On Europe

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On Europe
Margaret Thatcher

First published in her pioneering treatise Statecraft, the opinions and projections of the former Prime Minister on Europe remain potent and resoundingly prophetic.Margaret Thatcher foresaw the European Union as a swelling superstate, gradually eroding Britain's freedom. Irreparable and doomed, European integration did not allow for the birthright of nationhood. It was the most recent incarnation of an idea that has been tried many times before, and the outcomes were far from happy. “During my lifetime,” she says, “most of the problems the world has faced have come, in one fashion or other, from mainland Europe, and the solutions from outside it.”

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William Collins

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This eBook first published in Great Britain by William Collins in 2017

This is an extract from Statecraft by Margaret Thatcher, originally published in 2002

Copyright © Margaret Thatcher 2002

Margaret Thatcher asserts the moral right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988

Cover photograph © Georges De Keerle/Getty Images

A catalogue record of this book is available from the British Library

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Source ISBN: 9780008257361

Ebook Edition © May 2017 ISBN: 9780008263775

Version: 2017-05-08

Contents

Cover (#u15f9c53a-3cac-5eb4-851d-ae98d25568c7)

Title Page (#u852c51fb-66d9-52df-b995-efea85d0c082)

Copyright (#u3f964671-3043-58d1-9fcd-1e440df3def6)

1 Europe – Dreams and Nightmares (#u29cfee73-ad2f-56de-a06f-8bff2ea10d9c)

2 Britain and Europe – Time to Renegotiate (#litres_trial_promo)

Notes (#litres_trial_promo)

Also by Margaret Thatcher (#litres_trial_promo)

About the Author (#litres_trial_promo)

About the Publisher (#litres_trial_promo)

1

Europe – Dreams and Nightmares (#u57afc3dd-7a5a-575f-b040-f6e1016245ea)

THE PROBLEMS OF EUROPE

During my lifetime most of the problems the world has faced have come, in one fashion or other, from mainland Europe, and the solutions from outside it. That generalisation is clearly true of the Second World War. Nazism was, after all, a European ideology, the Third Reich an attempt at European domination. Against both, the resolve of Britain, of the Commonwealth and, decisively, of America were successfully brought to bear. A great victory for liberty was the result. The mainland Europeans benefited from an outcome which, by and large, they had not themselves secured: some have resented it ever since.

But my opening generalisation is also in a different sense true of the Cold War. Although it was above all in the Soviet Union, that is outside a narrowly defined ‘Europe’, that Marxism became the ideology of empire, Marxism too had European roots. Karl Marx was, it should be remembered, a European thinker in a line of European thinkers; he developed his ideas by studying the experience of Revolutionary France and, I am sorry to say, he prepared his works by courtesy of the British Museum, long before they took political shape in St Petersburg and Moscow; and it was finally the liberal democratic values of the English-speaking peoples, spearheaded from Washington, which proved the ultimate antidote to communism. For a second time – for a third if you go back further to the First World War, though the issues there are somewhat more complex – salvation came from across the Atlantic.

At a personal level, I am conscious that much of my energy as Prime Minister was also taken up with Europe – and, if I had my time again, still more would have been so. Of course, Britain was not in those days fighting a war against a European power. But there was an increasingly intense struggle, all the same – one which focused on issues of great national and international significance. And, looking forward into the century which has just begun, there is every reason to imagine that this clash of aims and ideas is likely to continue.

I want, therefore, to examine now in some detail what is at stake – in this chapter from a mainly global perspective, in the next from a more narrowly focused British one. Having sketched out the problems, I shall also suggest some possible solutions. These will, however, not by and large be directed at ‘Europe’. Too many British and other critics have spent too long trying to do that: it is, to speak bluntly, a waste of time, because, as I shall seek to show, Europe as a whole is fundamentally unreformable. My suggestions will thus be addressed principally to those who are still not fully party to the project, and thus not fatally compromised by it.

NEW STATES FOR OLD

For most of the Cold War period, the boundaries of Western states marked out on our atlases seemed remarkably clear, and seemed likely to last. In Asia, and still more in Africa, the situation was, of course, more fluid and confusing; though even there it was generally new names rather than new borders that appeared, as one after the other European colonies gained their independence. The greatest divide, though, was between communist and non-communist states, with the former, whatever their notional titles and dignities, falling under the sway of the Soviet Union or China, and the latter enjoying political sovereignty under the formal or informal protection of the United States.

Since the end of the Cold War, however, that easily identifiable and comprehensible pattern has radically, and probably permanently, changed. Recent years have seen more new states emerge in Europe than at any time since the 1918–19 Versailles and Trianon Treaties. Not that most of these were ‘new’ in the sense that they lacked political antecedents. But certainly in the former Soviet Union and in the Balkans the maps have been redrawn in ways that still leave politicians trying to draw breath, and cartographers in profit. This, then, has been one feature of modern times.

Yet over the same period, another and contrary trend has also emerged. While the countries of Eastern and Central Europe, the Balkans and the old USSR have been trying to establish viable national institutions, the countries of Western Europe have been seeking to supplant and replace theirs with international ones. The last pretences that the European Union is an economic organisation of freely collaborating independent states are now being discarded. I very much doubt, for example, whether any of his Continental equivalents would echo Mr Blair’s promise that he would ‘have no truck with a European superstate’ and would ‘fight for Britain’s interests and to keep our independence every inch of the way’ – and then advocate a European single currency.1 (#litres_trial_promo) Only in Britain does anyone still peddle such nonsense and expect to be believed. A fair-minded reading of recent history shows the way events are leading. Each new global development – the reunification of Germany, instability in financial markets, war in the Balkans, the rise of the American superpower – has served as a spur to create a politically united Europe. We are at or very near the point of no return. But Downing Street seems not to have noticed.

Of course, in one sense the confusion about the European Union’s true goals is understandable. No one has ever seen anything quite like it before. States, we must admit, are always to some extent artificial creations. After all, without the machinations of Bismarck there would probably have been no united Germany – at least not one based on Prussia. And much the same could be said of Cavour and his project for a united Italy based on Piedmont. Even the oldest nation states – Britain and France – are the result of deals and diplomacy and to some extent remain together because of them. States are thus the work of man, not nature.

This is even more so in the case of empires. They, above all, require able and committed elites employing skills and stratagems to sustain or expand them. Indeed, the fact that they are ultimately based on force not consent (though culture may supply some bonds in time) makes them supremely the fruit of artifice.

But how does Europe fit into this pattern? The emerging federal Europe is not, of course, a nation state.2 (#litres_trial_promo) It is, indeed, based upon the suppressing or, as the enthusiasts would doubtless have it, the surpassing of the concept of national identity. Its actions are often aimed at creating a kind of ‘nation’ of Europeans – hence the European anthem, flag, cultural and educational propaganda programmes and the like. But this process of nation-building, it is understood by all concerned, will take time. And it will certainly have to follow, it cannot hope to precede, the process of institution-building on which the Euro-enthusiasts have embarked. In fact, the EU’s priority is clear: first make your government, the rest will follow.

Is the new Europe, therefore, an empire in the making? Here the parallels are closer, for its elite displays much of the arrogance and introversion of a supra-national ruling class. Yet Europe is clearly not an empire in other traditional and conventional respects. It is not a power possessed of great military might, or of over-arching technological supremacy, or of boundless resources – though again it wants to acquire or develop all these things.

Europe is, in fact, more like a state or an empire turned upside down. It lacks so much that would provide the solid foundations of statehood or imperial power that it can only exist through the satisfaction of accumulated vested interests. You only have to wade through a metric measure or two of European prose, culled from its directives, circulars, reports, communiqués or what pass as debates in its ‘parliament’, and you will quickly understand that Europe is, in truth, synonymous with bureaucracy. It is government by bureaucracy for bureaucracy – to which one might add ‘to’, ‘from’ and ‘with’ bureaucracy if one were so minded. It is not that the actual size of the EU bureaucracy in absolute terms is so staggering – at roughly thirty thousand employees it has a smaller staff than Birmingham City Council, though this figure leaves out the much larger number of national officials whose tasks flow from European regulation. No: what makes Europe the ultimate bureaucracy is that it is ultimately sustainedby nothing else.

The structures, plans and programmes of the European Union are to be understood as simply existing for their own sake. Europe thus provides a new variation on Descartes’ ‘I think therefore I am’: in its version ‘I am therefore I do’ – though, like other multinational bureaucracies, it gets round to doing rather less and less effectively than it intended. Pope John XXIII was once asked by a visitor to the Vatican how many people worked there. He answered: ‘About half.’ This reflection may be applied to Europe too.

The movement towards a bureaucratic European superstate – for no other term adequately serves to describe what is emerging – has huge implications for the world as a whole. Yet I am repeatedly struck on my travels outside Europe by just how little understanding there is of this. At least until recently, the main attention which the issue received in America or in the Far East related to the nuts and bolts of trade agreements. And when successive British governments – not least that which I led in the 1980s – were seen to be at odds with the rest of Europe, and particularly with the dominant Franco–German axis, that was put down merely to the quirks of history or to the ordinary jostling of national interests.

That perception is now changing, particularly in Washington. And not a moment too soon. It is one of the great weaknesses of reasonable men and women that they imagine that projects which fly in the face of commonsense are not serious or being seriously undertaken. The creation of the new European superstate is a case in point. It is time for the world to wake up to it; if it is still possible, to stop it; if it is not, to contain and cope with it.

THE EUROPEAN IDEA

Bismarck, who makes several appearances in these pages and whose opinions on such matters should be taken seriously, knew exactly what to make of appeals to European idealism. ‘I have always,’ he observed, ‘found the word “Europe” in the mouths of those politicians who wanted from other powers something they did not dare to demand in their own name.’3 (#litres_trial_promo) This too has been my experience.

The concept of Europe has always, I suspect, lent itself to a large measure of humbug. Not just national interests, but (especially now) a great array of group and class interests happily disguise themselves beneath the mantle of synthetic European idealism. Thus we find an almost religious reverence for ‘Europe’ accompanied by a high degree of distinctly materialistic chicanery and corruption. I shall try to explain the low-mindedness later. But here it is the high-mindedness that accompanies it which concerns me, because it is actually the more disturbing in its consequences.

It is often said that the origins of the European project should be traced back to the post-war determination of a number of Continental European politicians, officials and thinkers to build a supra-national structure within which future wars in Europe would be impossible. To this end, France and Germany would be locked together, initially economically, but by incremental steps politically too. And, of course, this impulse was indeed historically important. It was the basis of the first stage of the European plan – the European Coal and Steel Community established on 18 April 1951 – conceived by Jean Monnet and Robert Schuman. It was then manifested in the famous (or notorious) preamble to the Treaty of Rome, signed on 25 March 1957, which sought ‘ever closer union’. And it has persisted and grown in strength up to the present day, when a federal European superstate is on the verge of creation. One should add that this was not the only impulse at work throughout that period: it was not, for example, my goal, or as I then believed the Conservative Party’s goal, in the seventies, eighties and nineties. But the fact is that it is the ideas of Monnet, Schuman, de Gasperi, Spaak and Adenauer – not those of Thatcher (or even de Gaulle and Erhard) which have ultimately prevailed.4 (#litres_trial_promo)

My point here, however, is that the impulse to create a European superstate was not simply that of avoiding war in Europe. It was a good deal older than that. Nationalism is often condemned as providing an excuse for the persecution of national minorities. But supra-nationalism should be still more suspect, because it provides a doctrine for the subjugation of whole nations. So it has proved in Europe. At the height of its power in the sixteenth century, the Habsburg Holy Roman Empire, for example, aspired to universal domination. The initials A-E-I-O-U (Austria est imperare orbi universo – Austria is destined to rule the whole world), the Habsburg motto, famously summed up that ambition. But, in practice, it was only partially and fleetingly realised. Then for a still briefer period, though with much bloodier thoroughness, Napoleon Bonaparte bestrode the continent of Europe. It is not simply that the language was French which makes the Napoleonic programme for European unity seem so contemporary. For example, among Bonaparte’s aims was, he said, to create ‘a monetary identity throughout Europe’. He later claimed that his common legal code, and university and monetary systems, ‘would have achieved a single family in Europe. No one would ever have left home while travelling.’5 (#litres_trial_promo) The President of today’s European Central Bank could hardly have put it better.

Adolf Hitler can with good reason be seen as following in Napoleon’s footsteps in his ambitions for European domination. Indeed, the Nazis spoke in terms that may strike us as eerily reminiscent of today’s Euro-federalists. Thus Hitler could refer contemptuously in 1943 to ‘the clutter of small nations’ which must be eliminated in favour of a united Europe.6 (#litres_trial_promo)

It is not, of course, my suggestion that today’s proponents of European unity are totalitarians, though they are not well-known for their tolerance either. What we should grasp, however, from the lessons of European history is that, first, there is nothing necessarily benevolent about programmes of European integration; second, the desire to achieve grand utopian plans often poses a grave threat to freedom; and third, European unity has been tried before, and the outcome was far from happy.

In reply to this, it will certainly be said that the purpose of today’s projected European political union is quite different, because it is not to be achieved by force, and because its proclaimed rationale is to preserve peace. But this argument is no longer convincing, if indeed it ever was.

It is surely questionable whether either the European Coal and Steel Community, or the European Common Market, or the European Economic Community, or the European Union – let alone the incipient European superstate – played or will play any significant role in preventing military conflict. A defeated, divided and humiliated Germany was not in any position to cause trouble during the Cold War years – and it is a very long time indeed (since Napoleon, in fact) since any power other than Germany ever caused wars in Europe. The threat during the Cold War was, rather, from the Soviet Union, and it was an American-led NATO, not European institutions, which preserved Western Europe’s peace and freedom. Even today, it is still true that an American military presence in Europe is the most important guarantee of the Continent’s security, both in the face of threats emanating from the former Soviet Union and from any renewed German ambitions – not that I wish to exaggerate those dangers at present either. Finally, it does seem to be stretching the pacifist credentials of the Euro-enthusiasts beyond credibility to maintain that a united Europe is necessary to keep the peace, when it is energetically seeking to become a major military power.

The idea of Europe would, though, not have as powerful resonance if it was merely associated with cartels, Commissioners and the Common Agricultural Policy. As someone who has come to be profoundly disillusioned with and suspicious of all that is done in the name of ‘Europe’, I fully recognise this. The European myth is no less powerful for being that – a myth. And its power stems from its association in many people’s minds with most of what goes to make up civilised living. For example, the contrast is often made, particularly in France, with the alleged vulgarity of American values. In the eyes of many Euro-enthusiasts, Europe vaguely represents ideas of law and justice that stem from the Greek and Roman eras. For the aesthetically minded, it is Gothic cathedrals, Renaissance paintings and nineteenth-century classical music that hold sway. The European idea is, it seems, almost infinitely variable. Therein lies its appeal. If you are pious, it is synonymous with Christendom. If you are liberal, it embodies the Enlightenment. If you are right-wing, it represents a bulwark against barbarism from the Dark Continents. If you are left-wing, it epitomises internationalism, human rights and Third World aid. But the fact that this portentous concept of Europe is so infinitely malleable means that, in truth, it is simply empty.

‘Europe’ in anything other than a geographical sense is a wholly artificial construct. It makes no sense at all to lump together Beethoven and Debussy, Voltaire and Burke, Vermeer and Picasso, Notre Dame and St Paul’s, boiled beef and bouillabaisse, and portray them as elements of a ‘European’ musical, philosophical, artistic, architectural or gastronomic reality. If Europe charms us, as it has so often charmed me, it is precisely because of its contrasts and contradictions, not its coherence and continuity. It is difficult to imagine anything less likely to be moulded into a successful political unit than this extraordinarily uneven mix of unlike with like. I suspect that in actual fact even the most fanatical Euro-enthusiasts have, in their heart of hearts, understood this. They keep quiet about the fact and would protest the opposite, but actually they do not like the day-to-day human reality of Europe one bit. That is why they want to harmonise, regulate and twist it into something altogether different, rootless and shapeless that can be made to fit their utopian plans.

THE EUROPEAN ECONOMIC AND SOCIAL MODEL

To the extent that there is a ‘European’ identity it can best be perceived in what is often described as the European economic and social model. This model, though it comes in several somewhat different shapes and sizes, depending upon the politics of the Europeans concerned, is clearly distinct from and indeed sharply at odds with the American model. In order to illustrate the philosophy behind it, and so as not to confuse it with old-fashioned socialism, one can profitably consider some words of Edouard Balladur, the then French Prime Minister: ‘What is the market? It is the law of the jungle, the law of nature. And what is civilisation? It is the struggle against nature.’7 (#litres_trial_promo)

M. Balladur is an extremely sophisticated and intelligent right-of-centre French politician. But he clearly understands nothing about markets. Markets do not exist in a void. They require mutual acceptance of rules and mutual confidence. Beyond a certain level, only the state, setting weights, measures, rules and laws against fraud, profiteering, cartels and so on, can make markets work at all. Of course, the market – any market – implies limits upon the power of the state. In markets the initiative comes from individuals, the prices reflect supply and demand, and the outcomes are, by necessity, unpredictable. But to describe the operation of markets as barbaric shows a particularly shallow and unrealistic understanding of what constitutes Western civilisation and underpins Western progress.

In France, the hostility to markets – and particularly to the international markets through which nations trade with another – is very deep-rooted. It may be that there is something in the French psyche which reacts better than the British to a large measure of state control and high levels of regulation. Certainly, the quite successful performance of the French economy in recent decades might confirm that.

But the European economic model also has a German variant, and this, given Germany’s size and wealth, is the more important one. Whereas the French prefer statism – they invented the word, after all – the Germans incline to corporatism. They are not anti-capitalist, but their conception of capitalism – sometimes referred to as Rhenish capitalism – is one in which competition is limited, cartels are smiled upon, and a high degree of regulation is provided. Another aspect of this system is revealed by the term ‘social market’. This expression was coined by Ludwig Erhard,8 (#litres_trial_promo) though I believe that he later came to dislike it because it was used to justify too much state interference and expenditure. For Germans nowadays it implies the provision of more generous social benefits than anyone in Britain, apart from those on the left of the Labour Party, would normally consider appropriate to a ‘safety net’. And indeed the Germans are still wrestling with the need to curb that spending.

What both the French and the Germans can agree upon, however, is that the sort of economic policies pursued in America, and to a large extent in Britain since 1979, are unacceptable. Thus, writing in Le Monde, the French and German Finance Ministers proclaimed: ‘The obsessive insistence of the neo-liberals on the deregulation of labour markets has contributed more to the blocking of reforms than to the creation of jobs. We are convinced that the European social model is a trump card, not a handicap.’9 (#litres_trial_promo)

In fact, a number of authoritative studies have quite convincingly proved the opposite. Examining the impact of moves in France and Germany to stimulate employment by limiting working hours, Keith Marsden noted that at the same time as the average number of hours worked had fallen, the two countries’ unemployment rates had risen. By contrast, in the United States where people were working longer, and in Britain where working hours had remained stable, there had been significant falls in unemployment. Similarly, early-retirement programmes in Europe had not made available more opportunities for younger workers: rather, the effect had been to increase social security taxes to support the retired – so burdening business. Finally, Mr Marsden noted:

There is a clear correlation between higher government expenditure and lower employment. In the US, the government share of GDP was twenty-two percentage points below that of France but its employment ratio was fifteen points higher. Britain’s public spending level was eight points below Germany’s, yet its employment ratio was seven points higher.10 (#litres_trial_promo)

Another study of Europe’s social model by Bill Jamieson and Patrick Minford has highlighted the main economically harmful features of the European model: higher state spending, higher overall taxes, higher social security contributions – noting particularly the damaging burden this places on business – higher corporate taxes and higher levels of regulation, especially of labour markets. The results have been eminently predictable, but as an example of wilful self-damage no less shocking all the same: ‘The contrast with the United States is stark. Since 1970 the US economy has created almost fifty million new jobs, while the EU has created just five million.’11 (#litres_trial_promo)

EUROPE’S PENSIONS CRISIS

Another way of describing the difference between the European and the American models is to borrow a rather profound observation of Friedrich von Hayek. In TheRoad to Serfdom, first published in 1944, Hayek wrote:

[T]he policies which are now followed everywhere [in Europe], which hand out the privilege of security, now to this group and now to that, are nevertheless rapidly creating conditions in which the striving for security tends to become stronger than the love of freedom. The reason for this is thatwith every grant of complete security to one group the insecurity ofthe rest necessarily increases.12 (#litres_trial_promo) [Emphasis added]

The European model epitomises precisely this: it places security above everything else, and in its persistence in eliminating risk it inevitably discourages enterprise. That is the basis of Europe’s pensions crisis, whose full implications are still not widely grasped.

Of course, in one sense the cause of the crisis is demography, the failure of much of Western society to reproduce. One can speculate about the causes for this and what it may tell us of contemporary values, attitudes and institutions. One can also debate whether and how policies might be changed to reverse long-term demographic decline. But such discussions, fascinating as they are, are irrelevant to the crisis much of Europe is facing now.

No less a person than the EU Commissioner in charge of the Internal Market and Taxation, Frits Bolkestein, has admitted that Europe faces a ‘pensions time-bomb’. He has noted that the ratio of workers to pensioners will decline from four to one to less than two to one by 2040. And he observes that if unfunded pension liabilities were shown up in the national accounts of some member states this would represent a debt of over 200 per cent of GDP.13 (#litres_trial_promo) Italy is the EU country which is facing the worst crisis. It has a fertility rate of just 1.2, the lowest in the world, and also the world’s most costly pensions system, amounting to over 15 per cent of GDP – 33 per cent of worker payrolls, expected to rise to 50 per cent by 2030.14 (#litres_trial_promo)

Continental European countries have walked into a trap from which there appears no painless exit. Of course, they could not know just where demography would lead. But they have known well enough for some years that the promises implicitly made to pensioners could not be afforded. It was precisely because we realised the implications for Britain’s public finances that in 1980 we ended the connection between the retirement pension and incomes (it now rises in line with prices). And in 1986 we cut back state funding of the State Earnings-Related Pension Scheme (SERPS) and provided incentives to opt for private-sector Personal Pension Plans (PPPs). As a result, future state obligations have been curtailed to manageable levels. Britain also now has more money invested in pension funds than the rest of Europe put together. Although other EU countries have made repeated attempts to scale back their social liabilities, none has taken similar substantial steps. As a result, just three countries – the United States, Britain and Japan – possess three-quarters of the entire world’s funded pension assets.15 (#litres_trial_promo)

Quite how the countries of mainland Europe are going to cope with their problems is unclear. But someone is going to be disappointed – either pensioners or workers. And it seems that the official figures actually understate the scale of that disappointment. This is because it is not enough to express the problem in terms of national finances: it can only be understood in terms of equity between the generations. There is nothing theoretical about this. If one generation is expected to carry an excessive burden on behalf of another it will seek by every means to avoid it. It will either demand that past promises are broken, or it will not work, or it will not pay its taxes, or the most talented people will leave. Socialist governments which have tried to tax ‘till the pips squeak’ have ample experience of that. It is the main reason why even left-wing governments today try to keep marginal tax rates down. In the present case, and employing the concept of ‘generational accounts’ – which ‘represent the sum of all future net taxes (taxes paid minus transfer payments received) that citizens born in any given year will pay over their lifetimes, given current policy’ – Niall Ferguson and Laurence J. Kotlikoff have made various projections of the changes required to achieve ‘generational balance’. The scale of what is implied is illustrated by the conclusion that, for example, nine EU countries would need to cut government spending by more than 20 per cent if they wanted to rely on this means to achieve balance.16 (#litres_trial_promo)

THE COMMON AGRICULTURAL POLICY AND PROTECTION

Europe’s pensions problem is relatively recent. By contrast, its agriculture problem is of long standing. Although the European Common Market had its origins in a project to create a common policy towards coal and steel, it was the Common Agricultural Policy (CAP) which from the time of the Treaty of Rome was the central pillar of the structure.17 (#litres_trial_promo) Political leaders and their policies come and go. Reform programmes rise and fall. But the CAP goes on for ever. No one seriously seeks to justify it. The days when we were told that without it Europe might be short of food have long since passed. Despite successive attempts at reform, not least those initiated by Britain, the CAP is wasteful, environmentally damaging and extremely costly. It still absorbs some £30 billion – about half of the EU’s total budget.18 (#litres_trial_promo) But it continues because it constitutes the most important reason why the less industrially developed European countries put up with other European programmes that diminish their competitiveness, and it is the unspoken reason why so many new countries want to become members.

The CAP puts up the cost of food for EU consumers, thus increasing our costs and reducing our growth. It also depresses food prices worldwide, as subsidised European food exports deprive farmers in poorer countries of their livelihoods. This is precisely the wrong way round. Industrialised countries need low-cost workforces; agricultural countries need to provide their peasants with incomes. Both lose from the CAP.

The CAP is also a force for global protectionism. It has been estimated that the CAP is responsible for 85 per cent of the world’s agricultural subsidies.19 (#litres_trial_promo) Not surprisingly, this prompts widespread resentment. Other countries, aware of this scandalous situation, are thus less willing to make compromises and resolve disputes.

The EU is not the only body which subsidises agriculture and it is not the only trade grouping which is inclined to protectionism. But on both counts it is certainly the most serious global offender. It has been estimated that the total annual cost of the CAP to the world economy is about $75 billion, of which two-thirds is borne by the Europeans in the form of higher prices, inefficient production and economic distortions. The rest falls on non-EU countries through lost agricultural export opportunities.20 (#litres_trial_promo)

Another expert study has found that the EU economy is almost as protected as it was a decade ago. Thus Professor Patrick Messerlin calculates that the cost of this protection, across the board, is equivalent to about 7 per cent of the European Union countries’ GDP, some $600 billion.21 (#litres_trial_promo)

The European tendency towards protection – demonstrated not just in the operation of the CAP but in numerous trade questions: films, bananas, and hormone-treated beef – is inherent in the European project itself. The reluctance to engage in open trade with the outside world only reflects a reluctance to accept the working of open markets at home. The EU and its predecessors were never, it should be remembered, interested primarily in free trade as such. They were and are a customs union – that is a group of countries which, while allowing free trade among themselves, charges a common set of tariffs to the rest of the world. The level of these tariffs has fallen sharply from an average of 12 per cent to 3 per cent over the last forty years as part of international trade negotiations. But the concept of global free trade is one to which the European countries have never been wedded, and never will be.

In theory, fundamental reforms of the CAP might, if they ever came about, remove one of the main reasons why the EU is such a force for protectionism. But the combination of high taxes, high levels of regulation and so high costs on the one hand, and the inflexibility resulting from a single currency and interest rate on the other, will in any case press Europe further down the protectionist path. Even within the framework set by the World Trade Organisation, there are many ways in which the EU could provide covert protection for its producers – such as through ‘anti-dumping’ measures. The EU’s trading partners must expect that it will do everything that it can to exploit such loopholes.

As the European superstate emerges on to the world scene, it will be keen to flex its muscles in economic as in other matters. It will seek to combat the ‘neo-liberalism’, i.e. the belief in free markets, which the French and German Finance Ministers so roundly denounced in Le Monde. It will try to substitute a more highly managed, i.e. more bureaucratic, model on international trade and finance. The Europeans will ultimately fail. But ‘ultimately’ can be a long time. Meanwhile, they spell trouble.

WIDER STILL AND WIDER …

In such circumstances it might seem odd that the EU is besieged by countries seeking membership. The shortcomings of the system are, after all, there for all to see. Yet enlargement is still the topic most talked about in European circles – at least in public.

Thus the alleged rationale of the Nice Summit in December 2000 was to prepare for further enlargement of European Union membership. It was argued that increasing the number of member countries from fifteen to twenty-seven required institutional reforms which would allow more streamlined decision-making, i.e. loss of the national veto.22 (#litres_trial_promo) One can see how that fits the federalist agenda. What is increasingly contestable, however, is the sincerity with which EU countries view enlargement.

During the 1980s and most of the 1990s, Britain was in the forefront of those urging a widening of Community membership. As Prime Minister, I was keen to see the former dictatorships of Spain and Portugal given the opportunities and the stability required for democracy to flourish. Both I, and later John Major, were even keener to widen membership to include the former communist countries of Central and Eastern Europe, for very much the same reason. The extension of the frontiers of a free and prosperous Europe to the east was an integral part of the programme of a Europe of cooperating nation states which I had put forward in my speech at Bruges in 1988 – where I reminded my audience that ‘we shall [for which read ‘should’] always look on Warsaw, Prague and Budapest as great European cities’. After the fall of the Berlin Wall the following year this argument became even more cogent. To prolong the division of Europe by an economic tariff wall once the old political wall dividing West and East had crumbled was manifestly unjust.

Yet this is precisely what the European Community did. Far from welcoming in the former communist countries – with the exception of East Germany, which joined the West with hardly a by-your-leave – they were left to the tender mercies of agricultural dumping under Europe’s CAP and a niggling system of trade quotas. Twelve years after the collapse of communism, Poland, Hungary, the Czech Republic and the rest are still waiting.

Enlargement of the Community eastwards has traditionally been attractive to both the British and the Germans, but has been a good deal less so to the French and to the countries of Southern Europe. There is no great secret as to why this is so. Alongside our wish to see the ex-communist countries encouraged to create successful Western-style economies, British governments have hoped that, as the EU jargon has it, ‘widening’ would be at the expense of ‘deepening’. With the prospect of enlargement to include as many as twenty-seven members – counting in all the candidate countries – it seemed to us a plain impossibility to proceed with creating a federal superstate. The differences and potential conflicts between the members would be just too great.

For the Germans, extension eastwards had a rather different attraction and reflected other geopolitical interests. As a revealing CDU/CSU paper, ‘Reflections on Europe’, of 1 September 1994, put it:

The only solution which will prevent a return to the unstable pre-war system, with Germany once again caught in the middle between East and West [a somewhat eccentric description of the Third Reich in the thirties!], is to integrate Germany’s Central and Eastern European neighbours into the European post-war system and to establish a wide-ranging partnership with Russia … If European integration were not to progress, Germany might be called upon, or be tempted by its own security constraints, to try to effect the stabilisation of Eastern Europe on its ownand in the traditional way. [Emphasis added]

By contrast, the French have, with the limited exception of Romania, not sought out friends or clients in Eastern Europe. Moreover, France and even more so Greece, Spain and Portugal have been extremely wary of the impact upon the CAP, and the valuable benefits they receive from it, of the introduction of new members with large, primitive agricultural sectors.

For as long as the Germans continued to be enthusiastic about the entry of the ex-communist countries, some (albeit snail-paced) progress was made. But it is now apparent that resistance within Germany to expansion is growing. The German EU Commissioner for Enlargement, Günter Verheugen, has, for example, suggested that a referendum may be needed in Germany before enlargement goes ahead. German public opinion appears to be quite strongly opposed to the prospect of free entry for goods and services and, above all, workers from the East. In particular, hostility to early full membership for Poland has hardened.23 (#litres_trial_promo)

The present British government is, it seems, still strongly in favour of early expansion. But one may question whether this policy still makes much sense. All that has been seen of developments within the European Union over the last decade confirms that ‘deepening’ – that is the persistent accumulation of more and more powers by European institutions to override national wishes and interests – will go ahead, however much membership ‘widens’. Indeed, as was shown by the decisions made at Nice, even the vague prospect of enlargement provides the excuse for a raft of new measures of centralisation. Similarly, the long-standing British hope that the need to absorb new members would lead to fundamental reform of the European Union’s finances, above all the CAP, shows every sign of proving illusory.

For all these reasons, I am now unpersuaded by the case for further EU expansion. And although I fully understand the mix of historical, political and economic factors which account for the enthusiasm of the Central and East European countries for full membership, I also doubt whether they are well-advised to press for it on the terms available. Since leaving office, I have had the benefit of many frank and friendly (and that in the proper not diplomatic sense) conversations with senior political figures from these countries. Most of them, when pushed, are uneasy about what the EU may entail. Having endured the best part of half a century living under socialist bureaucracy, and seeing their national identities and rights overridden, they are not at all keen to be ruled from Brussels. Furthermore, although many of them are deeply uneasy about instability to the east, and so still want the reassurance offered by EU (as well as NATO) membership, they have few illusions about the degree to which Europe is dominated by Germany. And that too worries them, though they are not likely to admit it publicly.

European politicians and officials are wont to talk rather patronisingly of how far the applicant countries have yet to go in modernising and opening up their economies in order to prepare for entry. But what really alarms the Europeans is their own lack of preparedness in the face of low-cost competition. If as part of their preparations for entry the former communist countries are willing to tie themselves up with all the rules and regulations imposed by Europe, they will finish up by giving away much of the competitive advantage they currently enjoy. At which point, presumably, their slower growth rates could be used in order to justify putting off membership once again. In my view, the applicant member countries would therefore be well-advised to consider long and hard whether full membership of the European Union is what they really want. Negotiating free-trade agreements with the EU and with the North American Free Trade Area (NAFTA) – and, indeed, with Britain (on which, see the next chapter) – might suit their interests better.

So I believe that:

The old arguments for expansion of EU membership no longer apply