Why Italy cannot keep Xi and Trump happy

By Andrew Hammond

Chinese President Xi Jinping begins an Italian trip Thursday to reportedly sign a memorandum of understanding (MOU) for the Belt and Road Initiative (BRI).

The expected move will be the first time any G7 state has endorsed the $1 trillion plan which lies at the center of a geopolitical contest between China and the United States for global influence.

While Rome is not always seen as being among the top-tier global powers, part of the reason why the development has such potential significance is Italy's continued systemic importance in Europe. As a G7 country, it is the third-largest eurozone economy and poses perhaps the biggest threat to the single currency area's future because the country has the second-biggest debt load in the bloc after Greece.

And it is Rome's current economic travails which are a big driver of its apparent decision on the Belt and Road. With Xi starting his trip in Venetia, some Italian leaders have also invoked the spirit of Marco Polo by hailing what some have called the “new Silk Road.”

The revelation that Rome has been deep in discussions with Beijing first emerged two weeks ago when Italian Undersecretary of Economic Development Michele Geraci said that Italy was considering signing an “initial framework” accord. That prospect, which predictably irritated Washington, drew an immediate rebuke from Garrett Marquis, a National Security Council spokesman who asserted that there was “no need for the Italian government to lend legitimacy to China's infrastructure vanity project”.

Yet, it is not just Washington that is concerned, but also Brussels too. EU officials are increasingly conscious of Beijing's influence across the continent, including the so-called “16+1” initiative of China and key countries in Eastern and Central Europe. Buttressing this, a number of EU states have already signed MOUs with China on the BRI, including Croatia, the Czech Republic, Hungary, Poland, Greece, Malta and Portugal.

Like Washington, Brussels has reservations about the BRI, not least given wider frustrations over Beijing's perceived slowness to open up its own economy, and a wave of Chinese takeovers of European firms in key industries. Yet, Brussels has declared it will cooperate with the grand initiative “on the basis of China fulfilling its declared aim of making it an open platform which adheres to market rules, EU and international requirements.”

As well as being divisive with Washington and Brussels, Geraci's initial comments prompted an apparent split in the Italian government itself too indicating that Rome had not 100 percent made up its mind on this issue. Take the example of Deputy Minister for Foreign Affairs and International Cooperation Guglielmo Picchi who commented last week that “at the moment, I do not think we should proceed with the signature.”

These signs that Italy might back out of the plan, especially in light of U.S. criticism, then irked China. Take the example of Foreign Minister Wang Yi who hit back that “Italy is an independent country. We trust that you'll stick to the decision you have independently made” on the BRI.

Wang's frosty response and the concern about the BRI in much of the West stem from the scheme's immensely ambitious nature. Beijing has big plans to boost trade and stimulate economic growth across Asia, Africa and beyond by building massive amounts of infrastructure and connecting it to countries around the globe.

Take the example of Pakistan, for instance, where Beijing has already made commitments of around $60 billion under the BRI. While this is to be largely spent on infrastructure, it has cemented warming geopolitical ties with Islamabad, a previous longstanding U.S. ally during the Cold War.

In this context, one of the key reasons why Washington will have been so upset by recent revelations from Rome is that the Trump team had been trying to form its own strong relationship with the populist government there. Indeed, Italian Prime Minister Giuseppe Conte, who met with Donald Trump several times last year, including at the White House, was perceived by some to be emerging as the U.S. president's strongest supporter in Western Europe.

Trump last year declared Conte “a really great guy” and that he “will do a great job ― the people of Italy have got it right”. And this political affinity appeared to rest not just on apparent personal chemistry, but also the alignment of their policy positions on key issues like Russia and immigration.

While the Trump team therefore has particularly perceived reason to feel vexed, should Conte sign the MOU with Xi as reported, concern about the BRI is bipartisan in Washington given the concern of many Democrats about the growing Chinese international influence.

This was underlined, during the Obama administration, when Washington raised significant concerns about the degree to which London was then perceived to be cozying up to Beijing under the previous government of David Cameron, including the U.K.'s decision to become a founder member of the Asian Infrastructure Investment Bank which is being championed by Beijing as a potential alternative to the World Bank.

Taken overall, Italy's anticipated endorsement of the BRI will be a political breakthrough for Beijing. This is especially so given that the White House had perceived that the populist stripe of the administration in Rome had brought new spice to bilateral bonds following the positive initial meetings last year between Trump and Conte.

Andrew Hammond (andrewkorea@outlook.com) is an associate at LSE IDEAS at the London School of Economics.