Benelux Customs Union Enters into Force Summary

  • Last updated on November 10, 2022

The Benelux Customs Union was created by a treaty signed among the governments-in-exile of Belgium, Luxembourg, and the Netherlands in London in 1944. Once it entered into force, it provided a model for many of the customs and economic unions that characterized Europe in the post-World War II era.

Summary of Event

The catastrophic destruction of World War II left all Europeans who survived with an urgent sense of the need for collaboration across international boundaries. This sense was most pronounced in the Low Countries—Belgium, Luxembourg, and the Netherlands—whose governments-in-exile in 1944 banded together to create the Benelux Customs Union. The union provided a model for later integration initiatives. Benelux Customs Union Economic unions Trade agreements [kw]Benelux Customs Union Enters into Force (Jan. 1, 1948) [kw]Customs Union Enters into Force, Benelux (Jan. 1, 1948) [kw]Union Enters into Force, Benelux Customs (Jan. 1, 1948) Benelux Customs Union Economic unions Trade agreements [g]Europe;Jan. 1, 1948: Benelux Customs Union Enters into Force[02350] [g]Belgium;Jan. 1, 1948: Benelux Customs Union Enters into Force[02350] [g]Luxembourg;Jan. 1, 1948: Benelux Customs Union Enters into Force[02350] [g]Netherlands;Jan. 1, 1948: Benelux Customs Union Enters into Force[02350] [c]Diplomacy and international relations;Jan. 1, 1948: Benelux Customs Union Enters into Force[02350] [c]Economics;Jan. 1, 1948: Benelux Customs Union Enters into Force[02350] [c]Trade and commerce;Jan. 1, 1948: Benelux Customs Union Enters into Force[02350] Monnet, Jean Schuman, Robert Spaak, Paul-Henri

The three countries that created the Benelux Customs Union (often simply referred to as “the Benelux”) shared many common features. They were all quite densely populated, Belgium and the Netherlands being the world’s two most densely populated nations. A very high proportion of their gross national product (GNP) consisted of trade, mostly with the European nations adjoining them; by 1970, trade amounted to nearly 40 percent of the GNP of the three countries. In Belgium in particular, there was a recognition that tariffs needed to be kept low to encourage this trade; no duties, for example, were levied on raw materials.

For years, Belgium and Luxembourg had depended on metalworking and textile production, exporting the products of these industries to Europe and the rest of the world. At the time the Benelux was created, the Netherlands was less industrialized than was Belgium, but this situation changed during the years in which the Benelux was developing into a model of economic integration. By contrast, Luxembourg, a tiny country of just one thousand square miles, was devoted very largely to its well-developed iron and steel manufacturing industries.

The Benelux Customs Union had historical roots going back to the era after World War I. On July 25, 1921, the governments of Belgium and Luxembourg inked a treaty creating a customs union between the two small nations. This customs union went into effect in 1922, and under its aegis the customs duties of the two countries merged into a single tariff, and the currencies of the two countries became effectively integrated on a one-to-one basis. Each currency became legal tender in the other country.

As Allied victory in World War II became more assured, the governments-in-exile in England began looking to the future. The customs union of 1922, in abeyance during hostilities, was revived for the postwar era in an agreement signed in 1944, and it was expanded to include the Netherlands. The agreement between the Netherlands, Luxembourg, and Belgium was created in part under the stimulus of French diplomat and economist Jean Monnet, who was to become the father of European economic integration in the post-World War II era in Europe.

The inclusion of the Netherlands in the Benelux agreement created the need for some important adjustments. For example, the Netherlands had had for years considerable government control of its agricultural sector. The Netherlands sought access for its agricultural products in Belgium, and although the tariffs of the two countries were soon unified, many quotas remained in existence during the first decade of the Benelux’s existence. Coordination of the nations’ social and economic policies took time, and the quotas could be eliminated only as this coordination developed.

Belgium hoped to displace Germany as a major source of industrial products in the Netherlands. At the same time, the Netherlands was developing its own industries, and—as with agricultural policy—coordination of industrial policy gradually emerged over the course of the first decade. Likewise, methods had to be developed to deal with the fiscal deficit in the Netherlands, and the price levels of the two countries needed to converge.

By 1953, capital movements among the Benelux members had been freed up, and this freedom was extended to the movement of labor. All excise duties were standardized in 1958. By 1958, the economic convergence had been completed: The three nations signed a new treaty that year that created a full economic union as of 1960. This union was called the Benelux Economic Union. The Benelux was thus well placed to enter into the European Economic Union European Economic Union Economic unions created by the Treaty of Rome in 1957. The gradual implementation of common practices during the development of the Benelux provided the model for the European Economic Union, which assigned a longer time frame for convergence in the light of the Benelux’s experiences.

Several contemporary developments contributed to the success of the Benelux “experiment.” The first of these was the Marshall Plan Marshall Plan Foreign aid, U.S.;Marshall Plan , in which the United States threw its full weight into the reconstruction of the war-torn European continent, demanding that all recipients of Marshall Plan aid should design their own industrial resuscitation. At the heart of the plan for the Benelux countries was the realization that the revival of trade, spurred on by lower customs duties, would play a significant role in the economic revival of the Low Countries. Between 1948 and 1969, the exports of the Benelux countries grew by 579 percent, and their imports increased by 471 percent.

A second concurrent factor contributing to the success of the Benelux customs union was the signature, in Geneva in October, 1947, of the first General Agreement on Tariffs and Trade General Agreement on Tariffs and Trade (GATT). The underlying principles of the GATT were that trade promoted prosperity and that low tariffs promoted trade. The gradual abolition of all internal tariffs in the Benelux countries and the great growth in prosperity during the years after the end of World War II provided support for the fundamental concept of the GATT.

The third concurrent factor was the success of the Schuman Plan Schuman Plan , named for Robert Schuman, the French foreign minister. Created under this plan in 1951 in negotiations in Paris, the European Coal and Steel Community European Coal and Steel Community (ECSC) brought under international control the operations of the coal, iron, and steel industries of Western Europe. The success of the ECSC showed that transnational economic organizations were the most effective way to bring about economic unity.

Significance

The Benelux Customs Union was not the first customs union to play a role in creating greater economic unity among relatively small political entities. The most famous such union was the German Customs Union, the Zollverein, started in 1834, which played an important role in German unification in 1870-1871. The Benelux Customs Union, however, provided a direct model for the European Economic Union, which grew out of the Common Market established by the Treaty of Rome in 1957. The Benelux therefore had an importance that transcended the actual populations it embraced. In particular, the Benelux made clear that a gradual approach to the harmonization of governmental policies affecting national economies offered the best hope of success. Benelux Customs Union Economic unions Trade agreements

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Lewis, David W. P. The Road to Europe: History, Institutions, and Prospects of European Integration, 1945-1993. New York: Peter Lang, 1993. Focuses on the institutional and diplomatic development of the European Union, but is quite comprehensive.
  • citation-type="booksimple"

    xlink:type="simple">Neal, Larry, and Daniel Barbezat. The Economics of the European Union and the Economies of Europe. New York: Oxford University Press, 1998. An overview that includes many useful details.
  • citation-type="booksimple"

    xlink:type="simple">Newcomer, James. The Grand Duchy of Luxembourg: The Evolution of Nationhood, 963 A.D. to 1983. Lanham, Md.: University Press of America, 1984. A long view of the duchy that gives details showing how its economy integrated with that of Belgium.
  • citation-type="booksimple"

    xlink:type="simple">Urwin, Derek W. The Community of Europe: A History of European Integration Since 1945. New York: Longman, 1995. The most concise and useful history of the various efforts to integrate the nations of Europe, including the Low Countries.
  • citation-type="booksimple"

    xlink:type="simple">Vanthoor, Wim F. V. A Chronological History of the European Union, 1946-2001. Cheltenham, Gloucestershire, England: Elgar, 2002. A purely chronological listing of important events in the development of formal economic ties among European nations.

Bretton Woods Agreement Encourages Free Trade

General Agreement on Tariffs and Trade Is Signed

Marshall Plan Provides Aid to Europe

European Coal and Steel Community Is Established

European Common Market Is Established

European Free Trade Association Is Established

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