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China's New Silk Road May Hurt Italian Workers, Analysts Say

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Chinese President Xi Jinping, left, and Italian Prime Minister Giuseppe Conte shake their hands following the signing of a memorandum in support of Beijing's "Belt and Road" initiative, at Rome's Villa Madama, March 23, 2019.

Italian Prime Minister Giuseppe Conte signed up his country Saturday to China's Belt and Road Initiative (BRI), an ambitious trillion-dollar transcontinental trade and infrastructure project. The memorandum signing in Rome was the centerpiece of Chinese President Xi Jinping's three-stop visit to Europe and it will make Italy the first G-7 nation to participate in China's so-called New Silk Road.

Italy's endorsement of the BRI, which spans Eurasia as well as the Middle East and parts of Africa, has prompted the disquiet not only of the United States, but also of European Union leaders, who have voiced concern about Beijing's growing political clout in Europe and its use of commerce as a tool of statecraft. The U.S. has been critical of the trillion-dollar project and warned about the risks of "debt-trap diplomacy." Members of the EU are worried the plan could add to fissures in an already strained coalition.

They aren't alone in worrying about what the longer-term consequences on Italy might be if signing up for BRI moves from symbolism into full participation. Matteo Salvini, head of the populist Lega party, which represents one-half of Italy's coalition government, is indicating his opposition by staying away from the signing ceremony and won't be present at a scheduled gala dinner afterward.

Salvini, an ideological bedfellow of Donald Trump and friend of the U.S. president's former adviser, Steve Bannon, frets the BRI risks turning Italy into a Chinese colony and will saddle it with more debt. He also has publicly indicated his security concerns about allowing the Chinese control of critical infrastructure, including major ports.

"Before allowing someone to invest in the ports of Trieste or Genoa, I would think about it not once but a hundred times," Salvini said earlier this month.

Some Italian officials in the economy and finance ministry have also offered behind-the-scenes warnings. They argue that while engaging with Beijing in this manner may help boost Italian exports to China, a prospect highlighted by Xi in marketing BRI, it will likely result in a bigger boost for cheap Chinese exports to Italy.

FILE - A map illustrating China's so-called "One Belt, One Road" megaproject, is displayed at the Asian Financial Forum in Hong Kong, China, Jan. 18, 2016.
FILE - A map illustrating China's so-called "One Belt, One Road" megaproject, is displayed at the Asian Financial Forum in Hong Kong, China, Jan. 18, 2016.

Such a scenario, they caution, could have a ruinous impact on domestic Italian producers and workers.

"If trade does take off significantly, it might be a matter of short-term gain, but long-term pain," one official told VOA.

Despite the warnings, as well as U.S. and EU disapproval of Italy's BRI endorsement, Conte and Luigi Di Maio, leader of the anti-establishment Five Star Movement, which makes up half of the country's populist coalition government, says Chinese investment could kick-start Italy's sputtering economy.

Several of the EU's smaller cash-strapped nations have also signed up in the past two years to China's BRI, hoping that by doing so their economies will be boosted.

Italy slipped into recession last year and its debt levels are among the highest in Europe. The populist coalition government came to power in June 2018 with high-spending plans, promising expensive pension reforms and a living wage for all Italians.

Italian ministers favoring BRI accuse other large EU countries, including France, which is critical of the BRI, of hypocrisy, saying they conduct multi-million-dollar deals anyway with China albeit outside the framework of the New Silk Road initiative.

"The way we see it, it is an opportunity for our companies to take the opportunity of China's growing importance in the world," Italy's under secretary of state for trade and investment, Michele Geraci, told foreign reporters.

FILE - Journalist take pictures outside the venue of a summit at the Belt and Road Forum in Beijing, China, May 15, 2017.
FILE - Journalist take pictures outside the venue of a summit at the Belt and Road Forum in Beijing, China, May 15, 2017.

But some Italian officials worry that view might be short-sighted.

They say while the BRI may offer Italy new funding sources — the country is still lagging well behind the foreign investment levels it enjoyed before the 2008 global financial crash — it could trigger a significant wave of Chinese imports, which would have long-term detrimental consequences for Italian industry, employment and politics.

The officials in the country's finance ministry, who declined to be identified for this article, have been scrutinizing recent academic studies on the impact of Chinese imports on local labor markets. A series of studies, including those by economists David Autor, David Dorn and Gordon Hanson, suggests that Western countries and regions exposed to rising Chinese import competition see a major jump in unemployment, lower labor force participation and lower wages. Unskilled and manual workers are especially adversely affected.

The impacts "are most visible in the local labor markets in which the industries exposed to foreign competition are concentrated. Adjustment in local labor markets is remarkably slow, with wages and labor force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences. Exposed workers experience greater job churning and reduced lifetime income," noted Autor, Dorn and Hanson in a paper for the National Bureau of Economic Research, an influential U.S.-based nonprofit.

Other recent academic studies have noted that the regions of the U.S. and Europe most impacted by trade with China are the ones which in recent elections and plebiscites have backed populist candidates and nationalist causes like Brexit, support fueled by anger at the effects of globalization. Brexit is Britain's decision to leave the European Union.

"Ironically, looking to Beijing for an economic boost and to alleviate economic deprivation could well hurt the workers and businesses who backed populists in the first place and who the populists want to help — Salvini gets that, but the rest of the coalition doesn't," observed an Italian official.

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