Why the French problem has come to define Mr Blair's policies on Europe

The French and British still have much in common beside, in the phrase of a French official, their 'modesty and humility'

Tony Blair doesn't really do rude. It isn't in his make-up. Jacques Chirac, while fully capable of a Gallic charm which would melt the hardiest opponent, on occasions does. Which is one reason why Mr Blair seems to have been genuinely taken aback not so much by the ferocity of his disagreement with the French President in Brussels last week as by the latter's implausible observation that he had never been spoken to so rudely as by the British Prime Minister.

If that were all, however, it would hardly matter. Indeed, heroic efforts are now being made in Paris and London, after four lively days of verbal warfare, to bury the memory of the incident. British officials hotly deny that they gave any encouragement to stories about the row. Their civilised French equivalents bravely insist there was no linkage between the postponement of the next Anglo-French summit – first threatened by the French President during the Brussels exchanges – and those very stories.

There is, to put it politely, a certain diplomatic licence, on both sides, about these protestations. For the row has a significance which goes beyond the normal cut and thrust of summit negotiations.

It's necessary first to be aware of the content of the confrontation. Given the French President's enthusiasm for the Common Agricultural Policy, the first part of the deal he struck with Chancellor Gerhard Schröder was hardly catastrophic from a British point of view. It did at least avert a widely underestimated threat that the French might actually sabotage EU enlargement. And though it provided for an annual 1 per cent increase in the CAP it did at least impose a ceiling on EU farm subsidies. No doubt Mr Blair was irritated – and he was not alone in this – to be summoned to the Presidential presence to be told of a fait accompli. No doubt, too, this irritation was compounded by gleeful reporting that he had been stitched up.

But when it came to the further question of whether this meant an end to structural CAP reform – the transfer of funds from wasteful and protectionist production subsidies to environmentally sound land stewardship – Mr Blair was certainly on the winning side in arguing very strongly that it must not.

What makes this worth rehearsing is that Anglo-French relations are more complex than they look. It's not just that the new French government had sorted out the dispute over the Sangatte refugee camp and British beef. On other issues, the British and French still have much in common beside – in the deliciously wry phrase of a senior French official this week – their "natural modesty and humility."

Most notably, they are very close on the the future of European institutions. The emphasis in Valéry Giscard d'Estaing's Convention paper this week on strengthening the European Council as the representative body of a Europe of nation states draws strongly on Anglo-French thinking. So too does the planned creation of a powerful new EU President – a job in which well-placed British sources insist they ideally envisage not Tony Blair but Jose Maria Aznar, the present Spanish Prime Minister, as the first incumbent.

But that doesn't mean there aren't serious differences. Indeed, rather as European policy under Margaret Thatcher was defined by what she and her ministers saw as the German problem, so in the very different and vastly more pro-European climate of the Blair premiership, it tends to be defined by the French problem.

The CAP is part of that. For many senior politicians in France it has the merit of being a wholly distinctive European policy as well as a means by which French farmers are among the most successful agricultural exporters in the world. For us in Britain, who now have the free trade microchip embedded in our genetic make-up, across a political spectrum which runs from Margaret Thatcher to Clare Short, it is the "bloated and inefficient scheme" for raising food prices and impoverishing the developing world which the cabinet minister Peter Hain decried yesterday.

Problems on defence have come to a head in an apparently arcane argument over whether the EU or Nato should run peacekeeping operations in Macedonia. France argues in favour of an ad hoc agreement which would allow the EU to run the operation without waiting for a permanent solution to a dispute over the EU's use of Nato assets, protracted by Greek and Turkish opposition. The British fear that this could be a precedent for just the sort of breach with Nato they oppose.

On the one hand, (relative) French weakness in EU terms, rather than overbearing strength, is an exacerbating factor. Enlargement is a long-term threat not only to the scale of French farming subsidies but perhaps to its self-distancing – at times – from the Atlantic alliance. Despite last week's deal, the Franco-German motor is not what it was; despite the real and growing constraints on British influence because the UK is outside the eurozone, Mr Blair has managed to build effective alliances with Germany, Spain and Portugal, and even with Italy.

But Mr Blair can hardly ignore French influence. It looks likely that the French will agree to a UN resolution in Iraq next week that will make war sanctioned by the UN – if there is war – more likely than one without it. In different ways, but with a similar suspicion of unilateralist US hawks, France – as well as Britain – has helped to internationalise the conflict and afford the chance that the West will take yes for an answer from Saddam if he is disposed to say it. But even this has not eliminated the possibility that Mr Blair could yet find himself dangerously suspended between French opposition and US unilateralism.

Secondly, M Chirac did touch a raw nerve last week, when he predictably raised Britain's famous £2bn-a-year rebate. Renegotiation is no doubt a domestic impossibility ahead of British euro-entry. But it's hard to see, once even France finally begins to see the light about the CAP, that wholesale reform would not be accompanied by a rethink of the totemic rebate negotiated by Margaret Thatcher precisely because the CAP had a much higher cost than benefit for the British.

One of Tony Blair's huge achievements has been to shift the terms of the British European debate, helped though he has been by a (once again) imploding Opposition. Consider how calmly the Giscard paper has been taken here, and how it would have been even five years ago. More qualified majority voting? A European constitution? An EU charter of human rights? No problem. Public opinion isn't yet ready for a new look at the rebate. In time, and as part of a package of sane financing for the EU, it might just be.

To get to that point – euro-entry included – Mr Blair needs to persuade the public that Britain can, with France and Germany, lead the EU. The most visionary French officials share that aspiration. British pro-Europeans must fervently hope that deep in his heart M Chirac does too.

d.macintyre@independent.co.uk