Italy caught in the midst of EU struggle with China
This essay is part of “On the New Silk Road in China,“a Global Reporting Center podcast that traces China’s global ambitions. Over nine episodes, Mary Kay Magistad, former China correspondent for The World, partners with local journalists on five continents to uncover the effects of largest global infrastructure initiative in history.
If Venice reminds you of picturesque canals and singing gondoliers, also think about how Venice was once a center of world trade. Goods from as far away as China would travel on the ancient Silk Road, in ships that sailed to the city’s San Marco Square.
This trade brought wealth, ideas, innovation – and disease to Venice. The bubonic plague, which geneticists have attributed to its origins in China, wiped out a third of the population of Venice – and Europe – in the mid-14th century. Venice’s innovation then was to isolate incoming travelers to the islands until it was clear that they were not infected. It was the dawn of quarantine.
Today, in a new pandemic, Italy faces new challenges. Its economy was already in recession with high unemployment before COVID-19 hit this spring. In March 2019, disgruntled populists, skeptical that the European Union had much to offer Italy, paved the way for making Italy the first G7 country to join the China Belt and Road Initiative (BRI) – a global infrastructure initiative to build a belt of land routes and a sea route of sea routes, in which Chinese loans and investments, and mainly Chinese state-owned enterprises, build roads, railways, ports, pipelines , 5G networks and more around the world.
The hope was that BRI membership would help Italy export more of its products to China, narrow its sizable trade gap, and attract new Chinese investment. China has already invested some $ 20 billion in Italy over the past 20 years. But that investment peaked four or five years before Italy joined the BRI. And significant new Chinese investment, or a new Chinese appetite for Italian exports, hasn’t exactly poured in since – certainly not this year in the midst of a pandemic.
But Italy’s rapprochement with China, which the European Union calls “a systemic rival”, served as a warning to the EU: if that doesn’t help member economies when they experience economic hardship, they could come up with solutions that may not be in the EU’s strategic interests. When the Italian economy fell under COVID-19, the EU offered aid to Italy: more than $ 200 billion in cheap loans and subsidies from the EU coronavirus recovery plan, a disproportionate share of the total of $ 890 billion available in the fund.
The EU appears to be applying a lesson learned from the 2008 financial crisis. At the time, it insisted that an already distressed Greece was undergoing austerity measures. Instead of being in an indefinite rush, Greece accepted an investment from the Chinese state-owned China Ocean Shipping Company (COSCO) to manage, and ultimately buy, a controlling stake in the former Greek port of Piraeus, which is located also to be one of the most strategic in Europe. localized ports. COSCO’s investment has helped transform Piraeus into the busiest port in the Mediterranean.
Chinese investments in the Italian ports of Genoa and Trieste were mentioned in the memorandum of understanding signed by Italy when it joined the Chinese BRI last year, a fact that has led some Europeans to speculate on the whether a Chinese presence in these ports would be a Trojan horse for China. dominate central Europe.
Michele Geraci is an Italian economist who, as Italy’s Under-Secretary for Economic Development at the time, was instrumental in getting Italy to join the BIS. He dismisses these concerns as exaggerated, given the number of European ports that China manages or already owns.
“When we hear warnings that the Chinese should not invest in Italian ports, it is too late. China has already invested in all the major European ports and manages around 15 to 20% of European traffic. “
“We have Bilbao, Valence, Antwerp in Belgium, Zeebrugge, Piraeus in Greece of course, Dunkirk, Le Havre, Marseille, Nantes in France, Malta, Rotterdam in the Netherlands,” he says. “So when we hear warnings that the Chinese should not invest in Italian ports, it is too late. China has already invested in all the major European ports and manages around 15 to 20% of European traffic. “
The challenge, he said, should be for Italians to figure out how to make Chinese investments serve Italy’s interests.
And in Trieste, a picturesque town rising above the Adriatic Sea, with a port dating back to the Roman Empire, and a free port for 300 years, the president of the port Zeno D’Agostino has seen a great opportunity.
“We have to try to seize this opportunity, which is to be a node in global logistics,” he said.
D’Agostino says he is working with Chinese partners to increase Italian exports to eastern China. It seeks to develop areas of the Freeport of Trieste, with factories and warehouses to take advantage of its free trade status – only paying tariffs on goods when they leave warehouses.
He expected this kind of investment from the Chinese. But although it was slow in coming, the publicity that came to Trieste when Italy joined the BRI of China attracted more European investors.
“I don’t need the money from the Chinese, I can tell you that, no problem,” D’Agostino said. “So if we do what we agreed to, we’re both happy. If they do what they want, and it’s something different from what we agreed to, we can’t do [it]. “
Italy’s “Golden Power” rules prohibit the sale of ports and other strategic assets to foreign entities.
Back in Venice, the head of his modern port of Marghera, Pino Musolino, says it’s a good thing Italy has these restrictions, as China has shown itself adept at establishing a presence in strategic ports ranging from from China to Europe.
“The belt and the road [Initiative] it’s not just a question of infrastructure, ”he says. “It’s a huge design to control trade flows and control major global value chains. If you control them, you no longer need to control an army. You control the very specific wealth of any country along these economic corridors. The Chinese are very aware of this and they are doing a very good job on it, honestly. And they’re pretty straightforward about it as well, I have to say I don’t see them particularly scheming on this. They have a clear goal and they are pursuing it. ”
The Italian government, made up of the Anti-Settlement Five Star Movement and the center-left Democratic Party, is shaping its own goals for what it hopes will be a economic rebound next year, after the Italian economy contracts 8-9% this year. It is about modernizing train lines and creating a fast broadband network. Chinese Huawei was in the running. Italian leaders have since reconsidered their use, citing security concerns.