It's in our best interests to partner Europe, not America

IT IS not often I admit to being 100 per cent wrong, but William Hague's Euro-ballot is an example of just how wildly wrong you can be. Back in 1986, when Heseltine walked out of Mrs Thatcher's cabinet on the issue of Westland, it became part of my set speech to predict that the Tory party would bitterly divide on the issue of Europe. Thatcher's determination that the helicopter firm would be taken over by an American corporation scuppered Heseltine's dream of an emerging Europe-wide defence industry. I dread to think how many audiences I regaled with my prediction that Europe would split the Tory coalition of big business interests from the English petty bourgeoisie who staff the Tory party at every level. While this is exactly what has happened, and explains why big business is so eager to cuddle up to Labour, my great error was to predict that big business interests would come out on top and the Tory Eurosceptics would be defeated.

Instead we have seen a dramatic rout of the pro-Europe wing of the Tory party. No amount of whingeing can hide the fact that as an exercise in mass democracy, Hague's ballot has triumphantly demolished any remaining hopes of the Europhiles. It has also triumphantly demolished any chance of the Tories winning the next election, which is a pity because a government without an effective opposition will have a tendency to arrogance and complacency.

In retrospect, the defeat of the Tory Euro-wing should not have been a surprise. Late one night in the middle of one of the interminable debates on the Maastricht Treaty, Sir Peter Tapsell, to widespread approval from the Tory benches, declaimed that he could divide his life into two phases. In the first the German army had tried to dominate Europe, and in the current phase the Bundesbank was trying to dominate Europe. Sadly, a few Labour voices were raised in support of this interesting analysis. Almost without exception, when you scratch a Eurosceptic you reveal a Germano- phobe. It's no coincidence that the few remaining Labour Eurosceptics come from the generation whose politics were formed during the Second World War.

The idea that the European Union is a crafty German plot to win by stealth what they failed to achieve in two world wars is the product of too much gin and tonic in the Commons smoking room. The force that now drives us towards a United States of Europe is overwhelmingly economic. In the real world economy of Intel, Microsoft and Boeing, one thing is immediately obvious. The huge scale of production required for efficiency means that new products require an international market. Even the largest economy in the world, the USA, has moved away from a self-contained one, to one in which its companies export and produce on an international scale.

The world economy is now dominated by three great blocks: the US, Japan and the EU. The size of all three is in the range of four to seven thousand billion dollars. Excluding internal trade within the EU, these three great blocks are still relatively self-contained, with exports and imports amounting to less than 12 per cent of each block's GDP. It's wholly improbable that this convergence in the proportion of exports and imports at this size of market is accidental. It seems pretty clear to me that $4,000bn dollars is the minimum size of market required for a rounded development of a modern economy, and some sectors of production can already only operate efficiently in the even larger global market. Whereas in the Sixties the German firm Siemens could develop the next stage of switch technology based on its control of a third of the West German market, to achieve the equivalent new developments today requires a firm to control a quarter of the global market.

The American government has clearly understood what is at stake. It has cajoled and prodded US corporations to prepare for global competition. The transformation of the American economy has been stunning. The first stage was to gain access to Canada's raw materials via a trade pact which allowed their unrestricted exploitation by American corporations.

And the second stage, achieved by the Nafta treaty, brought in a pool of cheap Mexican labour that allows American corporations to compete with Japan's South East Asian cheap labour and Europe's in the former Communist nations. Clinton has also been able to use America's dominance of the IMF and the World Trade Organisation to force competitors to open their economies to newly invigorated corporate north America. The goal is clear: the recasting of the whole global economy as a world America.

The drive towards European Union is precisely because the most far-sighted European governments would prefer the alternative European economic model, with its greater concern for the environment and workers rights, to say nothing of its superior welfare state. As a socialist, I have not the slightest problem in deciding which of these two models is the lesser evil.

No one would deny that many European economies need major reform in the face of the renewed US onslaught, but that reform must be based on protecting employment and our environment. This won't be achieved by producing a fortress Europe, and certainly not by the so-called "new protectionism".

Instead, Europe must look outward to the rest of the world and follow a consistent strategy of reforming the IMF and the World Trade Organisation so that these institutions can be used to pull emerging economies up to European norms on issues such as the environment and workers rights.

Labour should have been prepared to join the Euro from the beginning even though this would have meant increasing taxes. We would have seen a counterbalancing fall in interest rates.

There is no future for a modern economy outside one of these great trading blocks, which is why Newt Gingrich has urged Britain to apply to join Nafta, a call that has been taken up by Conrad Black's Daily Telegraph and Rupert Murdoch's empire. The coming recession will make the choice of Nafta or Europe all the more stark. We can be part of a US-dominated block where we have no more influence than Canada, or we can be equal partners with France and Germany in Europe. I can see why Black and Murdoch have made their choice. No one in the Labour Party should have any doubts that to be full partners in Europe is in our best interests.