The Benelux Customs Convention

On 5 September 1944 in London representatives of three governments-in-exile – the Belgian, the Dutch and the Luxembourg – signed a customs convention, known after the place of signature as the London Customs Convention. The agreement provided for the abolition of customs duties on trade between the three countries and the adoption of a common tariff on goods from outside. It was signed by the foreign ministers: the Belgian Paul-Henri Spaak, the Dutchman Eelco van Kleffens and the Luxembourger Joseph Bech. From the first syllables of the three countries’ names (Belgique, Nederland, Luxembourg), the agreement and the community it created came to be called Benelux.

The moment of signing was remarkable. Brussels had been free for two days, and British tanks had entered Antwerp the previous day. But most of the Netherlands and the whole of Luxembourg were still under German occupation. The three governments, which had been operating in London since 1940, were thus laying down the rules of the post-war economy for countries they did not yet govern, and for economies whose state after liberation nobody could predict.

Background: small states between great markets

Between the wars Belgium, the Netherlands and Luxembourg had some of the most open economies in Europe. They lived on trade, on transit through the great ports of Antwerp and Rotterdam, on processing industries and on exports. The economic crisis after 1929 hit them particularly hard, because the great powers were walling themselves off behind high tariffs, quotas and systems of preference.

The oldest element of the later cooperation was the union between Belgium and Luxembourg. Until 1918 the Grand Duchy had belonged to the German Customs Union (Zollverein). After the First World War, when the Luxembourgers voted in a referendum for economic union with France and Paris turned it down, an economic union with Belgium was concluded in 1921. It created a common customs area and linked the exchange rates of the Luxembourg and Belgian francs. This Belgium–Luxembourg Economic Union was a party to the 1944 convention alongside the Netherlands: strictly speaking, the agreement was concluded between two customs areas, not three.

Attempts at wider cooperation had been made before. In December 1930 Belgium, the Netherlands, Luxembourg and the Scandinavian states concluded the Oslo Convention, in which they undertook not to raise tariffs without notifying their partners. In July 1932 Belgium, Luxembourg and the Netherlands signed an agreement at Ouchy near Lausanne on the gradual reduction of tariffs. It never came into force, however, because Great Britain and the United States opposed it, attached as they were to the most-favoured-nation clause and averse to regional preferences.

Governments in London

After the defeat of May 1940, all three governments ended up in Great Britain. Queen Wilhelmina and the Dutch cabinet reached London as early as mid-May, and from September 1940 the prime minister was Pieter Gerbrandy. Grand Duchess Charlotte and the government of Pierre Dupong left the country on the day the Germans occupied Luxembourg. The Belgian government of Hubert Pierlot had the longest journey: after the army’s surrender and the dispute with the king, it spent several months in France and only in the autumn of 1940 assembled in full in London.

Exile drew these cabinets closer together. Their ministers were in constant contact with one another; they faced similar problems – managing their merchant fleets and colonies, financing the war effort, preparing for their return – and shared similar fears that after the war the great powers would once again decide the fate of small states over their heads. The Belgian side, and Spaak in particular, was the most determined advocate of close regional cooperation. The Dutch were more cautious: according to historians, Van Kleffens and his colleagues in the Gerbrandy government pinned greater hopes on Atlantic cooperation with Great Britain and the United States, and on general trade liberalisation, than on a regional bloc.

The first concrete step was the monetary agreement of 21 October 1943. In it the three governments fixed a stable exchange rate between the Belgian franc and the Dutch guilder and opened mutual credits, so that after liberation trade settlements would not grind to a halt for lack of foreign currency. The monetary agreement was not yet a customs union, but it laid the groundwork for one: a common market without stable settlements would have made no sense.

What the convention provided for

The convention signed on 5 September 1944 was short and largely a framework. Its main aim was the abolition of import duties on trade between the Netherlands and the Belgium–Luxembourg union and the introduction of a common customs tariff towards third countries. Agreeing a uniform, detailed trade policy proved too difficult to negotiate in exile, so it was decided to confine the agreement to a tariff community. Excise duties and other charges were to be gradually harmonised.

To implement the agreement, three administrative councils were established: one for customs (harmonising customs regulations and excise), one for foreign trade (common rules for trade with the rest of the world) and one for trade agreements (coordinating treaties with third countries). Their proposals were to be approved by joint meetings of ministers and, ultimately, by the competent authorities of each country. The convention thus transferred no sovereignty to any common body – it was an intergovernmental agreement, not the nucleus of a supranational institution.

The final provisions stipulated that the agreement would enter provisionally into force once the governments had returned to their territories. On the day of signing this was still a plan for the future. On that same 5 September the Netherlands was living through the so-called Mad Tuesday (Dolle Dinsdag): after false reports that the Allies were about to arrive, thousands of Dutch people poured into the streets with flags, while Dutch National Socialists and German officials fled eastwards in panic. For most of the country, however, liberation came only eight months later.

From paper to customs union

Liberation reached the three countries at different times, and this delayed the implementation of the agreement. Belgium and Luxembourg were largely freed in the autumn of 1944 and quickly began rebuilding, helped by the undamaged port of Antwerp and by the currency reform of Finance Minister Camille Gutt. The Netherlands, whose western part still had to endure the Hunger Winter of 1944–1945, emerged from the war far more devastated and impoverished. Opening the borders to Belgian goods threatened to flood its market, so the Dutch pressed for delay.

The parliaments first approved the 1943 monetary agreement (at the end of 1946). The customs convention was supplemented and clarified by a protocol of 14 March 1947 and ratified that summer. The common external tariff and the abolition of import duties on internal trade came into force on 1 January 1948, without a transitional period. The Benelux tariff was among the lowest in Europe. Full freedom of trade, however, remained a distant prospect: quotas, excise charges and restrictions on trade in agricultural products were retained, and the payment problems eased only with the creation of the European Payments Union in 1950.

Significance

The convention of 5 September 1944 was one of the first projects of economic integration in post-war Europe, concluded while the war was still going on and largely with the aim of ensuring that small states would not be left alone in a world of great powers. It was followed by the treaty establishing the Benelux Economic Union, signed in The Hague on 3 February 1958 and in force from 1 November 1960, which also covered the free movement of people, services and capital.

The three countries’ cooperation soon extended beyond the economy. They acted together in the talks on the Marshall Plan, signed the Brussels Pact with Great Britain and France in March 1948, and joined NATO in 1949. Benelux entered the European Coal and Steel Community and the European Economic Community as a bloc that already had experience of a common tariff. Spaak, one of the signatories of 1944, chaired the committee that in 1955–1956 prepared the Treaties of Rome. The Benelux countries were also, together with France and Germany, the first signatories of the Schengen Agreement in 1985 – signed in a Luxembourg village on the Moselle, where the borders of Luxembourg, France and Germany meet.

When it was signed, the agreement was an act of faith by three governments that had no authority over most of their citizens. Even so, the principles drawn up in London proved durable, and the name invented for a customs agreement became the name of a whole region.