Why we should take the Silk Road

We won’t be China’s next morsel

by Danilo Toninelli

Minister of Transport and Infrastructure

Dear Director,

I read the article “Italy must escape the claws of the Dragon” by Giulio Terzi di Sant’Agata with great attention. While respecting the legitimate position of the author, I do not share the gloomy scenario that is outlined with regards to the effects of the signing of the Memorandum of Understanding (MoU) and not even the conclusion that Italy may soon become China’s “next morsel”

As far as the aspects that most directly concern my Ministry are concerned, I would like to develop some considerations on the “Silk Road” theme starting from the relations between Italy and China in numerical terms and some general data.

The most recent statistics tell us that sea transport continues to be the main cargo-handling mode in the world: 80% of international trade travels by ship for volumes that, in 2018, were estimated at 11 billion tons of goods. The United Nations Conference on Trade and Development estimated an annual growth rate of 3.8% until 2023, with containerized traffic reaching peaks of +6%.

The doubling of the Suez Canal has led to an increase in the type and volume of maritime traffic arriving in the Mediterranean: to name but a few, the traffic of mega-containerships from 13 to 20 thousand teus has increased by 56% in 3 years. We are talking about the Mediterranean, a sea where 20% of the world’s commercial maritime traffic and 25% of containerized liner services pass and where the goods handled have increased by 500%  over the last 20 years. Trade in goods in transit from Suez is growing at a rate of over 9% per year, also taking advantage of the slowdown in the Pacific route due to the trade war between the USA and China.

For China, the Mediterranean is the crossroads between European markets and North Africa, with the opportunity of reaching the east coast of the United States. To date, 60% of Chinese trade is by sea. The country is therefore the world leader in maritime transport, with a 35% share of container traffic.

The enormous quantity of goods from East Asia has led to massive investments in northern European ports, particularly in Germany (Bremen and Hamburg), Belgium (Antwerp) and the Netherlands (Rotterdam and Zeebrugge), while North African ports are also growing at double-digit rates. Competition from the southern bank of the Mediterranean will also intensify as Algeria has allocated 3.3 billion dollars to build a container terminal of over six million Teus in El Hamdania, about eighty kilometers from Algiers.

In this development framework, with Italy having geographical advantages compared to Northern European ports and North African ports, as it stretches out into the Mediterranean like a long quay – part of the Government’s desire is to improve our relations with the world’s second largest economy. Other major European countries, in particular Germany, the United Kingdom and France, have already finalized close collaboration with China and receive far more direct Chinese investment than Italy does.

I spoke of “improving our relations” because there is an incontrovertible fact: the “Silk Road” is nothing new. The network of interconnections on the Italy-China route already exists, has grown exponentially over the last few years and today has well–consolidated numbers.

As far as Italy is concerned, in fact, Chinese exports to our country increased in 2018 from 28.4 to 30.8 billion euros and China is Italy’s main supplier with a share of 17% of all Italian imports by sea. As far as Italian exports to China are concerned, they reached 13.2 billion euros in 2018. Trade between Italy and China has increased by 65% since 2009.

There are more than 600 Italian companies with Chinese capital which generate almost 18 billion euros in turnover and employ more than 30 thousand employees, but there are more than 2 thousand Chinese companies with Italian capital which provide work for almost 160 thousand employees in China and generate more than 25 billion euros in revenues. These are Italian companies that are not only in China to relocate production but that see the Chinese market as an opportunity for increasing their profits.

If we focus our attention on our ports, Italy has concentrated on the quality of its infrastructure and its proximity to Central and Eastern European markets, taking advantage of the opportunities of existing operational port and rail systems, such as the North Tyrrhenian network with Genoa and the Northern Adriatic network with Venice and Trieste.

35% of the commercial transactions of the ports of Genoa and Savona is with China, a percentage destined to increase as the Vado Ligure Terminal is about to become operational. Three of the top- ten world ports that have commercial exchanges with the port of Genoa are Chinese. Out of a total of more than 2 million containers handled in 2018 in Genoa, 412 thousand concern the Chinese market. Italy’s north-eastern “arch” with the port of Trieste, which has 600 million investments in progress and which started 10,000 trains to the flourishing markets of Central Europe in 2018, with a growth forecast of 10% in 2019, is attracting a lot of attention.

But if Trieste and Genoa, due to their particular geographical position, are considered the main ports for the arrival of goods from the Far East, other Italian ports of call can also play a key role thanks to the development of the Ten-T networks and the massive investments in the Italian Railway system to improve the connections of the national network with our ports.

China has not ignored this potential and the strategic role that Italy’s geographical position guarantees to its ports, as a platform for the distribution of goods from Asia and a collection point for European goods to be distributed on the global market. However, this interest in our quays cannot lead to the risky and a little simplistic conclusion that Italy is preparing to give up the control of strategic infrastructural assets or that our ports are “for sale” to China, as happened with Piraeus during of Greece’s recent serious financial crisis. In that case, the Chinese State Company COSCO acquired 67% of Piraeus Port Authority. This is not the scenario for our Port Network Authorities, that are non-economic public bodies of national importance under special regime, called to manage state maritime-port areas and operate under the vigilance of the Ministry.

There is simply a potential for investment, a feverish commercial excitement, a liveliness on the markets and in the Mediterranean,that Italy must be able to manage and improve, without being submissive. For this reason, the Italian Government, signing the Memorandum of 23rd March last, wanted to reaffirm that the Italian ports act as a privileged Maritime Silk Road terminal, in a balanced relationship with the counterpart, with each respecting the other’s “national economic system”

The challenge, in fact, is to be considered by Beijing not only as a “market” but also as a “partner”, through a strong territorial infrastructural and logistic cohesion. Through innovation too. In this sense, the Memorandum contains a commitment to promote the development of bilateral collaborative projects, to develop the interoperability of infrastructures (ports and telecommunications), to facilitate mutual investment and trade, to achieve coordination of tax policies, to explore the possibility of collaboration in the training of human resources.

In the wake of an already well-structured trade partnership with China, the signing of the Memorandum has only facilitated further opportunities for collaboration with the watchwords of “reciprocity” and “mutual benefit”: a strong convergence of interests, as also mentioned by President Conte and President Xi Jinping, designed to strengthen trade and investment between two countries that consider each other important partners.

Translation by Giles Foster

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