This paper discusses the following 1 In the world envisaged by present customs union theory, trade diversion cannot raise welfare. Lipseys contrary conclusion follows from confusing the effects of two separate policy changes. 2 Second-best is irrelevant in analyzing the welfare effects of a customs union. 3 Although trade creation may in the Vinerian world result in a rise in welfare, a country can always do even better by an appropriate policy of non-preferential protection. Although Viner would presumably concur, because he regards free trade a limiting case of nonpreferential protection as the best of all worlds, our conclusion follows even if one regards protection as sound policy. 4 Once one leaves the Vinerian world, greater opportunities for gain may be provided by a customs union than by nonpreferential protection but these opportunities cannot be dealt with in the customary framework developed by Viner and subsequent customs theorists.