Benelux Economic Union

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BENELUX ECONOMIC UNION.

The organization of postwar Europe through regional agreements finds its origin in the Benelux accord, the first of its kind, which arose out of World War II and was concluded as a treaty in 1958. Negotiations among Belgian, Dutch, and Luxembourgois delegates began in exile in London during World War II. An economic agreement among them was signed on 21 October 1943, while they were still under German occupation. A transitional bilateral customs convention followed on 5 September 1944, further linking the three countries. The thinking behind these documents was clear. The future Netherlands-Belgium-Luxembourg economic union was intended to contribute to the birth of a stable European and eventually to a stable global monetary system, embodied in the Bretton Woods Conference. In Bretton Woods, New Hampshire, in 1944 the Belgian and Dutch delegations adopted a common standpoint, pointing to a shared future of small European states in international economic affairs.

The Benelux Treaty, signed only in 1958, but there in outline from the time of the customs convention of 1944, did not aim at a complete economic integration of the three signatory countries. The three states joined it to improve their standing in international negotiations, which had hardly been salient before and during the war.

Through the impetus given by the Belgian Minister of Foreign Affairs, Paul-Henri Spaak (1899–1972), the first ministerial conference of the Benelux countries took place on 17 and 18 April 1946, in the Hague, where the ministers decided to bring the institutions of the union immediately into effect. During July 1946 the office of the Secretary-General of the Benelux group began its work in Brussels.

The common customs tariff came into force on 1 January 1948. While customs duties were removed for trade within the Benelux group, all the other protective barriers remained: quantitative restrictions, value-added tax, licenses, monetary and financial regulations, and fixing of quotas. One of the principal tasks of the organs of the Benelux union during postwar years was gradually to remove all the protectionist measures enacted during the 1930s.

The Benelux Economic Union Treaty, signed in the Hague on 3 February 1958, came into force on 1 November 1960. The treaty bore the hallmarks of the experience gained starting in 1946, in the context of a customs convention. Each of the three partners had the right to appoint three members of a Committee of Ministers, thus signaling the continued political independence of the three states.

The model of a customs union, based on older patterns, was adopted to provide the basis for cooperation, rather than to define what common policies would be. More complete economic integration would have required major constitutional change, which in the immediate postwar period was unacceptable to the populations of all three partner states.

In the pre-1958 period the economic and monetary tasks faced by the Benelux countries related to the consequences of the war. The Netherlands, whose entire territory was liberated only in April–May 1945, suffered war damage of a kind much more extensive than did Belgium. In addition, Belgium did not face the monetary problems of the Netherlands, encumbered from 1945 by an expensive colonial war in Indonesia. Both countries could not export to Germany, whose economy was prostrate in the immediate postwar period. The effects were felt more heavily in the Netherlands, which had a serious deficit in its balance of payments.

The monetary difficulties of the Netherlands were solved gradually at the beginning of the 1950s, thanks to the European Payments Union. The temporary absence of the German market encouraged the three governments to look to joint benefits through the Benelux union, so as to mutually open outlets for trade for their export sectors. Belgian industry, until at least 1952, profited substantially from these agreements through access to Dutch markets, previously dominated by German competition.

Free movement of goods among the three countries did not extend to agricultural goods. That problem was resolved only at the level of the Common Market after 1958. The same was true in other sectors—for example, in the area of tax harmonization (in particular as regards excise duties) and with respect to the opening of national markets to foreign competing companies.

Despite the incomplete and limited nature of the Benelux initiative, the progressive dismantling of trade barriers had positive effects on trade among the three after the war. This presented a strong precedent observed closely by those contemplating joining the process of European economic integration. For this reason, the Benelux group boasted that it was a veritable "laboratory of Europe." The experience accumulated by the Benelux countries with respect to a common tariff policy and a coordinated external marketing policy played a clear role in the negotiations leading to the establishment of a Common Customs Tariff of the European Economic Community. The Benelux experiment thus prepared the ground for the Western European pathway to economic union, one that now extends well beyond the horizons initially envisioned during World War II.