Beef isn't the burning issue

There is an economic argument for Britain leaving the EU, but it ignores the political reality

We are dreaming of other Europes, other Britains. When Norman Lamont, the first mainstream Tory openly to address the possibility of leaving the European Union, raised the idea at the Tories' 1994 Bournemouth conference, it was denounced by the Prime Minister as fantasy. Less than two years later, the idea is coursing through a great swathe of his party. This counter-revolution is in full flood.

Today's controversy over the beef ban is merely the latest local skirmish in something much bigger. More important by far is the suddenly popular argument that Britain generally is being impoverished by her membership of the EU. This has the power to change everything.

Before, the anti-European case was largely about sovereignty, while the pro-European case was all about prosperity. No contest: offered the choice between the romance of political independence and greater wealth inside ''Europe'', the down-to-earth British would always plump for faster-growing living standards. Our affection for Parliament has never been as deep as parliamentarians think.

But if this argument now reverses itself, so that people believe the way to enrich themselves is through withdrawal, then the lip-smacking pragmatism that has underpinned British Europeanism suddenly disintegrates. The great project stands naked. All the accumulated irritation about invasive bureaucracy and popular xenophobia can be unleashed. And we are nearly there; this is an important moment for the nation.

It's true that the economics of British membership are more finely balanced than before. As world trading tariffs have fallen to about 3 per cent, the comparative advantage of being inside this particular trading bloc has fallen. Britain, an economically struggling country, pays around pounds 3bn a year into EU coffers. Compared with the Asian economies, Europe is growing slowly. It has expensive levels of social protection.

These are the big facts on which the economic case for British withdrawal is being constructed. The vision is of an entrepreneurial Britain that lacks the social costs and labour laws of the Continent but which, as a member of the European Economic Area, enjoys all the trading benefits of today. It is a heady thought: Britain as a giant offshore Hong Kong, exploiting those huge mainland markets but entirely free of the political and social shackles of the neighbouring union.

Think of it. No single currency arguments. No more interference with our historic right to produce inedible sausages and gunk-filled crisps. Our fishing fleet free to sail the empty waters around our coasts. Our political destiny safely in the hands of John Major, Bill Cash, Michael Portillo. Parliament free to do whatever it wants to us without outside interference. Perhaps we could go the whole hog and withdraw from the European Convention on Human Rights while we're about it: unshackle Michael Howard, say I. And all of the above is based, remember, on the new ''heads we win, tails they lose'' economics of withdrawal.

But the trouble with such macro-economic projections is that macro-economics doesn't exist. It is an abstraction from one kind of human relationship, which gets the future wrong because it forgets changing politics and social behaviour. That was true of the burst dream of the Thatcher-Lawson boom. It was true of the subsequent Conservative promise of a feelgood factor, now about four years overdue. And it is likely to be true of optimistic Tory projections about EU withdrawal.

The withdrawal case makes two heroic assumptions. The first is that outside Europe, we would be changed - changed utterly - and thrive. But our problems are too deep to be laid at the doors of Brussels. I keep thinking of an attack on Scottish nationalism made by an economist a few years ago, who accused Scottish intellectuals of ''spinelessly abandoning their obligation to speak truth to their society. Of warping our history, of cruelly deceiving the unemployed and the homeless, the lost and the lonely, by offering them a single, all-weather explanation for their plight: England.'' Substitute ''Europe'' for ''England'' and that encapsulates aspects of the anti-Brussels crusade.

The second assumption is that the involvement of the UK in the EU does not affect continental politics at all; that Europe would act the same way without us and could accommodate us as a trading partner as easily at it accommodates Norway's 4.3 million people or Switzerland's 6.9 million. We have a trading deficit, after all, and free trade enriches everyone. Surely our economic ties would be unaffected?

A shrewder assessment of the grand politics of the EU was the one written in 1994 in a paper for Germany's Christian Democrats. This described a fault-line running diagonally across the Continent. It divided Mediterranean countries ''inclined to protectionism'' and led by France, from a north- east group ''more in favour of free world trade and headed, in a certain sense, by Germany''.

It suits both native Euro-phobes and lofty continental politicians to pretend that Britain doesn't weigh at all in the grand politics of the EU. But that is clearly nonsense. We are unquestionably one of the ''big three''; and if we left, the balance between protectionist olive Europe and free-trading herring Europe (of which we are part) would shift.

It is quite possible that the EU would turn more protectionist, as the anti-free trade mood continues to build in different parts of the world. To regard the new free-trading order as firmly grounded and irreversible is wrong; the challenges to the free flow of goods from an authoritarian China, for example, will be numerous. Some will be couched in human rights terms, some in terms of the need for environmental standards.

However they are couched, though, France and her followers in the EU have a history of successfully stifling imports for political and social reasons. If Britain had left the EU and was gleefully parading her lack of social legislation and her ability to devalue as part of a strategy to drive deeper into French markets, who really believes that nothing further would follow? We are a little more important, and a little more threatening, than Norway.

We shouldn't, therefore, see the beef ban only as a tale of federalist failure; we should see it as a warning. Outside the EU, we would have even less leverage. Our absence would make it easier for protectionist instincts on the Continent to reassert themselves. And if they did, there would be nothing we could do. That is one of the political consequences of withdrawal that need to be set alongside the economic calculations described earlier.

But pro-Europeans, including those who, like me, want a looser, confederal union, should go further and admit that there are domestic political reasons for remaining inside. This is an argument about the future shape of the country, not just about trade.

A Britain that pulled out would be likelier to remain politically centralised, dominated by the doctrine of parliamentary absolutism and determined on minimum social protection in order to maximise the economic benefits of independence.

Because this would represent the triumph of a style of conservative English nationalism much resented north of the border, it would probably help to drive Scotland away. That, in turn, would push the English counter- revolution further. We would become a retro-country. It is not a pretty thought. Though withdrawal is described as leading inexorably to the rebirth of a once-great trading nation, it sounds to me more like a way of turning us into a grimy island Gormenghast.