Italy is the world’s 8th largest economy with a GDP of $1.9 trillion in 2017. In 2017 Italy was the 19th largest market for U.S. exports, which totaled approximately $18.3 billion, and the 6th largest export market in the EU, following Germany, the UK, Netherlands, Belgium and France. However, export values to the Netherlands (Rotterdam) and Belgium (Antwerp) are skewed by the ‘Rotterdam Effect’ where goods are valued at the port of entry, but then distributed throughout the EU.
The Italian economy is driven in large part by the manufacture of high-quality consumer goods produced by small and medium-sized enterprises, many of them family owned. Small and medium-sized firms, many of which are family-owned, comprise 99% of Italian businesses and producing 68% of Italy’s GDP.
U.S. exports to Italy are concentrated in high-value sectors such as pharmaceutical products (17%), nuclear reactors and machinery (12%), and aircraft (7%).
Italy’s cumulative inward FDI investment is well below the EU average due largely to structural problems, which affect domestic as well as foreign investment. U.S. direct investment in Italy totaled $24.6 billion in 2016, ranking Italy 8th in Europe, less than half of U.S. investment in France and one-fourth the size of U.S. FDI in Germany. U.S investment in Italy is concentrated in manufacturing, computer services and software, and energy, with significant industrial relationships in the aerospace and automotive sectors.
Italy’s regulatory environment is complex and at times lacks the transparency, clarity, efficiency and certainty found in other developed economies. Products that involve health, safety, or environmental concerns are likely to be highly regulated. While EU-wide regulations often apply, Italian laws may go beyond the basic EU requirements.
E-Commerce remains less developed in Italy due to factors such as a high level of credit card fraud, lack of trust in the postal system, limited broadband connectivity, and the traditionally less favorable return practices of Italian merchants. However, Italians do use the Internet extensively for social networking and information.
Italy ranks 46 out of 190 countries in the World Bank Doing Business Report and 54 out of 176 countries in Transparency International’s Corruption Perception Index.
The cultivation and maintenance of personal relationships are a vital part of doing business in Italy. Finding the right Italian agent, distributor, or business partner is therefore essential to enter the Italian market. It is usually not effective to rely on agents or distributors in neighboring markets, despite the existence of the EU common market. Patience is essential as it may take two to three times longer than expected to make relationships, establish a market presence or set up a business.
Treaties & Agreements
Italy and the United States belong to a number of the same international organizations, including the United Nations, North Atlantic Treaty Organization, Euro-Atlantic Partnership Council, Organization for Security and Cooperation in Europe, Organization for Economic Cooperation and Development, G-20, G-7, International Monetary Fund, World Bank, and World Trade Organization. Italy also is an observer to the Organization of American States.
As a member of the European Union (EU), Italy is bound by EU treaties and laws, including those directly governing or indirectly impacting business investments. Under both the EU treaty’s Right of Establishment and the Friendship, Commerce and Navigation Treaty with the United States, Italy is generally obliged to provide national treatment to U.S. investors established in Italy or in another EU member state. The two countries have enacted an income tax agreement to prevent double taxation.