Brown urges against financial protectionism
LONDON (Reuters) - Prime Minister Gordon Brown warned on Monday against a retreat into financial protectionism as the global economic downturn gathers pace.
With sterling languishing near record lows against the yen and 23-year lows against the dollar, Brown also reiterated that his government policy was not built around exchange rates.
"We have not yet seen the same protectionism in trade with beggar-thy-neighbour policies of the 30s," he told reporters in London, referring to the fallout from the Great Depression.
"And I will fight hard to ensure we do not. But we also need to ensure we do not exercise a new form of financial mercantilism of retreat into domestic lending and domestic financial markets."
France last week called for the Bank of England to do more to support the pound, concerned that businesses in the euro zone -- Britain's main trading partner -- were losing competitiveness on export markets.
As Britain prepares to host in April the follow-up to November's financial crisis meeting of G20 developed and developing nations, Brown proposed a "charter of principles that will govern the individual behaviour of each country."
Global policymakers are under pressure to reform financial institutions to make them more representative of emerging nations such as India and recast the world's financial structure by tightening up regulation and improving monitoring.
Brown will meet leaders from China, South Korea, Japan and global institutions such as the World Bank in the coming days as he seeks to build a consensus for the G20 summit on how to tackle the financial crisis and to prevent a recurrence.
He has already spoken to new U.S. President Barack Obama and this week's World Economic Forum in Davos will present another chance to try and get policymakers on to the same page.
"We could allow this crisis to start a retreat from globalisation," he said, "or we could view the threats and challenges we face today as the difficult birth-pangs of a new global order."
The world's biggest commercial bankers will also be invited to meet Brown and finance minister Alistair Darling before the G20 meeting, he said.
"The fragility of the global financial system must be addressed internationally," Brown added.
"If what happens to a bank in one country can -- within minutes -- bring potentially devastating effects on banks in a different continent, then only a truly international response -- in policy and governance -- can be effective."
Britain officially entered recession last Friday, following the U.S., Japan and Germany. The domestic economic decline has already taken its toll on Brown's popularity -- with an election due by May 2010.
The tumbling pound has contributed to the rot in confidence, raising questions on markets about the health of Britain's financial position, even though policymakers have said a weaker currency will boost Britain's exports.
"British policy is not based on targeting the exchange rate," Brown said. "It is based on targeting interest rates through inflation and it is our low inflation that is absolutely central to the policies we are pursuing."
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