Our whole EU relationship is up for debate now

This is the moment to consider moving to associate status as the best way to preserve our nation

So the dreaded "f word" has now been removed from the latest draft of Valéry Giscard d'Estaing's proposed new constitution for Europe. The Prime Minister will no doubt claim he has scored a great diplomatic triumph by exorcising "federal" from the preamble - notwithstanding M. Giscard's spokesman saying there is no difference in meaning between "federal" and "community", which is the new substitute. Meanwhile, demands for a referendum on what is now described as nothing more than a "tidying-up operation" continue to be dismissed by Peter Hain as a "hullabaloo" got up by the right-wing press and the Tory party. In any event, say the EU sympathisers, this is merely the start of a year-long haggle between member states' governments.

But Mr Blair is now fighting an unexpected war on two European fronts. The more he resists the demands for a referendum on this constitution, the more the public actually thinks, albeit mistakenly, that he is going back on his promise to have a referendum on the single currency.

Speaking this weekend to a Tory supper club gathering in West Sussex, I was amazed when one questioner asked me why the Prime Minister was reneging on the referendum promise relating to the single currency. The questioner had conflated the two issues, but this shows just how difficult it is going to be for the Government to persuade the public that it still stands by its promise to have a vote on the euro - especially while it trumpets its refusal to do the same on the proposed new constitution.

So the first difficulty for Mr Blair is a matter of public relations in getting the public to understand the difference between the two issues. The more the press, the Tory party and senior figures such as John Major are joined by the Liberal Democrats and a growing number of Labour backbenchers in calling for a referendum on the new constitution, and the more such calls are resisted by the Government, the more the public gets muddled into thinking that there will not be a referendum on the single currency. This, in turn, is leading to a hardening of anti-European sentiment on both issues.

This debate threatens to be the familiar re-run of the arguments that surrounded the Maastricht negotiations. But the worst way of stopping legitimate debate, as Lord Blackwell (formerly Mr Major's head of the Downing Street policy unit) has argued in his recent Centre for Policy Studies paper, A Defining Moment?, is the Europhiles' claim that the only alternative to signing up to yesterday's proposals is to leave the EU entirely. They argue that a wholly European future for the UK is simply "inevitable" and that we must focus on getting the best terms which place us "at the heart of Europe".

But there are actually a whole range of alternatives between "inevitability" and "withdrawal" that the Convention has failed to address. The chances, as things now stand, are that at least one of the member states which do hold a referendum - and there could be 10 or more of them - may yet force the EU to stick with the current status quo. It would then be up to the core group of states that wished to press ahead with deeper political and economic co-operation to do so by setting up new legal structures outside the present EU framework.

Lord Blackwell makes the case, that Britain, even if it simply retained the status quo, would miss an opportunity during the current negotiations to agree a new and better relationship with Europe. This is the chance for the UK to establish a special position within a new EU treaty that protects our economic interests without being part of the core group of integrating states. And this is the moment to consider moving to associate status as the best way of maintaining, strengthening and preserving nationhood.

The justification for deeper integration has been based, hitherto, on the benefits that accrue from the single market. But while this accounts for about 50 per cent of Britain's external trade, the proportion of our economy dependent on trade with the EU is, according to the Institute of Directors, less than 15 per cent of GDP. Trade between the UK and the EU has grown less rapidly than trade with other global export markets. Indeed, we actually have a net trade deficit with the rest of the EU, so it would be difficult for our partners to punish us, if we are unwilling to sign up for political union, by creating barriers to exclude us from the European market.

Lord Blackwell points out that non-member states such as Switzerland and Norway, as members of the European Free Trade Area, actually export more to the EU as a proportion of GDP (and per head) than the UK. But the most compelling argument for resisting further integration lies with the growing success of recent GATT rounds in lowering tariffs across the world. The significance of the EU as a privileged trading area is diminishing. The average level of tariffs on international trade is falling and is now less than 4 per cent.

This convention has missed an opportunity to set the EU into the wider international trading context. But, ironically, by opening up the whole constitutional issue, Giscard d'Estaing has also made possible the argument fora different, associate membership for Britain.