Here's looking at EU

Should Britain be at the heart of a federal Europe? Martin Holmes protests at such a future but Helen Wallace can see advantages. Three arguments have been advanced in favour of a federal/integrated Europe. First, that European integration has prevented war in Europe. Second, that the nation-state and national sovereignty are obsolete, and that supranational federalism is a superior form of government. And third, that the European Union is economically successful, so that, in John Major's phrase, Britain should be "at the heart of it".

The first and second world wars were, so the argument runs, caused by nationalism. But whereas the virus of nationalism led to these terrible conflicts, since 1945, as the nation-states have gradually surrendered their powers to the institutions of the European Community, a new era of cooperation in Europe has made war unthinkable. I believe this argument is a grotesque distortion of history. The cause of the second world war, as any decent history textbook will testify, was not nationalism, but fascism. Fifty years ago the Nuremberg trials rightly concluded that the German fascists were guilty of crimes against humanity and planning an aggressive war.

Nationalism and fascism were not the same thing. During the second world war, in the many cases of anti-fascist resistance, it was love of one's country Q nationalism, patriotism Q that was the most important reason for defiance of Nazi rule. The greatest nationalist and patriot in Britain was Winston Churchill. That most nationalist of Frenchmen, General De Gaulle, personified the spirit of resistance to the Nazis. Stalin called on the people of the Soviet Union to fight the fascist invaders not for Bolshevism but for Mother Russia.

But, as it is untrue that nationalism caused the second world war, is it also untrue that the moves towards European integration have preserved the peace since 1945? Consider Germany. After 1945, it is impossible to speak of Germany having the same freedom in its foreign policy it enjoyed before 1939. After 1945 Germany was divided for 45 years. West Germany had on its soil up to 350,000 American and 55,000 British troops. East Germany had upwards of 500,000 Soviet troops. In these circumstances, it is impossible to conceive of Germany having the ability to start another war.

What then has kept the peace in Europe in this period? Again, any history book will provide the answer. It was the balance of terror in the cold war and in particular it was the role played by Nato. The heart of Nato doctrine was the possession of nuclear weapons as a deterrent, leading to "mutually assured destruction" and the balance of nuclear terror. A glance at the chronology of the postwar period reveals European integration reached its maturity in 1957 with the Treaty of Rome and the establishment of the European Economic Community, eight years after the establishment of Nato. The truth is that European integration is the consequence, not the cause, of peace in Europe since 1945.

European integrationists argue that the nation-state is obsolete, that national sovereignty is outdated, and that federalism is a more sensible form of political organisation. Thus Helmut Kohl told his Louvain University audience in February that the nation-state is associated with war and should be superseded by European integration. As Eurointegrationists tell us, many federal states are models of political success. But federalism works if its component parts are regions, cantons or former colonies. Federalism works only if the component parts are not nations. This was one reason why the Soviet system imploded; it was a federal state, based on the pretence that the social cement of communism would transcend feelings of religion, nationality and culture. The same analysis applies to the collapse into barbarism in the former Yugoslavia. Federal states comprising nations whose people have no ultimate allegiance to the federal state are doomed to collapse.

* In Britain democratic accountability and national sovereignty are as important today as ever before. Whatever we think of individual politicians, our system of government itself should not be negotiable. In retaining the concept of parliamentary sovereignty we should cooperate with other countries as necessary in international bodies. Internationalism not isolationism has always been the Eurosceptical watchword in respect to General Agreement on Tariffs and Trade/World Trade Organisation, the Commonwealth, the G7, Nato, the United Nations and the "special relationship" with the US. But internationalism Q unlike supranational federal integration Q does not imply the acceptance of laws made by institutions that are not directly accountable to us.

Supporters of a federal Europe have long argued that the European Community is an economic success story, and that Britain has an economic destiny within it. But why should the EC be regarded so? The answer is obvious; during the cold war, the countries of central and eastern Europe languished under a communist regime that retarded their economic growth. Viewed against these, the EC was a fantastic success. But now that we are in the post-cold war world, this comparison will no longer do. It is no longer sufficient to compare the EC to our eastern European neighbours; that is too insular an approach, a "Little European" approach. Instead it is necessary to look at the wider world. Over the past ten years or so, the rate of economic growth in the EC has been lower than that in the US, and much lower still than that in Japan. Moreover, the EU's level of unemployment is scandalously high. In the US, unemployment in 1995 was 5.5 per cent; in Asia, 3 per cent; it was over 10 per cent in the EU. The primary cause is well documented; by keeping interest rates too high to artificially procure a single European currency, the recession of the early 1990s crushed the already faltering EC economy. When the rest of the world cut interest rates and relaxed monetary policy, the EU increased interest rates in the teeth of the recession, causing more bankruptcies, underinvestment and high unemployment.

EC membership disadvantaged the British economy primarily because the structure of Britain's trade is global; it is not confined to Western Europe, as the advocates of EEC membership 20 years ago presupposed. Last year Britain's balance of payments deficit with the EC was Pounds 7 billion; with the rest of the world, over Pounds 5 billion. In the past decade, the accumulated deficit with the EC was Pounds 105 billion; with the rest of the world a Pounds 13 billion surplus.

There are other economic disadvantages as well. The single-market 1992 project has produced a plethora of unnecessary harmonisation measures that damage business by imposing greater regulatory burdens to the advantage only of those bureaucrats who dream up, and enforce, a multitude of petty tyrannies. The Common Fisheries Policy is a disaster with government policy a pitiful exercise in damage limitation. VAT is a tax on the factors of production that is now levied at a 15 per cent minimum rate. Britain's experience of the EC in economic terms can be summarised as follows: we can survive within it, but we would prosper outside it.

* The march to an integrated federal Europe may be unstoppable; the project begun in the 1950s will reach its logical conclusion with the full implementation of the Maastricht Treaty, including the imposition of a single currency. But this project is intellectually and historically flawed. Eurosceptics should not be downcast; the Europe of Maastricht is just as doomed as the Europe of Napoleon or Hitler.

Martin Holmes is lecturer in politics, St Hugh's College, Oxford, and co-chair, The Bruges Group.