The Dragon in the Room What lies ahead for the economic partnership between Italy and Australia? by Giovanni Di Lieto
W
hat the Italo-Australian trade relationship will look like by 2030 will depend on China. Here’s why. Despite the vast distance between Italy and Australia, as well as structural differences in their respective political and socio-economic systems, both countries share similar geopolitical dynamics in the fracturing world trade system. To begin with, both countries are caught between a rock and a hard place as the past decade saw the US-China competitive cooperation turn into a hostile contest for economic hegemony over Asia and beyond. Long gone are the days when Italian and Australian firms could trade freely and sometimes sell out to China while enjoying the protection of the USA’s security patronage across both the Atlantic and Pacific oceans. Since the dawn of the century, while the US was distracted with the war on terror, China strived to make significant geopolitical advances in Asia, Europe and Africa. With the more assertive leadership of Xi Jinping beginning in 2013, China made it clear to trading partners that it was never just about the money. In the 2020s, US-aligned middle powers like Italy and Australia find themselves on much shakier ground, as it becomes increasingly untenable to have their cake and eat it too - that is, to trade with China without giving up support of US hegemony over Asia and Europe. It is rather ironic that this external change of circumstances to the Italo-Australian trade relationship comes at a time of
Segmento Issue XXII • March-May 2021
historically high diplomatic relations between Australia and the European Union, with Brexit having at last occurred and the EU-Australia free trade agreement negotiations well under way. However, the main problem today is that between Italy and Australia there is China, literally as a geographic and diplomatic presence. This means that any meaningful development in the economic partnership between Italy and Australia in the coming decades is entirely dependent on how each country is going to deal with China’s rising power and the US reaction to it. To be pessimistic, it is quite possible that the US-China contest could become an insurmountable trade/security wedge - if not a new iron curtain - between the Atlantic and Pacific oceans that will force Italy and Australia even further apart, to a place not seen since the 1930s. But even from an optimistic view we face a tricky scenario, as Italy and Australia could grow closer only if they braced together in a fight against a common enemy - be it China or the US. I don’t need to list the many ways in which the geopolitical relationship between our two countries deeply affects our material consumptions, life choices and financial investments, as any Italian-Australian individual surely and sometimes sorely knows. In other words, the geopolitical posturing and positioning towards China of both Italian and Australian governments is poised to make us all closer to or further away from Italy or Australia, as the case may be.
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