From China to Europe: will the Memorandum benefit Italian businesses?
On March 22nd Italy signed a Memorandum of Understanding with the People's Republic of China regarding the so-called Belt and Road Initiative, the Chinese ambitious global project that aims at connecting Asia, the Middle East, Africa and Europe through a network of ports, railways, tunnels and other infrastructures. Italy is the first G7 country to enter into these kinds of agreements and has been heavily criticized for this choice by the EU partners and by the US as well. But what is the BRI and what does it imply?
On March 22nd Italy signed a non-binding bilateral “Memorandum of Understanding with the People's Republic of China" on cooperation within the framework of the silk road economic belt and the 21st century maritime silk road initiative", simply known as the Belt and Road Initiative (BRI).
BRI was launched in 2013 by President Xi Jinping during a speech entitled "Promote People-to-People Friendship and Create a Better Future" at Kazakhstan's Nazarbayev University. The idea is to create different "corridors" and sea routes (a “belt” of overland corridors connecting China with Europe, via Central Asia and the Middle East and a maritime “road” of shipping lanes linking China’s southern coast to east Africa and the Mediterranean) and to resurrect the ancient "Silk Road", the network of trade routes officially established during the Han Dynasty of China in 130 BCE. These routes were used by traders for more than 1500 years until the Ottoman empire closed them in 1453 CE. As the name suggests, silk was one of the goods exchanged but many others were traded.
The first aim of BRI is thus to build transport infrastructures (ports, harbors, railways, bridges etc.) in order to connect Asia and Europe through the Middle East and Africa. However, BRI has a much broader scope: official documents underline that the BRI is open to global participation and promotes cooperation among States, especially with developing countries such as Africa, and aims to create people-to-people bonds, prosperity, and sustainable development as well as build a system of financial integration and common trade. China also plans to set up international courts in Shenzhen and Xi’an, the former hub of the original Silk Road, to resolve commercial disputes related to the BRI. The initiative has been defined as "truly monumental" or "grandiose" and potentially has an immense impact on the Eurasian continent. BRI involves about three-fourths of the world's population, 40% of Global GDP and so far, there are more than 100 countries and international organizations taking part at different levels (See China's Belt and Road: a Game Changer?edited by Alessia Amighini, p. 24 ).
Since its launch observers have pointed out that BRI could be seen as just a new form of economic imperialism that will facilitate Chinese firms only and will lead to Chinese dominance in vast portions of the areas involved, especially in Africa; moreover, almost all new projects are funded by Chinese commercial loans and thus China is becoming the biggest foreign creditor for many countries.
With a more balanced attitude, other commentators observe that the overall effects of the BRI on Europe can be positive, negative, or neutral depending on the sum of the costs and benefits for each sector while considering both the demand side and the supply side impacts. BRI is likely to have a major trade creation effect that will be significant for both EU and China and, regarding export of consumer goods, could leverage on the needs of the emerging Chinese middle class; moreover, economic analysis suggest that some Italian industries, like automotive and electronics, will benefit more than others (see E. Fardella, G. Prodi, The Belt and Road Initiative Impact on Europe: An Italian Perspective, in China & World Economy, 125-138, Vol. 25, no. 5, 2017).
But at the same time, considering for example consumer law or labor law, China of course has not the same level of rights protection that is granted by the EU, which could lead to an unfair competition. When in 1957 the Treaty of Rome created the European Economic Community with the aim to eliminate barriers between the European region and to create a common market, it was clear to all that fair competition is possible only if the rules are also unified, especially those related to consumers, environment, capital market and financial services.
In the last months, especially after the signing of the Memorandum, the scope of BRI has been object of debate in Italy and Europe, also because Italy is the first G7 country that has adhered officially to the Initiative.
Actually the Memorandum, which was signed during President Xi's visit to Italy along with other 19 intergovernmental bilateral cooperation documents, is perfectly in line with the general rhetoric of the initiative and does not enter into specific details: in only 7 pages it lists the objectives and guiding principles of cooperation, the areas of cooperation, the modes of cooperation, the cooperation mechanism, the settlement of differences and the applicable law. Regarding in particular the areas of cooperation, the interventions shall regard: policy dialogue on connectivity initiatives, with the support of the Asian Infrastructure Investment Bank; transport, logistics and infrastructure, with a particular attention to sustainable, safe and digital transport solutions; trade and investment, with a commitment to free and open trade; financial cooperation, with a focus on fiscal, financial and structural reforms and the aim to support investment and financing cooperation; people-to-people connectivity and exchanges, with particular consideration of cultural heritage and UNESCO sites; green development and cooperation for promoting the global process towards green, low carbon and circular development and for reducing climate changes.
Italy has been criticized in particular because it has supposedly acted alone, without the participation of other European countries. This is a valid argument only partially, since other European partners have already formed significant relationships under the BRI umbrella: one year ago France negotiated a "joint statement", similar to the MoU, with China; Germany has already simplified customs procedures so that there is no requirement for trains from China to have stops; Rotterdam's harbor is partly owned by a Chinese shipping company.
What is true is that, as commentators observe, China is still a developing country that needs Europe as a partner to drive the change that it is facing: consequently, probably the most suitable place to discuss these bonds is Europe and not the single member states. In this light, it is very welcome that on the 9th April China signed a joint statement with Europe, where some of the most crucial issues pertaining the impact of BRI have been addressed