To understand Brexit, look back to the first attempt to create a European Customs union—and how Britain blew its chance to lead

Now that Britain has now got a breathing-space until the end of October and following Theresa May’s adoption of cross-party talks with Labour, a compromise through a permanent customs union with the European Union appears the mostfeasible way out of the Brexit maze. Among the four options considered in MPs’ indicative votes on 1^st April it was this proposal that came closest to gaining a majority. Michel Barnier, the EU’s chief negotiator, said on Tuesday that a customs union could be added “within a few hours or days” to the political declaration setting out the framework for Britain’s future trading arrangement with Europe.

If a customs union does indeed become the way to secure Brexit, there will be a bitter historical irony. The story of the original failure to become a founder member of the common market in the late 1950s has often been told, not least since it helps to explain why latecomer Britain found the European club uncongenial. Less familiar is the episode soon after the end of the second world war when Britain came close to leading the way in forming a European customs union and thus directing the course of integration on its own terms. The story helps us to understand Britain’s fractious relationship with the EU today.

The overwhelming priority after the war ended in 1945 was to restore economies brought low in the conflict and crippled by protectionist barriers erected in the 1930s. Freeing trade within a Europe blocked by high tariffs and quotas was an obvious remedy. Already some countries in western Europe were taking the medicine. Belgium, the Netherlands and Luxembourg pressed ahead with the Benelux customs union, which their leaders had already mapped out while in exile in London during the war.

A wider international push for freer trade did not preclude customs unions. The General Agreement on Tariffs and Trade (GATT), signed by 23 countries in Geneva in October 1947, permitted customs unions even though these contravened the principle of opening up markets on equal terms to all trading partners covered by the GATT. Most important of all, America backed closer integration within Europe and expected concrete results in response to its historic offer of aid, set out by George Marshall, the secretary of state, in June 1947.

Under pressure from America the Labour government thought long and hard about adopting a customs union in 1947 and 1948. Helping the cause was the fact that Ernie Bevin, the redoubtable foreign secretary, had long seen the merits of a European customs union. As a trade unionist he had supported the idea in the late 1920s. As foreign secretary he could see the political and strategic virtues in an economic as well as a military alliance with France and other western European countries.

Hopes ran high when in late January 1948 Bevin set out the case in the House of Commons for Britain participating in a “Western Union” brought together by “trade, social, cultural and all other contacts.” The foreign secretary said that “the time is ripe for a consolidation of western Europe” and that “Britain cannot stand outside Europe.” This was the clearest commitment yet from the Labour government towards taking a lead in European integration across the board. Opinion polling in February and March showed widespread support among the British public for the idea, with 76 per cent backing a customs union.

But it was not to be. The project of a customs union was stymied by economic and political objections made by the Treasury. An overriding concern was that participation could jeopardise Britain’s still vital trading links with the Commonwealth and remaining empire, corresponding broadly with the sterling area of countries who used the pound or pegged their currencies to it. Almost half of British exports in 1946 and 1950 were with other members of the sterling area whereas less than 30 per cent went to western Europe. Another big worry was that it could compromise the government’s ability to conduct economic planning.

The government’s failure to pursue a customs union was fateful. It left the door open to the French government to take the lead, in 1950, with the Schuman plan to create a coal-and-steel community with a supranational “high authority.” That initiative, which Britain shunned because of French insistence on accepting the principle of ceding sovereignty before any negotiations, paved the way in the late 1950s to the common market, whose core was a customs union between the six founder countries. In This Blessed Plot, recounting Britain’s tortured post-war relations with Europe, Hugo Young wrote: “It is not too much to say that the customs union that didn’t happen in 1948 became the common market that did happen, without Britain, in 1958.”

Today a customs union is once again centre stage. But instead of providing a means to establish British leadership over post-war European integration, it is now no more than a form of damage limitation. Where it once offered economic and political hope, now fear animates its backers while opponents are gripped by illusions about Britain’s influence over trade relations outside the EU. And although a customs union will help to mitigate the harm of Brexit especially for manufacturers, Britain will still forfeit the advantages of the single market which it did so much to bring about in the 1980s for its much more important services sector.

Ministers in the post-war Labour government were in a different league from today’s sorry crop. Bevin was in many respects an outstanding foreign secretary, helping to secure the crucial commitment of America to the defence of western Europe through the creation of NATO, which has just celebrated its 70th anniversary. But after the war, when the continent looked to Britain for a lead on shaping European integration, Britain missed its opportunity. That fact continues to haunt our politics today.