Fixing the dollar: Why an international accord won't work

Emerging economies matter

    The Plaza Accord dealt with a single currency issue, which made it a much less complex problem to tackle compared with the currency tensions world leaders face today, says Edwin Truman of the Peterson Institute and former assistant secretary of the U.S. Treasury for International Affairs.

    Though it's clear the current debate focuses largely on pressures to significantly appreciate China's yuan, it's not the only currency that is viewed as undervalued. Some have argued that many of the East Asian currencies, such as the Hong Kong dollar, Singapore dollar and the Taiwan dollar need to appreciate, which makes any kind of unified agreement all the more complex.

    Adding to the matter is the growing influence of emerging economies over economic policy. Unlike the days of the Plaza Accord, the rapid rise of economies such as China, India and Brazil have given them more say over how the global marketplace should run. Take, for instance, the IMF -- it's considering giving more board representation to emerging economies. This could mean Europe loses some of its positions on the board.

Hard to wag fingers when you might be guilty yourself

    U.S. officials, in particular, have argued time and again that China keeps the yuan artificially low, which in turn, gives the country an unfair advantage of selling goods more cheaply abroad. However, some say America might just be as guilty for embarking on policies that weaken the U.S. dollar. In fact, in the six or so weeks that the Federal Reserve started talking about further easing monetary policy, the greenback has declined 7% against a basket of major currencies.

    This is probably be a relatively minor issue. But the point is any unified plan will involve some give and take. And that becomes increasingly difficult when more countries and more currencies count in the great debate.