Formation of Benelux
During World War II, all three countries were occupied by Germany and functioned in exile, from London. Belgium, the Netherlands and Luxembourg were economically smaller than other European players like France, Italy and Spain. Meanwhile, their geographical advantages were also less. Thus, the formation of Benelux and the complete economic integration of the three countries strengthened their position on international platforms. Even if foreign trade had certain problems, Benelux provided barrier-free trade to the three members.

Their political stance was also amplified as Benelux in international organisations. Even though the Netherlands and Belgium had differences in approach towards European integration and the Marshall Plan, Benelux emerged as a common political voice for all three members. According to historians, forming blocs is a coping strategy that countries have during or after a war to deal with trade imbalances. 

Benelux since the 1940s
On 21 October 1943, the monetary agreement was signed between the three countries. The monetary agreement fixed the exchange rates between Belgian–Luxembourg franc and the Dutch guilder. Since 1921, Belgium and Luxembourg already had an economic union called the Belgo-Luxembourg Economic Union. In 1944, the Benelux countries laid the foundation for fixed exchange rates. They realised that in post-war years, most countries faced the problem of parity in economies; due to volatile exchange rates, countries would face trade imbalances. This issue was solved by the Benelux monetary agreement in 1943. During the following year, three countries had meticulous discussions on a common external tariff and the Customs Union Convention was signed in 1944. However, the agreement was not ratified by the three members until 1947 and the agreement was fully effective only in 1949. Despite signing the agreement, there were differences between Belgium and the Netherlands over the trade deficit and employment provision.

Under the Convention, a tariff community was formed to eliminate customs duties on trade among Benelux countries. However, Benelux countries maintained their protectionist laws like deciding quotas and levies. In 1953, Benelux countries decided to adopt common export and import policies. This led to the three countries taking a common stand on global trade issues. Later, on 03 February 1958, Benelux countries signed the Benelux Economic Union Treaty in The Hague. The Treaty declared free movement of people and goods among the Benelux. It was fully effective from 1960.

Benelux and the EU
Apart from dealing with European countries in one voice, Benelux assimilated into the EU. Benelux signed a Schengen Agreement with the Republic of France and the Federation of Germany in 1985. The Agreement eliminated border controls and other formalities at common borders. This set an example for European countries on restriction-free borders.
Benelux was the first Union in which free movement of people and goods was allowed. It also fixed the currency exchange rates, laying the foundation for the European Economic Union and further, for common currency in the EU. Benelux also signed the Convention for Cross-Border Policing for carrying out joint patrols and observations. Thus, Benelux has set an example for how small states can survive. 

Today, Benelux focuses on three areas; economic union, sustainable development and interior affairs. In 2024, Belgium is the President of the Union. Luxembourg will be holding the presidency in 2025, as it is on a rotation basis. Benelux countries also have right-wing governments. New areas of cooperation have emerged in Benelux, such as data exchange, sustainability, policing and cybercrime. The Government of Luxembourg describes Benelux as a “testing ground for cooperation within the European Union.”

References
Lorene Paul, “Benelux countries were blueprint for Europe,” Luxembourg Times, 07 September 2024
Benelux Union, accessed on 18 September 2024
James Boughton, “Financial Relations between the Netherlands and Belgium 1943 to 1993,” IMF eLibrary, 13 December 2004