In "The White Inn", retracted the story (7)
I believe the answer is:
parable
'story' is the definition.
(parable is a kind of story)
'in the white inn retracted' is the wordplay.
'in' is an insertion indicator.
'the white' becomes 'pale' (I've seen this before).
'inn' becomes 'bar' (I've seen this before).
'retracted' shows that the letters should be reversed in order.
'bar' backwards is 'rab'.
'pale' enclosing 'rab' is 'PARABLE'.
'the' is the link.
(Other definitions for parable that I've seen before include "Leap bar poorly for a biblical story" , "Moral tale" , "Story illustrating moral lesson" , "Sower, for one" , "Biblical allegory" .)