’s visit to Italy in March 2019. Given the role I played in the signing of the memorandum of understanding between Rome and Beijing and my current involvement in this important issue, I think that these reports are not based on facts nor should they reflect the real intention or views of Italian Prime Minister Giorgia Meloni.
The reality is much simpler: Prime Minister Meloni has not yet fully focused on the Belt and Road Initiative, because she has been preoccupied with other more pressing issues related to domestic politics as well as international crises, such as Ukraine crisis, inflation, energy supply in Italy, the flow of migrants into Italy, a seasonal crisis that Italy faces every summer.
Meloni is an avid reader of reports, data and analyses, and she always makes decisions, not on whim, but after fully understanding the issues at hand, analyzing all the facts and taking into consideration all possible implications. She is a true politician and, as such, will make a decision purely based on what is best for our own country, Italy.
As an indication of that, during her meeting with the United States President Joe Biden a few days ago, she emphasized that she will not accept any interference in Italy’s national affairs by the US and that her responsibility as prime minister is to protect and take care of the interests of Italy. Therefore, the Belt and Road Initiative is an issue that will be discussed between Rome and Beijing, not decided by Washington. And the decision will be based on facts.
So, what do the facts say? Data and analyses clearly point to benefits and therefore a renewal of the initiative for an additional five years. I focus on only a few.
From 2018 to 2021, Italy’s exports to China grew by 20 percent, higher than those of its main competitors France and Germany. Even extending the range, from 2018 to 2022, the difficult years for the Chinese economy, Italy’s figures show its exports to China grew by 11 percent compared with about 2 percent for both France and Germany. This indicates the catch-up process, which was my goal when I worked to ensure Italy joined the Belt and Road Initiative, is starting to materialize, which is encouraging.
Critics of the MoU argue that, while Italy’s exports to China have grown, Chinese exports to Italy have grown at a faster and higher rate, increasing the trade deficit for Italy. True, Italy’s trade deficit has increased, but using it as an argument against the renewal of the MoU is fundamentally flawed. No economist looks at trade surplus or deficit in itself as a measure of a country’s advantages or disadvantages. In fact, trade surplus was considered a source of wealth back in the 16th century, during the mercantilist era, before economists developed new theories to prove it wrong around 1800.
Therefore, those who insist that “trade deficit is bad” are hanging on to a 200-year-old, wrong theory. But in the specific case of Italy’s growing import of goods from China, not only this is not a bad thing; instead, it can actually be good for our own economy. What Italy buys today from China are not those goods that used to compete with Italian domestic products (textiles for instance) which indeed created some problems for the Italian economy 30 years ago.
Today, Italy mostly imports goods that it does not produce, hence they cannot be detrimental to domestic consumption or companies. Italy imports Chinese goods that are components of our production chain, and thus are necessary to support our import-led-growth and import-led-export model. And since these goods are relatively cheap, they contribute to mitigation of inflation. Of the $17 billion increase in Italy’s trade deficit, more than 40 percent ($7 billion) comes from imports of mobile phones, electric batteries, laptops and other “cheap” electronic equipment that we need to expedite our digital and green transition in addition to mitigating inflation.
Moreover, the Belt and Road Initiative is not just a trade deal between Italy and China. It is also a platform to cooperate with the rest of Europe, Asia and, above all, Africa.
The other urgent problem Meloni needs to solve is the inflow of migrants from Africa. The solution is not, like some media outlets argue, proportionately distributing the tens of thousands of migrants that arrive every year in Europe among the European Union member states. The real solution is how to promote stable social and economic development in African countries, whose population will grow from the current 1.5 billion to 4 billion by 2100. The Belt and Road Initiative will prove a golden asset in achieving that.
In the coming months, Meloni will likely analyse various aspects of the initiative, and I will also provide her with all the necessary data and analyses on the global economy. I expect the MoU to be renewed with potential changes in language to put emphasis on stronger cooperation with China on climate action, peace and security, and Africa’s development. As the first and only G7 country to join the Belt and Road Initiative, Italy could inspire other European G7 countries to join the initiative.
If anything, the agreement between Italy and China should be further strengthened, not abandoned.
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Professor Geraci interview with BRIX: EU-China Cooperation Is Essential for Peace and Development!