The possible impact of China′s Belt and Road agreement with Italy | News | DW | 20.03.2019
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The possible impact of China's Belt and Road agreement with Italy

Italy is set to become the first G7 nation to sign up for China’s controversial Belt and Road Initiative. But what does the agreement mean for the EU and its joint trade plan for China?

Italy came under fire this week, after a ministry official revealed the country was close to reaching a deal to become part of China’s Belt and Road Initiative (BRI). The two countries are expected to sign a Memorandum of Understanding (MOU) during President Xi Jinping’s visit to Rome - shortly after a European Council meeting to discuss on a joint, bloc-wide policy on Chinese investment.

The US had stern words for Italy following the announcement. President Trump’s special assistant Garrett Marquis labeled the BRI "China’s infrastructure vanity project" and claimed it would bring "no benefits to the Italian people."

No legal obligations

Memorandums of Understanding are non-binding agreements, meaning signatory countries are not legally obliged to abide by their terms. This is the case with the MOUs China has signed with Latvia, New Zealand, the Cook Islands, the state government of Victoria in Australia and the UN Economic Commission for Europe (UNECE).

The agreements were published by their respective governments and groups online and each of them has a termination clause stipulating a three-month notice period. Areas of cooperation are broad and the language is imprecise. For example, in the agreement with Latvia, the document refers to keeping China's "Silk Road spirit...enriched." It also calls for "stronger synergy" and priorities in the "Investment Plan for Europe in the region."

Read more: EU fears divisions as China woos Eastern European nations

Similarly in the agreement with New Zealand, there is a call to "carry forward the Silk Road spirit" and strengthen cooperation in transportation, trade, agricultural technology and tourism. There are references to knowledge sharing, increasing connectivity and furthering dialogue, but few of them describe anything specifically. Scattered through the documents are phrases like "cooperation that benefits all" and "mutual learning between civilizations," more suggestive of a friendly attitude rather than any explicit plan for bilateral trade.

Italy's dilemma

Italy still hasn't reached a definitive decision about the BRI, according to analyst Francesca Manenti, Senior Asia and Pacific Analyst at Italian think tank Centro Studi Internazionali (CeSI). She said her country’s ruling coalition, consisting of the populist Five Star Movement and the right-wing League party, remained split over the issue. "The two parties have two different positions regarding the BRI. For that reason, it’s very hard to say if the Italian government will sign the agreement," she told DW.

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If Italy did decide to join China's BRI, despite the non-binding nature of the agreement, the endorsement would carry substantial symbolic weight. According to Manenti, signing the MOU would be a "political message" which Rome would have to justify to the EU and to its NATO allies."There are some doubts, some uncertainty, regarding what implications this signing could have on Italy... from an economic point of view but also from a political point of view," she said.

Rome scouting for investors

According to Manenti, Italy is eager to show China that it wants to deepen trade relations and attract more investment in its infrastructure. The country, which has been struggling with debt, wants to boost its economy and keep up with its neighbours. Some of these neighbours have enjoyed “very strong economic bilateral relations with China,” both within and outside the framework of the BRI.

Infografik chinesische Direktinvestitionen in der EU EN

By signing an MOU, Italy would look to win the favour of Beijing and potentially tap into the flow of Chinese funds in Europe, which has been trending downwards.

Read more: Challenges and crises await the EU in 2019

Italy will be under a great deal of pressure during President Xi Jinping’s visit to Europe next week. Rome had the opportunity to sign an MOU during high-level talks in China last year, Manenti told DW, but that didn’t happen. "[This] is a very important moment… There are probably high expectations from the Chinese side in finalizing the [BRI] process," she said.

Read more: Xi Jinping is taking China down a dangerous path

Indeed, Beijing has little doubts when it comes to Italy signing the deal. Rome was supportive of the BRI soon after it was introduced and Italy's Prime Minister Paolo Gentiloni went to China to participate in the first international cooperation summit in 2017, Sun Yanhong of the Chinese Academy of Social Sciences and the Chinese Association for Italian Studies told DW.

The EU's importance

On the other hand, the Italian government did not want its allies to think it was "re-evaluating its partnership with the EU or its traditional allies," Manenti said.  If Rome signs the MOU, it needs to ensure that a new space for cooperation between China and EU is created on time for the European Council's discussion on a 10-point action plan next week, ahead of an EU-China Summit in April.

Read more: China's Southeast Asia investments - A blessing or a curse?

For China, too, a good relationship with the EU would be in its interest, Manenti told DW. "Even though it's true, it would be it easier for China to bargain on a bilateral basis with each EU member country... China needs to listen to the issues that the EU is putting on the table," she said, adding, "China is this moment is going through a very peculiar phase of internal transformation."

"China needs the partnership with the EU from an economic point of view for finding the quality that China is looking for right now, to make its own system sustainable... [It] needs the EU right now so it can’t pretend not to listen to what Brussels is asking," Manenti explained.

However, China seems to be clear about its priorities and assured of its stable ties with Italy, which it does not think will hamper its relationship with Brussels. According to China's Italian affairs expert Sun Yanhong, "It is normal for China to cooperate with the EU and with countries within the EU at the same time. Italy is an independent country. The cooperation between China and Italy is mutually beneficial and a win-win situation."

 

Additional reporting by Fu Yue

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