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BoE's Carney Sees Brexit As First Test Of New Global Order


The time may have come to reorder globalization to develop a more inclusive and resilient economy and Brexit could be a test for such efforts, Bank of England Governor Mark Carney said on Tuesday.

"In many respects, Brexit is the first test of a new global order and could prove the acid test of whether a way can be found to broaden the benefits of openness while enhancing democratic accountability," Carney said in a speech in London.

"Trade tensions abroad and Brexit debates at home are manifestations of fundamental pressures to reorder globalization," he said.

Carney noted that global economic policy uncertainty is at record highs and protectionist rhetoric is becoming reality, with US raising tariffs on imports from main trading partners.

Some have already started to wonder if the global expansion, that began in 2010, could be starting to end, given the confluence of the current broad-based slowdown and outstanding downside risks, the BoE Governor said.

"Consider the UK as a leading indicator of a nascent global trend," Carney said.

He pointed out that UK investment has not grown since the referendum was called and has dramatically underperformed both history and peers, amid the fundamental uncertainty about future market access.

"Similarly, a prolongation of global trade uncertainty could undermine the global expansion," Carney warned.

"The impact would be magnified if financial markets move such a possibility from their tail risks towards their central scenarios."

Carney said Brexit can lead to a new form of international cooperation and cross-border commerce that is founded on a better balance of local and supranational authorities. Hence, Brexit could affect both the short and long-term global outlooks, he added.

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