Michele Geraci (Geraci), former undersecretary of state at the Italian Ministry of Economic Development

Editor's note:
This year marks the 10th anniversary of the China-proposed Belt and Road Initiative (BRI), a global cooperation platform that demonstrates China's vision for global development and offers solutions to the reform of the global governance system and multi-faceted challenges. Against this backdrop, the Global Times is publishing a series of interviews with renowned scholars, think tanks, and financial institutions, sharing their insights and understanding of how this initiative has earned global recognition and growing esteem. This is the 12th installment in the series.

The Global Times reporter Li Xuanmin (GT) recently conducted an interview with Michele Geraci (Geraci), former undersecretary of state at the Italian Ministry of Economic Development who was also a main architect behind Italy's joining of BRI back to 2019.  Italy is the only G7 countries that have joined the initiative, and according to media reports, the Italian government is weighing on a decision to withdraw from the global cooperation platform. How would this potential decision impact China-Italy relations, and what benefits have Italy gained from joining BRI? Geraci shared his insights on these questions during the interview, while clarifying certain misunderstandings that downplay the potential results of BRI cooperation between China and Italy, as well as between other BRI participating countries. 

GT: It is reported that the Italian government is considering withdrawing from BRI and a decision will be made later. What would the potential withdrawal mean?

Geraci: A potential withdrawal would be damaging to the relationship between China and Italy. The BRI is an initiative very important for China, and this year marks the 10th anniversary of BRI, and we also have the third Belt and Road Forum (BRF) for International Cooperation this week. So the timing of the decision would be very bad, and the message Italy sent is negative.  

The relationship between Italian and Chinese companies would also be impacted negatively. And the companies that suffer most are the Italian companies, because the BRI will continue to live and exist with the other 140 or so countries, without Italy. It is the Italian company that would not to be able to participate in the BRI projects.

The discussion is on both sides, and my prediction as of now is a 70 percent chance of staying, and 30 percent chance of exiting.

GT: With regard to the ongoing discussion on BRI, some Italian politicians said that they do not consider BRI membership to have sufficiently benefitted its economy. What is your perspective?

Geraci: First of all, for people who say that we should leave the agreement because it has not brought positive benefit to our economy, they don't understand that this agreement is a free option. There is no obligation or commitment. So even if it was true that the benefits have not significantly materialized yet, you should still remain because the benefit will come later. It's a zero-cost option, equates to an option value with no downside. They make a bigger mistake on the methodology. They don't understand the possibility of a future benefit and they want to give up the potential for nothing. For me, that kills the argument of staying or not stay.

The second thing they don't understand is that there have been indeed benefits, if not a lot because we had three years of COVID and Russia-Ukraine conflicts. So it is very silly to simply analyze the result of an agreement during the last three years, when the world was in trouble. But still, there have been some benefits or so. Export to China has grown slightly, and then the exports from Italy to China has grown more than the exports from France and Germany to China, which was exactly one of the goals of MoU I did: To make sure that Italy does catch up with Germany and France. Italy's exports to China grew by 22 percent from 2018 to 2021, and 11 percent from 2018 to 2022. And the France and Germany grew by 1 percent or 2 percent in the same period. So we did grow more than them. So in a way, an objective was achieved. 

Third, there have been discussions on increasing trade deficit. People who say that the deficit is bad for our economy don't understand the economy. They don't understand the purchase from China is also very good. That's what trade is about. The trade is not about surplus or deficit, it's about the sums, or the import plus exports, not the difference. This is what brings benefit.This is a very fundamental mistake of people who do not understand basic economy. The fact that we buy more from China, it is good for our economy, as the imports from China are input to our production chain and manufacturing industry. 

Buying more from China has kept the inflation to relatively low, so it has mitigated the problem of inflation. That was one of the biggest global problems in the last two years. So imports from China have been positive for our Italian economy, not negative. 

GT: What are the other benefits to Italian economy that BRI has brought?

Geraci: One benefit you can confirm is that the image of Italy has increased. In the eyes of the Chinese government, the eyes of Chinese consumers, potential Chinese tourists and potential buyers of our fashion, luxury products, good image of Italy has increased. 

This is very important and it's important in both ways. If the Italy were to leave the BRI MoU, maybe the image of Italy in the eyes of Chinese consumers would be damaged. That would create a very big problem to our consumer goods, the export of fashion, furniture, luxury, and so on, because we know the Chinese consumers react [differently] to countries that are friendly and countries that are not so friendly. So when we were friendly to China like we are now, this has increased the potential Chinese consumers. 

In fact, just after we signed the BRI MoU, we also had another agreement with the travel agency Ctrip, that wanted to increase the flow of tourists from China to Italy. So that was immediate direct benefit and this is a potential after we are reopening. 

There's also something I wanted to do, to cooperate with China for the development of Africa, like infrastructure and joint projects that would help Africa to develop. First, we make revenue from these projects, and we open up a new market for our exports, because we all want Africa to be prosperous. 

GT: Dated to 2019, what were the main reasons that prompted Italy to sign the BRI MoU?

Geraci: The reason was to make Italy participate in the biggest infrastructure development project in the world. And I believe that developing transport, infrastructure, energy, and ports is the key of economic development. We knew there were many other countries participating in BRI, and we knew that Asia and Africa, which have wider participation in BRI, are the two continents that will grow most economically. And therefore, I personally wanted Italy to be part of this big project, because it would bring economic and social benefit to our country. It's a big opportunity and we want to be part of it.

GT: China just issued a white paper on BRI. And could you share your insights on the white paper?

Geraci: I think the concept is that BRI is a thing that belongs to the whole world is very important, because in the discussion on whether Italy should stay or exit the MoU, the whole discussion concentrates on benefits of China and Italy. BRI framework is not only about economic relations between China and a single country like Italy, but it is the relations between all the participating countries that matter more, or Italy's relations with the other over 140 countries. If Italy withdraws, what should it do with the other over countries? China is leading the initiative, but BRI belongs to the world, this concept is growing more important now, because during the time of geopolitical tensions, we need more cooperation, and more infrastructure input.