Caught in shifting sands on Europe

Twenty years ago, I was an anti-European. Today, I am a pro-European. The strange thing is that my views have not changed. I have always thought that Britain should stay out of the euro but inside the EU.

During the John Major and Tony Blair years, when the euro was the dominant issue, that position made me a eurosceptic. But now the argument has become about whether Britain should leave the EU altogether. The frontline in Britain's civil war over Europe has moved and, because I have stayed in the same place, I find myself on a different side of the battle-lines.

When the single currency was first mooted, I opposed it because I thought it was a dangerous economic experiment designed to promote an undesirable political union. But I still thought it made sense for Britain to remain inside the EU to reap the benefits of the European single market and the diplomatic and cultural links that come with membership.

The people who want Britain to leave the EU argue that my position – inside the EU, but outside the euro – no longer makes sense. They make two main arguments. First, the euro crisis is now creating an inevitable drive towards political union that will eventually suck in all EU members, so Britain's position is untenable. The second argument is that the British economy can do just as well, or better, outside the EU. But this first claim – that the euro crisis will inevitably lead to a political union, involving all EU members – does not withstand examination. It is true there has been an increase in federalist rhetoric, as Europeans search for a way out of the current euro-nightmare. But popular support for "ever closer union" is actually plummeting. Meanwhile, the divisions between the French and German governments – and between northern and southern Europe – are getting ever wider. There also remains a sizeable group of countries that, like Britain, are inside the EU but outside the euro – and likely to remain so for many years. Even where the euro has forced deeper integration, most notably in the decision to sign a "fiscal pact", legally enshrining restrictions on budget deficits, Britain has successfully fought to stay out. The future of the EU has never been so unstable or uncertain. It is bizarre to assume that a successful political union is now inevitable.

Economic crisis
However, the very economic crisis that makes Europe's future so uncertain has also gravely damaged the prestige of the EU. That has revived the British temptation to turn its back on Europe in favour of the rest of the world. Lord Lawson, Margaret Thatcher's former chancellor, argued recently that the real economic opportunities for Britain now lie in emerging markets – and will be better exploited if the UK withdraws from the EU.

It is true that Norway and Switzerland are prosperous European countries that are not members of the EU. However, both have decided that they need access to the EU single market and, to get it, have had to accept the market's rules, either wholesale like Norway, or through a painful series of sectoral negotiations like the Swiss. Yet they have no say in making the single market's rules. This is so clearly a bad deal that Lord Lawson and others argue that Britain should quit the single market altogether and simply rely on the protections of the world trading system.

In solving one problem, however, Lord Lawson immediately confronts two others. First, one has to assume that the Norwegians and Swiss, in seeking access to the single market, have simply misunderstood their own best interests. This seems unlikely. Second, Britain still sells a lot more to Europe than to emerging markets.

Lord Lawson argues that membership of the single market has led British industry to fail to recognise that the real opportunities now lie in Asia. But this argument poses a false choice. German manufacturers have done very well exporting to China from inside the single market.

A disdain for Europe may also be leading Britain’s anti-Europeans to romanticise the opportunities in emerging markets. If they find the bureaucrats of Brussels high-handed, they should try Beijing. A British diplomat recently told me ruefully that China is the only place where he had been told to remember that Britain is a “weak and declining nation”. It would also be easier to push the British around if they are no longer part of the EU, the world’s largest trading bloc.

The other Bric countries do not offer a much easier ride. Despite winning a case in the Indian supreme court, Vodafone, one of Britain's largest companies, has been hit with a $2.6 billion retrospective tax bill in India. BP executives have had to flee Russia, for fear of arrest. European law may be annoying. But it is a lot faster and more predictable than the Indian or Russian legal systems. – Copyright The Financial Times Limited 2013