Drivers and Prospects for the Italian Economic Pivot in the Indo-Pacific

Abstract

What shapes Italy’s approach to the Indo-Pacific? This study analyses Italy’s current and emerging engagement with the Indo-Pacific region through the lens of trade, recognizing the area's growing geopolitical and geoeconomic significance. While Italy has so far refrained from formulating an Indo-Pacific strategy, debates continue on the extent of the country’s interest in the region. In order to contribute to such a debate, we argue that a closer look at the status of Italy’s economic engagement with the Indo-Pacific may reveal the existence of incentives that are independent of Italy’s traditional foreign policy interests, and much more connected to its status in regional trade. For this purpose, a mixed-methods approach is employed, combining a literature review with an original econometric analysis of Italy’s 2022 trade flows with 34 Indo-Pacific countries. Using a hierarchical regression model estimating the impact of the EU’s preferential trade regimes, including the Generalized Scheme of Preferences (GSP), the study introduces weighted measures for preference utilization by HS Section to reflect their export relevance. Our results show that higher weighted preference utilization significantly enhances Italian imports, suggesting preferences matter not only in scope but also in application. Such findings highlight the possibility of deepening Italy’s engagement with the region through the deepening of cooperation and trade with GSP countries. Positioned within the broader context of Italian foreign policy as a second-tier power, our study aims to lay the foundation for further debates on ‘friend-shoring’ initiatives that seem to be increasingly viewed with favour by the European Union.