Italian trade with Australia: a picture of surprising resilience?
Disruptions to trade caused by the pandemic had a serious impact on the world economy. As the situation finds a new equilibrium, it is worth taking stock of the trade balance sheet between Italy and Australia.
Italy was one of the nations most severely affected by COVID-19 in human and economic terms. It was European ground-zero for COVID-19, suffered the most deaths, and was the first EU nation to enact serious lockdowns. The situation was so bad that the Italian government accused the EU of being slow in coming to Italy’s aid. The neglect was such that European Commission boss Ursula Van Der Leyen issued a “heartfelt apology” to Italy for not helping at the start of its deadly coronavirus outbreak.
Responding to the serious impact of COVID-19 on Italy, the EU decided that Italy would be the biggest beneficiary of the EU’s 724 billion euro post-pandemic recovery fund (RRF). Unsurprisingly, spending the recovery fund within the time limits will not be simple for Italy. A change in governments (from technocrat Mario Draghi to populist Georgia Meloni in September 2022) and, with it, a change of agendas in Rome, along with stringent processes imposed by Brussels, means releasing these funds has been a tortuous process.
ITALIAN TRADE WITH AUSTRALIA
Given the economic difficulties of the last few years in Italy, the country’s trade resilience with many partners, including Australia, is somewhat surprising, especially regarding exports. Over $A8 billion worth of Italian imports were sold to Australia against $A1.4 billion of Australian exports sent to Italy. Italian pharmaceutical products, travel goods, and heating and cooling equipment were the main items arriving from Italy. In the case of Australian exports to Italy, wool, coal, and aluminum made up the bulk of exports.
EUROPEAN PARTNERS AND TRADE
Australian exports from and imports to key European partners in $A billion
INVESTMENT
Another measure of the economic relationship is investment between the two countries. Australian investment in Italy is more than twice Italian investment in Australia. In 2021, the total stock of investment between Italy and Australia was valued at $A11.3 billion, while the Australian total stock of investment in Italy totaled $A8.7 billion. Australian companies with a presence in Italy include Lendlease, which has a major contract to create the Milan Innovation District on the former Expo 2015 site, and Macquarie, which is part-owner of Autostrade per l’Italia, one of Europe’s largest toll road operators, and Open Fiber, a fiber to the home (FTTH) wholesaler. Italian investment in Australia is focused on infrastructure and energy, with major companies such as Webuild, Ghella, Rizzani de Eccher, Enel, and ENI involved in key projects.
Austrade, the Australian Trade and Investment Commission maintains a small office in Milan but has shifted its focus primarily to Italian investment attraction to Australia. Much of Australia’s trade is conducted by large enterprises directly through specified sales platforms.
EUROPEAN UNION – AUSTRALIA FREE TRADE AGREEMENT
Another element in the Italy-Australia trade relationship are the ongoing Free Trade Agreement (FTA) between Australia and the European Union negotiations that began in July 2018. Even with the UK’s exit from the EU, its market portion remains sizeable. The EU is a high-income market of some 450 million people with a nominal GDP of US$16.6 trillion. As a bloc, it would be Australia’s third-largest two-way trading partner and second-largest source of foreign investment. After a pause in negotiations resulting from the establishment of AUKUS, negotiations resumed with the direct involvement of Australia’s Trade Minister, Don Farrell, who visited Brussels in early July. He visited the EU hoping to secure a better deal for Australia regarding agricultural quotas and regulations around geographic indicators related to the branding of products such as Prosecco, Feta cheese, and others. In both cases, Brussels was firm on these matters, and Australia has to decide whether to accept a deal in a form it did not want, to hold on for another opportunity, or to walk away.
Australia remains a significant trade and investment player in Europe even though its exports to Italy remain comparatively low. On the other hand, Italian exports to Australia continue to increase, reflecting Italy’s ability to add value to manufactured items despite Australia being a long way from Europe. Whenever it is concluded, the Free Trade Agreement between Australia and the EU will provide greater chances for all goods and services between the two sides, and especially for small and medium enterprises (SMEs), to join the export figures. The EU and Australia indicate in their communications that SMEs will be winners of this agreement.
