Expert View: Say goodbye to trade if the Tory Europhobes prevail

The Prime Minister came to the City last week and made one of the best speeches of his campaign so far. It was amusing to hear his attack on the Tory Party's "Basil Fawlty Economics". Even more interesting was that he finally mentioned this election's elephant in the room - Europe.

The election so far has heard precious little of international issues or discussion of Britain's future role in a globalised economy. We are being very insular. What madness this is when Britain (more than almost any other developed economy) is so dependent on its position in world trade, and British business is dominated by multinationals competing in global markets - finance, pharmaceuticals and oil. The Continent, in particular, is where we earn our bread - some 55 per cent of UK trade.

The lack of debate is perhaps understandable given the tabloid fury that greets any mildly pro-European statement from the Government, and the fact that the Tories learnt their lesson under William Hague. In making Europe the central plank of his 2001 campaign, he chose a seemingly populist issue ("our last chance to save the pound", and all that nonsense) which in the end was clearly not central to the decision-making of voters.

Yet there is a wide gulf in policy between the two parties. This is not because Labour is radically pro-European - if anything it would appear to have continued John Major's neutral stance - but because some of what is in the Tory manifesto is quite radical. Not only has the party stated that it would never sign up to a European constitution of any kind, but it has declared that it would renegotiate whole chunks of European trade agreements, and cease to belong to the Common Fisheries policy and to the Social Chapter.

This is its official policy. But worse still is what some of the more maverick Tory candidates have been saying. I am today in Harwich, where the candidate David Creswell believes that Britain needs to "become independent" and that "the EU is not going to exist in 12 to 18 months". Really? The candidate in Stafford says that if our European partners reject Tory policy, he will call for a referendum on withdrawal.

And reject they would. The chances of the UK being allowed to pick and mix trade policies, while still being part of the EU trade zone, would seem remote in the extreme.

This is particularly depressing when the European Union appears finally to be embracing more liberal economic policies, urged on by the many new members from emerging Europe. And it is particularly foolish when the EU is edging closer to a proper common market in financial services which would benefit the City, and indeed our whole economy, enormously.

If there is a real possibility that Britain might at some point move closer to withdrawal from the EU, then it is time for the issue to be brought much more out in the open and the consequences scrutinised.

Roger Liddle, No 10's adviser on Europe until last year, has commented that "leave Europe and we lose three million jobs". That number seems high, but there can be no doubt that there would be some serious economic consequences.

If the UK were out on its own, crushed between the major trading blocks, of course it could survive, but only if wages were cut to much lower, globally competitive levels, and if taxes were slashed to attract business - London having lost its capital-of- Europe role. In consequence, of course, public spending on such things as hospitals and schools would have to be dramatically slashed too.

I suppose some on the extreme right of the political spectrum actually like the sound of all that, but this is one policy where business must vote for the status quo.

christopher.walker@tiscali.co.uk