Conservative MEP, Daniel Hannan, has claimed that staying in the customs union would put the UK in a "worse situation than before".
Mr Hannan, who is the president of the Initiative for Free Trade, told talkRADIO's Julia Hartley-Brewer that being "half in half out" of the customs union is an "appalling decision".
"People are going to wonder decades from now how on earth we, as a global trading nation, came to such an appalling decision," he said.
- Read more: Theresa May heads to Brussels to finalise Brexit deal
- Read more: Bank of England Governor Mark Carney backs Theresa May’s Brexit plan
"In a way there's nothing wrong being half in half out given the narrowness of the result, if you were keeping the good bits and ditching the bad bits, but what we're doing is the opposite."
Theresa May's draft Brexit deal proposes a backstop consisting of "a single customs territory between the Union and the United Kingdom", which the UK cannot leave without the permission of the EU.
The backstop would only be implemented if there was no long-term trade agreement and no extension of the transition period.
Mr Hannan claimed the customs union "clobbered Britain" as a trading nation, and that allowing Brussels "100 per cent control with zero contribution" was "completely unthinkable".
"The idea that we could have stayed in the customs union while losing any input into it, that we would allow Brussels 100 per cent control of our trade policy with zero contribution as to what that should be...
- Read more: The customs union is a key part of Brexit – but what is it?
- Read more: Theresa May will not agree a Brexit deal that 'traps' UK in customs union, says Downing Street
"Worse than that, that we'd become effectively just a bargaining chip for the EU to use in its talks with third countries, that they'd be able to dangle the fifth biggest economy in the world and say you can have access to this market but you don't have to reciprocate to it, only to us.
"That would have been a completely unthinkable proposition, but we've decided that's the bit we're going to try and keep."